1. Direct Loan Program A NASFAA Authorized Event Presented by Dr
Direct Loan Program A NASFAA Authorized Event Presented by Dr. Phillip E. Hawkins Director of Financial Aid, UWG GASFAA Fall Workshop October 19, 2016

2. Lesson 1: Introduction to Direct Loans

3. Terminology Subsidized loans Unsubsidized loans PLUS loans
Loan origination

4. Direct Subsidized Loans
Need-based
Undergraduates only
No accrual of interest for most loans during certain periods
Repayment begins six months after borrower ceases at least half-time enrollment

5. Loss of Interest Subsidy on Prior Loans
Borrower subject to 150% subsidized loan limitation loses eligibility for subsidy once limit is exceeded and begins enrollment at least half time in:
Same undergraduate program
Undergraduate program of same or shorter length
Shorter undergraduate program when subsidized usage periods greater than program’s maximum eligibility period

6. Direct Unsubsidized Loans
Non-need-based
Undergraduate, graduate, and professional students
Interest accrues from date of disbursement
Repayment begins six months after borrower ceases at least half-time enrollment

7. Direct PLUS Loans Non-need-based
Parents of undergraduate students, and graduate/professional students
If adverse credit history, additional eligibility requirements
Interest accrues from date of disbursement
Repayment begins 60 days after fully disbursed, unless deferred

8. Direct Loan Interest Rates and Fees
Fixed or variable depending on when loan first disbursed
Fixed: No change for life of the loan
Variable: Rate fluctuates annually

10. The Application Process
School calculates loan eligibility, based on:
FAFSA application data
Determination of eligibility for other aid
Completion of Master Promissory Note
Dependency status

11. The Application Process
School may use professional judgment to award dependent student unsubsidized loan only, based on:
Parent refusal to complete FAFSA
Written documentation that parental support ended
Student portion of FAFSA completed

12. The Master Promissory Note (MPN)
Paper or electronic
Single- or multi-year feature
New MPN required in certain cases
Expires automatically after 10 years, or after 1 year if unused
Separate PLUS MPN may be required:
For more than one dependent student
From more than one parent for same student

13. PLUS Applications FAFSA and MPN required
Borrower with adverse credit history may obtain PLUS
If obtain PLUS despite adverse credit history, borrower must complete counseling
For multi-year use of MPN, borrow must confirm intent to borrow

14. Professional Judgment
School may use professional judgment to deny or reduce Direct Loan to a borrower
Case-by-case basis
Cannot discriminate
Document the decision
Communicate the decision in writing

16. Lesson 2: Factors for Calculating Loan Amounts

17. Loan Period Period of enrollment to which loan applies
Regulations define:
Minimum loan period
Maximum loan period
Cost of attendance (COA), expected family contribution (EFC), and estimated financial assistance (EFA) must match loan period

18. Undergraduate Program Type
Academic Year
Minimum Hours
Minimum Weeks in a Year
Undergraduate Program Type
Credit Hours
30 weeks
24 semester or trimester
36 quarter
Clock Hours
26 weeks
900 clock

19. Graduate/ Professional Program Type
Academic Year
Minimum Hours
Minimum Weeks in a Year
Graduate/ Professional Program Type
Credit Hours
30 weeks
Defined by the school
Clock Hours
26 weeks
Defined by the school

20. Standard Terms: Enrollment Status
Borrower must be enrolled at least half time
* Undergraduate standard term example

21. Nonstandard Terms
Anything other than semesters, trimesters or quarters
Modules are
nonstandard,
but may be
combined to
create a
standard term

22. Minimum Loan Period
For standard term credit-hour program and nonstandard credit-hour program with substantially equal terms: the term
For all other types of programs, the shortest of:
Length of student’s academic program
Length of the school’s academic year (AY)
Remaining portion of the student’s program

23. Minimum Loan Period Exceptions
Applicable only to:
Nonstandard term credit-hour programs with terms not substantially equal or any term less than nine weeks
Nonterm credit-hour programs
Clock-hour programs
Student changes schools or programs and loan periods overlap

24. Maximum Loan Period Usually one academic year
Exception: length of the student’s program, which is longer than one academic year

26. Cost of Attendance Tuition and Fees Room and board Books and supplies
Transportation
Miscellaneous personal expenses

27. Additional Cost Allowances
Loan fees
Dependent care expenses
Study abroad expenses
Cooperative education employment costs
Cost of obtaining first professional credential
Additional program-specific costs, if any

28. Expected Family Contribution
Measure of student’s and family’s ability to pay postsecondary expenses
Measure family’s financial strength or wealth
Assess a portion of family’s available financial resources

29. Estimated Financial Assistance
Aid the student can reasonably be expected to receive
In new calculations, include existing loans covering the same period

30. Evaluating Financial Need
COA
COA
COA
EFC
EFC
EFA
EFA
Financial Need
Remaining Need
Remaining Eligibility

32. Lesson 3: Direct Loan Amounts and Limits

33. Annual Loan Limits: Undergraduate
Subsidized Loan
Unsubsidized Loan
Base Annual Loan Limit

34. Annual Loan Limits: Undergraduate
Base Annual Loan Limit
Additional Unsubsidized Loan Limit
Total Annual Loan Limit

35. Annual Loan Limits: Graduate
Unsubsidized Loan
Total Annual Loan Limit

36. Aggregate Loan Limits $31,000 $57,500 ($23,000 subsidized) $138,500
Undergraduate
$31,000
($23,000 subsidized)
$57,500 ($23,000 subsidized)
Graduate
$138,500
($65,500 subsidized)
$224,000

38. Enrollment Patterns and Borrowing Frequency
Academic Year
Scheduled Academic Year
Loan #S1
Borrower-Based Academic Year
One Annual Loan Limit
Loan #B1
Loan #S2
Loan #B2
Loan #S3
Loan #B3

39. Enrollment Patterns and Borrowing Frequency
Scheduled Academic Year
Sequential
Standard term programs
Nonstandard term programs with substantially equal terms of at least nine weeks

40. Enrollment Patterns and Borrowing Frequency
Borrower-Based Academic Year
Floats with the student’s enrollment
Must always use a BBAY under certain conditions

42. 150 Percent Direct Subsidized Loan Eligibility Limitation
Encourages timely completion
Applies to “first-time borrowers”
Borrower may lose eligibility for subsidy

43. 150 Percent Direct Subsidized Loan Eligibility Limitation
Maximum eligibility period is 150% of the length of the student’s current program
Subsidized usage period reflects the borrower’s loan history

44. 150 Percent Direct Subsidized Loan Eligibility Limitation
Preparatory coursework
Simultaneous enrollment in more than one program
Dual degree programs
Baccalaureate degree completion programs
Selective admission associate degree programs
Teacher certification programs

45. 150 Percent Direct Subsidized Loan Eligibility Limitation
Days in loan period
Days in academic year (SAY or BBAY)
Subsidized usage period is a period during which subsidized loans were received
Prorated to reflect enrollment level
Rounded to nearest tenth of a year

46. 150 Percent Direct Subsidized Loan Eligibility Limitation
Remaining eligibility period is the time left before eligibility for subsidy is affected
Exception may apply to teacher certification programs

47. 150 Percent Direct Subsidized Loan Eligibility Limitation
Direct Unsubsidized Loan eligibility
After full amount of Direct Subsidized Loan eligibility received, based on remaining eligibility period calculation
Loss of interest subsidy
No remaining eligibility period left in current program, but enrolls again at least half time
Reaches 150 percent in current program, and enrolls at least half time in another undergraduate program
Enrolls at least half time in shorter undergraduate program with subsidized usage period greater than or equal to max eligibility period

49. Direct Loan Proration Programs shorter than an academic year
Programs equal to or greater than an academic year

51. Lesson 4: Calculating Direct Loan Eligibility

52. Calculating Direct Subsidized Loan Eligibility
Step 1
Calculating Direct Subsidized Loan Eligibility
COA
EFC
EFA
Subsidized Loan (eligibility)
Remaining Need

53. Subsidized Loan (eligibility)
Step 2
Calculating Direct Subsidized Loan Eligibility
Compare:
vs.
The lower amount is the student’s maximum subsidized loan eligibility
Subsidized Loan (eligibility)
Base Annual Loan Limit

54. Subsidized Loan (eligibility)
Step 2
Calculating Direct Subsidized Loan Eligibility
Compare:
vs vs.
The lowest amount is the maximum subsidized loan the school may originate
Subsidized Loan (eligibility)
Base Annual Loan Limit
Requested Loan Amount

55. 150 Percent Direct Subsidized Loan Limit
Example—Fernando

56. Determining Eligibility for Direct Unsubsidized Loan
Received all Direct Subsidized Loan funds for which student is eligible? No
Student may NOT receive a Direct Unsubsidized Loan
Yes
Calculate Direct Unsubsidized Loan eligibility

57. Total Annual Loan Limit
Step 3
Calculating Direct Unsubsidized Loan Eligibility—Undergraduate
Total Annual Loan Limit
Subsidized Loan (eligibility)
Unsubsidized Annual Limit Remaining

58. Calculating Direct Unsubsidized Loan Eligibility—Undergraduate
Step 4
Calculating Direct Unsubsidized Loan Eligibility—Undergraduate
COA
Includes Subsidized Loan amount from Step 2
EFA
Unsubsidized Loan (eligibility)
Remaining Eligibility

59. Calculating Direct Subsidized Loan Eligibility
Step 5
Calculating Direct Subsidized Loan Eligibility
Compare:
vs.
The lower amount is the student’s maximum unsubsidized loan eligibility
Unsubsidized Loan (eligibility)
Unsubsidized Annual Limit Remaining

60. Total Annual Loan Limit
Steps 1 & 2
Calculating Direct Unsubsidized Loan Eligibility—Graduate
COA
EFA
Unsubsidized Loan (eligibility)
Total Annual Loan Limit
Remaining Eligibility
vs.

61. PLUS Loan (eligibility)
Steps 1 & 2
Calculating Direct PLUS Loan Eligibility
COA
Includes student loan eligibility
EFA
PLUS Loan (eligibility)
Remaining Eligibility

63. Frequency of Annual Loan Limits
Scheduled Academic Year and Summer Terms
Summer as a header
Summer as a trailer

64. Borrower-Based Academic Year
BBAY required
BBAY optional

66. Transfer Students Borrowing frequency apply to students who transfer:
Between schools
Between academic programs at the same school
Academic credit may impact student’s grade level
150 percent Direct Subsidized Loan limitation applies

67. Programs Measuring Academic Progress by Number of Terms
Determining the prior school’s academic year
Determining remaining loan amounts and regaining eligibility
Summer terms for transfer students
Switching Between Scheduled Academic Years and Borrower-Based Academic Years, Trailers and Headers

68. Programs Measuring Academic Progress by Completion of Hours and Weeks
Transfer Between Schools
Transfer Between Programs at the Same School

70. Prorated Loan Limits 1
Is the student enrolled in either a program that is shorter than an academic year or a remaining period of enrollment? 2
If the program is an academic year or longer, is the student’s remaining period of enrollment shorter than an academic year? 3
What portion of the academic year remains to be completed? 4
What portion of the annual loan limit may the student borrow for the remaining period of enrollment?

71. Example: Nonterm Program
Nonterm clock-hour program
Academic year is defined as 900 clock hours and 26 weeks
Program consists of 600 clock hours and is scheduled to be completed in 13 weeks

72. Example: Standard Term Program
Standard trimester credit-hour program
Academic year is defined as 24 trimester credit hours and 30 weeks
Program consists of 18 trimester credit hours and is scheduled to be completed in two trimesters or 24 weeks

73. Proration and the 150 Percent Direct Subsidized Loan Limitation
Full-time enrollment
Three-quarter-time enrollment
Half-time enrollment
1.0
.75
.50

74. Example: Enrollment Proration of Subsidized Loan Usage
Semester based program
Scheduled academic year includes fall and spring
Enrollment equals half-time for fall and spring

75. Example: Standard Term Program
Semester based program
Scheduled academic year includes fall and spring
Receives annual loan limit for fall

77. Lesson 5: Loan Counseling

78. Entrance Counseling before borrowing Direct Loan for first time
Exit
Road to Direct
Loan Borrowing

79. Entrance Counseling Formats

80. Content of Entrance Counseling
Subsidized/unsubsidized Direct Loan borrowers:
Master promissory note (MPN)
Seriousness of repayment
Default consequence
Obligation to repay full amount
Monthly repayment examples
Effect of loan on other aid
Interest and capitalization
Definition of half time enrollment
Withdrawing from school
NSLDS
Contact information

81. Content of Entrance Counseling
First-time borrowers subject to 150 Percent Direct Subsidized Loan limitation:
Loss of Direct Subsidized Loan eligibility
Maximum eligibility period
Remaining eligibility period
Subsidized usage period
Responsibility for accruing interest
Impact of interest on total debt

82. Content of Entrance Counseling
Graduate PLUS borrowers:
Sample monthly repayments
Option to pay accruing interest
Loan comparisons
MPN
Seriousness of repayment
Default consequence
Obligation to repay full amount
Effect of loan on other aid
Interest and capitalization
Definition of half time
Withdrawing from school
NSLDS and contact information

83. Special Counseling for PLUS
PLUS borrowers with adverse credit have additional counseling requirements for each PLUS borrowed
Information on all Title IV programs
Borrower eligibility
Repayment requirements and options
Interest rates
Repayment calculators

85. Exit Counseling shortly before ceasing half-time attendance
Road to Direct
Loan Borrowing

86. Exit Counseling Formats

87. Content of Exit Counseling
Subsidized, unsubsidized, and graduate PLUS:
Average repayment
Repayment plans
Option to prepay
Effects of consolidation
Debt management
MPN
Default consequence
Repayment in full
Forgiveness/discharge
Deferment
Forbearance

88. Content of Exit Counseling
Subsidized, unsubsidized, and graduate PLUS:
Contact information
Copy of HEA 485(d) information
FSA Ombudsman availability
NSLDS loan status information
150% Direct Subsidized Loan limitation (affected borrowers only)
Available tax benefits

89. Borrower Information Collected by School for Servicer
Name
Address
Social Security Number
References
Driver’s license number/state
Permanent address
Next of kin address
Employer name & address
Loan Servicer
Borrower Information Collected by School for Servicer

91. Lesson 6: Direct Loan & FFEL Repayment Features

92. Grace Period
Enrolled
Grace
Repayment

93. Deferments In-school Graduate Fellowship Disability Rehabilitation
Unemployment
Economic Hardship
Military Service
Post-Active Duty Student
Deferred Interest Accrual

95. Forbearance
Mandatory
Mandatory Administrative
Administrative

96. Discharge False Certification or Unauthorized Disbursement by School
Death
Total and Permanent Disability
Bankruptcy
School Closure
False Certification or Unauthorized Disbursement by School
False Certification Due to Identity Theft
Unpaid Refunds by School to Loan Holder

98. Loan Forgiveness Teacher Loan Forgiveness Program
Public Service Loan Forgiveness Program
Civil Legal Assistance Attorney Student Loan Repayment Program
Service in Areas of National Need Loan Forgiveness Program

99. Consolidation
Combine certain student loans to simplify repayment (e.g., single payment, extended repayment period, lower interest rate, etc.)
May be used to resolve defaulted loan

101. Lesson 7: Direct Loan & FFEL Repayment Plans

102. Direct Loan & FFEL Repayment Plans
Repayment plan options are based on the loan type
Borrowers may choose between available repayment plans
There are advantages and disadvantages with each repayment plan
Prepayment without penalty

103. Direct Loan & FFEL Repayment Plans
Standard
Graduated
Extended
Income-Based

104. Direct Loan & FFEL Repayment Plans
Lower monthly payments typically increase overall cost

106. Direct Loan-Only Repayment Plans
Income-Contingent
Pay As You Earn (PAYE)
Revised Pay As You Earn (REPAYE)
Alternative

107. FFEL-Only Repayment Plan
Income-Sensitive