1. Federal Direct Loan Programs
Dan Robinson
Campus Director of Financial Aid
Pace University

2. What is it Really Called ?…
(William D Ford) Federal Direct Loan of the (Robert) Stafford loan programs

3. LOAN TYPES Subsidized Stafford Loan Unsubsidized Stafford Loan
PLUS /Grad PLUS
Perkins Loan – R.I.P

4. Subsidized Loans Eligibility based on financial need
Cost of Attendance
- Expected Family Contribution
- Other Financial Assistance
= Maximum Loan Amount (subject to annual and aggregate limits)
Interest “subsidized” (i.e. paid by the federal government for the student) while student is enrolled at least half-time and for appropriate grace period

5. Subsidized Loans – Interest Rates
Fixed for the life of the loan
4.66% for loans first disbursed July 1, 2014 to June 30, 2015
4.29% for loans first disbursed July1, 2015 to June 30, 2016
3.76% for loans first disbursed July 1, 2016 to June 30, 2017
4.45% for loans first disbursed July 1, 2017 to June 30, 2018
5.045% for loans first disbursed July 1, 2018 to June 30, 2019
The origination fee is currently 1.062% - this fee will change effective October 1 each year.
The interest rate is calculated each year based on the 10-year Treasury Bill rate plus 2.05 percent and is capped at 8.25%

6. Unsubsidized Stafford
Eligibility not based on financial need, but total aid cannot exceed Cost of Attendance (COA)
Subject to annual and aggregate limits
Interest not “subsidized”(Accrues while student is in-school)
Interested capitalized at repayment
For , fixed rate of 5.045% for undergraduates; 6.595% for graduates
Single promissory note for both Sub and Unsubsidized loans
NOTE: Does not consider the EFC

7. Parent Loan for Undergraduate Students (PLUS)
Parent is Borrower
Can be biological, adoptive or current step-parent
Non-custodial, biological or adoptive parent can be borrower
Eligibility – Student must file the FAFSA
Simple Credit Check performed on borrower – good for 180 days
Not based on financial need
Total aid cannot exceed COA
Cost of Attendance
- Other Financial Assistance
= Maximum Loan Amount (not to exceed COA)

8. PLUS (UNDERGRAD)
Interest not “subsidized” (Accrues while student is in-school)
Yearly fixed rate of 7.595% (through June 30, 2019)
4.248% origination fee (through Sept. 30, 2019)
Borrower may defer payments while student in-school
Starting with PLUS disbursed on/after July 1, 2015:
Loan Counseling mandatory for any PLUS applicant who has an adverse credit history
Credit check for a PLUS Loan applicant will remain valid for 180 days (prior years was 90 days)

9. Graduate PLUS Loan
Graduate Student is Borrower. Parent is not involved
Loan is modeled after Undergraduate PLUS, but without the parent
Eligibility not based on financial need, cannot exceed COA
Not subsidized (accrues interest while in-school)
7.595% fixed interest rate – through June 30, 2019
4.248% origination fee – through Sept. 30, 2019

10. Federal Perkins Loan
The Federal Perkins Loan Program was a school-based loan program for undergraduate students with exceptional financial need. This loan program expired on September 30,2017

11. Basic Eligibility
To receive any federal loan (including the parent loan), the STUDENT must file the FAFSA and meet the “eligible student” definition including:
Citizenship, selective service registration, matriculation, etc.
Not be in default on Title IV loans or owe a repayment on any federal grant
Be enrolled at least half-time in an approved program leading to a degree or certificate

12. PLUS Eligibility
A parent can receive a Parent Loan as long as the parent & student both meet the basic eligibility requirements.
The PLUS borrower must:
Be the biological or adoptive parent, or stepparent
Be a U.S. citizen or eligible non-citizen
Have a valid social security number
An undergraduate PLUS Loan can ONLY be used to pay for the educational expenses for a dependent undergraduate child

13. Credit Eligibility
Direct student loan borrowers do not need to pass a credit check to receive a Stafford Loan (or consolidation loan)
PLUS/Grad PLUS borrowers must not have an “adverse” credit history
Parent borrowers cannot be in default on any of their own federal student loans

14. PLUS Loans & Adverse Credit
If a parent is denied a PLUS loan, the parent may:
Secure an endorser
Appeal the decision
Choose to do federal loan counseling
If a parent is still denied a PLUS loan after appealing the lender’s decision, the FAO can certify an additional unsubsidized loan for the student

15. Best money first…
‘Gift aid’ is awarded prior to awarding loans
Subsidized loans are always awarded first with any remaining eligibility given in an unsubsidized loan
PLUS/Alternative loans are determined last
Some award letters include the maximum PLUS/Alt loan amount – each school’s award letter differs

16. Annual Loan Limits – U/G
Dependent Undergrads whose parents can borrow PLUS
Subsidized Base
Unsubsidized
Base
Total Sub/
Aggregate Limit
1st year
$3,500
$2,000
$5,500
Dependent Undergrads:
Sub = $23,000
Total = $31,000
2nd year
$4,500
$6,500
3rd year
$7,500
4th & 5th year
Graduate
$20,500
Grad Students:
$138,500

17. Annual Loan Limits – U/G
Independent Undergraduates & Dependent Students whose parents cannot borrow PLUS
Subsidized/
Unsubsidized Base
Add’l
Unsubsidized
Total Subsidized/
Aggregate Limit
1st year
$3,500
$6,000
$9,500
Sub = 23,000
Total $57,500
2nd year
$4,500
$10,500
3rd year
$5,500
$7,000
$12,500
4th & 5th year

18. Graduate Loan Limits Per year $20,500 Aggregate Limit
Independent Undergraduates & Dependent Students whose parents cannot borrow PLUS
Subsidized
Unsubsidized
Aggregate Limit
Per year
$20,500
$138,500 – combined UG and Grad.
No more than $65,500 can be subsidized*

19. Prorating Annual Loan Limits
Undergraduate Loans ONLY
Two situations require loan pro-ration:
The student’s academic program is shorter than a full academic year in length
The program is a year or more in length, but the student remaining period of study is shorter than a full year (Student will be graduating in less than one year)

20. Programs Shorter Than a Full Academic Year
When a student is enrolled in program shorter than a full academic year, you must use a relative pro-ration that is based on the lesser of:
# of terms or clock hours enrolled
# of terms, clock hours in the academic year Or
# of weeks enrolled
# of weeks in the academic year

21. Programs with Remaining Period of Study Shorter Than an Academic Year
When a student is enrolled in a program that is an academic year or more but the remaining period of study is shorter than an academic year; proportional pro-ration must be used:
# of credit or clock hours enrolled
# of credit or clock hours in the academic year
Ex: 12/24 = ½ of annual award
$5,550/2 = $2,775

22. Prorating Annual Loan Limits
You may readjust a prorated loan when a student drops or adds after originating a loan, but it is not required.

23. Academic Year Concept
Since each student’s annual loan eligibility is based on an academic year, we must define the academic year for each student
A Scheduled Academic Year (SAY) is used to standardize when the majority of a school’s students attend in a similar pattern (usually fall-spring).
A standard academic year is made up of 30 weeks of instruction.

24. Two Types of Academic Years…
Scheduled Academic Year (SAY)
Most “traditional” schools use a SAY
Only term based credit-hour programs can use SAY
A SAY has defined beginning and ending points for all students
Addition of a Summer term as a “header” or “trailer” is permissible in SAY
BBAY (huh, what’s that?) can be used at a SAY school for selected individuals

25. Two Types of Academic Years…
Since you asked on the previous slide….
Borrower-Based Academic Year (BBAY)
Clock-hour and non-term credit-hour programs must use BBAY
A BBAY must include at least 30 weeks of instruction
A BBAY is specific to an individual student
The beginning point of a BBAY is when the student begins classes, or immediately after the previous BBAY ends

26. Loan Eligibility and Academic Year
Generally, a student who has received the annual loan limit cannot receive another loan until the following academic year
A student can receive additional funds if:
The student moves to a higher grade level during the academic year
The student dependency status changes during the academic year – not a likely scenario

27. Loan Period vs. Academic year
For most students, the “Loan Period” (on the loan certification) is the SAME as the academic year
The minimum loan period is the shortest of these periods:
The academic year (AY) as defined by the school
The period between the beginning of the student AY and the end of the student program (i.e. Dec. grads)
The remaining portion of the SAY (i.e. spring starts)

28. LOAN PERIOD CAN NEVER EXCEED TWELVE MONTHS
Maximum Loan Period
The maximum loan period is normally the school academic year, but the
LOAN PERIOD CAN NEVER EXCEED TWELVE MONTHS

29. Subsidized Usage Limit Applies (SULA) – 150% rule
I apologize in advance…
A borrower’s Maximum Eligibility Period is a period of time that is equal to 150% of the published length of the student’s academic program
Only for Sub loans
More complicated if student transfers or has inconsistent enrollment history (part-time/full-time)

30. Certifying Eligibility
A loan cannot be certified for more than:
The amount borrower has requested
The student’s unmet need (sub loan only)
The student’s Cost of Attendance (COA)
The student’s maximum eligibility for the academic year/loan period

31. Borrower Confirmation
The borrower confirmation process is used to ensure that a student wants to borrow loans in subsequent academic years
The confirmation process can be:
Active - The loan will not be disbursed until the borrower accepts the proposed loan amounts and types, or requests changes to the package
Passive - The loan will be disbursed unless the student declines the loan

32. Certification & Verification
If a student has been chosen for verification, a loan origination can be processed before the verification is complete as long as you believe the information on the FAFSA is correct.

33. Multi-year use of the MPN
A MPN is valid for up to 10 years from the 1st anticipated disbursement date
PLUS note is not multi-year if a co-signer is required

34. What is a Disbursement???
Disbursement is the delivery of funds (money) to the student account at the school.
Federal regulations prohibit those that award aid (FA staff) from participating in the actual disbursement of funds. Financial Aid professionals usually set the rules and conditions under which the disbursement can be processed by the Bursar

35. Rules for Disbursements
Multiple Disbursements - In most cases, loan funds must be disbursed in at least two installments with no installment exceeding 1/2 of loan amount.
Schools with low default rates are exempt from this rule for single-term loans
30 Day Delay - Schools are required to wait 30 days after the start of classes before disbursing to first time, first year undergraduates.
Schools with low default rates may be exempt from this rule
A disbursement cannot be made earlier than ten days before the beginning of the loan period/term

36. Origination fees must be included in student “Cost of Attendance”
Can be actual or an average
Loan Origination fees reduce the amount of actual funds sent to the school to be applied towards the university bill
Loan origination fees are updated for October 1 each year for federal loans

37. Loan Counseling
Completion of Loan Entrance Counseling (LEC) is required prior to the first disbursement
LEC helps students understand their rights and responsibilities with regard to their student loans
Each school determines if LEC is yearly or only once
Must be done for each school student attends
School chooses the method of LEC:
In –person
Other web-based services (Mapping Your Future)

38. Loan Counseling Must Include:
Obligation to repay regardless of education outcome
Rights and responsibilities
Repayment terms
Consequences of default
For all schools – average loan indebtedness and monthly repayment

39. Recommended Elements of Entrance Counseling
Communication with Servicer (Address changes, changes in enrollment)
Deferments, forbearance and cancellation options
Consolidation
New: First time borrowers as of July 1, 2013 – 150% limit for subsidized loans

40. Exit Counseling MUST INCLUDE:
Detailed information of each payment plan
Debt management strategies
Pre-payment options
Terms and conditions of all forgiveness programs facilitated by ED
Terms and conditions of forbearances
Consequences of default
Effects of consolidation
Tax benefits available to borrowers
Notice of availability of the National Student Loan Database (NSLDS)

41. Questions?