1. Craig D. Rorie | Dec. 2014 U.S. Department of Education 2014 FSA Training Conference for Financial Aid Professionals Basics of Direct Loans: Credit-Hours and Standard Terms Session 4

2. Agenda Direct Loan Basics Awarding Loans Academic Year Prorating Annual Loan Limits Transfer Students Resources 2

3. Direct Loan Basics 3

4. William D. Ford Federal Direct Loan Program (“Direct Loan” or “DL”) Loan types: Subsidized Stafford - Only for undergraduates Unsubsidized Stafford - For undergraduates, graduates, and professional students PLUS Loan for Graduate and Professional Students (unsubsidized) PLUS Loan for Parents (unsubsidized) - For parents of dependent students Regulations at 34 C.F.R.§685 (link from IFAP) 4

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6. Reminder: All general Title IV student eligibility requirements also apply Student must: Be enrolled at least half-time Meet eligibility requirements, except for: Preparatory coursework Teacher certification coursework School must: Determine Pell eligibility before loans Determine loan eligibility Subsidized eligibility before Unsubsidized No Adverse Credit history for PLUS borrowers Aggregate limits Other Title IV eligibility requirements General Direct Loan Requirements 6

7. Direct Loan Interest Rates – 2014-15 Direct Loans first disbursed on or after July 1, 2014 but before July 1, 2015: Undergrad Subsidized and Unsubsidized – 4.66% (cap 8.25%) Grad Unsubsidized – 6.21% (cap 9.5%) PLUS – 7.21% (cap 10.5%) Consolidated Loans – weighted average of underlying loans rounded up to the next higher one-eighth of one percent with no cap 7

8. Annual Loan Limits Year Dependent Undergraduate Independent Undergraduate And Dep. Undergrad whose parent can’t borrow PLUS Graduate/ Professional Student 1 st $5,500 (maximum $3,500 subsidized) $9,500 (maximum $3,500 subsidized) Up to $20,500 each academic year (maximum $8,500 subsidized) 2 nd $6,500 (maximum $4,500 subsidized) $10,500 (maximum $4,500 subsidized) 3 rd and Beyond $7,500 (maximum $5,500 subsidized) $12,500 (maximum $5,500 subsidized) 8

9. Aggregate Loan Limits Dependent Undergraduate $31,000 combined sub/unsub No more than $23,000 in subsidized Independent Undergraduate* $57,500 combined subsidized/unsubsidized No more than $23,000 in subsidized Grad/Professional $138,500 combined subsidized/unsubsidized No more than $65,500 in subsidized *Also for dependent students whose parents are unable to obtain a PLUS loan. 9

10. Awarding Loans 10

11. General Loan Awarding Principles Students are subject to annual and aggregate loan limits Student may not be eligible to borrow the full amount due to other aid in the student’s aid package Must award subsidized before awarding unsubsidized Base Amount may be all subsidized, all unsubsidized, or a combination Subsidized amount may not exceed the Base Amount Annual Loan Limit includes the Base Amount and Additional Unsubsidized 11

12. Subsidized Stafford Loan Eligibility Subsidized loans are need-based COA – EFC – EFA = Loan Eligibility (Up to the Annual Subsidized Amount) Interest is subsidized during: In-School Grace periods Deferments School must determine subsidized eligibility before eligibility for unsubsidized loans 12

13. Direct Subsidized Loan Limit Limits how many years a “first-time borrower” may receive subsidized loans Applies to first-time borrowers on or after July 1, 2013. A first-time borrower is one who: Has no balance on any FFEL or Direct Loan on July 1, 2013, or Receives first Direct Loan (any type) on or after July 1, 2013 When student has received Direct Subsidized loans for a period of time that is equal to 150% of the published length of the student’s current academic program. The student may not receive additional subsidized loans for enrollment in that program or any program of equal or lesser length 13

14. Determining When 150% Limit is Met Maximum Eligibility Period Total Subsidized Usage Periods Remaining* Eligibility Periods * Met when Remaining Eligibility Period equals 0 or < 0. For more information, check out these sessions: GS4 – Overview of Direct Subsidized Loan Limits 27 – 150% - A Life Cycle View 14

15. Unsubsidized Stafford Loan Eligibility Unsubsidized loans are not need-based COA – EFA = Unsubsidized Loan Amount (Not to exceed the annual loan limits) May May replace EFC Borrower responsible for all interest Eligibility determined after awarding subsidized loans Students can only receive an Unsubsidized loan (base or additional) for a loan period if awarded the full amount of eligibility for a Subsidized loan Students who are not awarded full Subsidized eligibility may not receive any Unsubsidized loans for the same loan period 15

16. Unsubsidized Loan Flexibility Dependent Undergraduates whose parents are unable to borrow PLUS may receive additional Unsubsidized loans (same amount as Independent Undergraduate) mayFAA may use Professional Judgment to award Unsubsidized loans to dependent students without parental data: Parent must certify cessation of support and refusal to complete the FAFSA School must document both items Not a Dependency Override (D/O) 16

17. PLUS Loans May May replace EFC Have no Annual/Aggregate limit Borrower must have no Adverse Credit School must offer Subsidized and Unsubsidized before awarding PLUS Amounts may not exceed COA – EFA For: Parents of dependent undergraduates Graduate/professional students 17

18. Subsidized Eligibility - Tom Subsidized Loan can be up to $3,500 of $5,500, but cannot exceed need EFA is: Pell of $4,580 Scholarship of $6,500 Remaining Need = $2,720 Tom is a 1st year Dependent Student (Annual Loan Limit =$5,550) COA$15,000 - EFC $1,200 - EFA$11,080 =Subsidized $2,720 Direct Loan COA – EFC – EFA = Need 18

19. Unsubsidized Eligibility - Tom Unsubsidized Loan can be up to $2,780 ($5,550 - $2,720 in sub), but total aid cannot exceed COA EFA is: Pell of $4,580 Scholarship of $6,500 Sub Loan of $2,720 Remaining Eligibility = $1,200 Tom is a 1st year Dependent Student (Annual Loan Limit =$5,550) COA$15,000 - EFA$13,800 =Unsubsidized$1,200 Direct Loan COA – EFA = Eligibility 19

20. Laura's Parent PLUS Eligibility Laura - 1 st year Dependent student: COA$20,000 -EFA$9,500 =PLUS eligibility$10,500 Loan limit = COA-EFA EFA now includes –$4,000 Pell –$3,500 Subsidized loan –$2,000 Unsubsidized loan EFC not considered Laura's parents may borrow $10,500 COA – EFA = Eligibility 20

21. Laura's Increased Unsubsidized Eligibility* COA – EFA = Eligibility Laura - 1 st year student (loan limit $9,500) COA$20,000 - EFA$7,500 = Remaining Need $12,500 EFA includes: –$4,000 Pell –$3,500 Subsidized loan EFC not considered Laura may borrow the lesser of: COA – EFA = $12,500, or $9,500 - $3,500 = $6,000 (Annual Loan Limit-Sub Limit = Eligibility) In an Unsubsidized loan *If Laura’s parents denied PLUS or if she were Independent 21

22. Academic Year 22

23. Scheduled Academic Year (SAY) Fixed period of time, usually corresponds to school’s official academic calendar Generally begins at same time each year – Fall/Winter/Spring or Fall/Spring Loan period may include only portion of SAY Programs offered in SAY may Borrower-Based Academic Year (BBAY) or alternate between SAY and BBAY provided academic years do not overlap Once SAY has passed, student is eligible for new annual loan limit Summer term may be either a “header” or “trailer” Summer mini-sessions may be treated as single term or individual terms 23

24. Borrower-Based Academic Year (BBAY) Does not have fixed beginning and ending dates “ Floats” with student’s attendance and progression BBAY must be used for any program that does not meet definition of program allowed to use SAY 24

25. Scheduled Academic Year: Standard Term-Based Program 2-Year Semester-Based Credit-Hour Program Academic year = 24 Credits and 30 Weeks FallSpring 1 st SAY $3,500* FallSpring 2 nd SAY $4,500* * Student in this example is a first-year dependent student who chooses to borrow only the base amount 25

26. Eligibility for New Annual Loan Limit: Example 1 FallSpring 1 st SAY $3,500 FallSpring 2nd SAY $3,500 Loan Period 1 Loan Period 2 $3,500* 1 st year student attends Fall and Spring Year 1: No loan in Fall; $3500 Loan in Spring. No Summer attendance. Fall Year 2 begins new Scheduled Academic Year: Student regains eligibility for new loan at appropriate grade level. In this example, the student did not advance to the next grade level and was eligible to borrow only at the Year 1 level. 26

27. Eligibility for New Annual Loan Limit: Example 2 FallSpring 2nd SAY $5,500 FallSpring 1 st SAY $4,500 Summer Loan Period 1Loan Period 2 Loan Period 3 $1,000* $3,500* $5,500* 2 nd Year Student – Summer Trailer Loan Period 1: Fall/Spring - $1,000 Fall only loan. Loan Period 2: Summer (trailer to Fall/Spring) – $3,500 loan in Summer loan. Loan Period 3: Fall/Spring – Loan Period 3 begins a new SAY and student regains eligibility for new loan at new grade level. 27

28. Who Can Use Either and/or Both? Credit-hour programs offered in a Scheduled Academic Year Traditional academic calendar with at least two semesters/trimesters or three quarters in fall through spring, OR Comparable academic calendar with nonstandard SE9W (substantially equal at least 9 week*) terms *Difference in length of terms is no more than two weeks 28

29. Borrower-Based Academic Year 1 (BBAY1) Standard term credit-hour programs and comparable academic calendar in nonstandard SE9W* may use BBAY1 BBAY must include same number of terms as the school’s definition of an academic year Student becomes eligible for new annual loan limit after BBAY calendar period has elapsed Floats with student’s enrollment, but student must attend first term of BBAY Mini-sessions must be combined as single term If BBAY includes Summer, may be s horter in weeks/hours than statutory academic year definition Full-time in Summer must be defined as 12 credits *Difference in length of terms is no more than two weeks 29

30. Grade Level Progression Students in standard or non-standard SE9W programs who advance to a higher grade level within academic year can receive additional funds Remember: Do not confuse grade level progression with eligibility for new annual loan limit School can develop own grade level standards but at minimum must equal the school’s defined Title IV academic year 30

31. BBAY 1: Standard Term Program Two Year Semester-Based Credit-Hour Program Academic year = 24 Credits and 30 Weeks Dependent Student 1 st BBAY $3,500 2 nd BBAY $4,500 Fall–15wksSpring–15wksSummer–10wksFall–15wks BBAY 1: 15 Weeks –Fall/Spring - $3500 loan. BBAY 2: Summer (10 Weeks)/Fall 15 Weeks - Student advances a grade level from Summer to Fall. - $4500 loan. 31

32. BBAY 1: Standard Term Program Two Year Semester-Based Credit-Hour Program Academic year = 24 Credits and 30 Weeks Dependent Student SpringSummer 1 st BBAY $3,500 FallSpring 2 nd BBAY $4,500 BBAY 1: Spring/Summer - $3500 loan. BBAY 2: Fall/Spring - Student advances a grade level from Fall to Spring. - $4500 loan. 32

33. Prorating Annual Loan Limits 33

34. Prorating Annual Loan Limits Proration required Proration required when a student is enrolled in a program that is shorter than a full academic year Proration required Proration required when a student is enrolled in a program that is one academic year or more in length, but is in a remaining period of study shorter than a full academic year Proration NOT required for: Proration NOT required for: PLUS loans Graduate students Teacher certification Preparatory coursework must not award more Regardless of loan proration, school must not award more than student’s loan eligibility 34

35. Programs Shorter than an Academic Year Multiply the applicable loan limit by the lesser of: Hours enrolled in program Hours in the defined academic year Or Weeks enrolled in program Weeks in the defined academic year 35

36. Program Shorter Than an Academic Year Program length is 22 credit-hours and 28 weeks Defined AY is 24 credit-hours and 30 weeks Hours: 22 =.92Weeks: 28 =.93 24 30 Annual Unsubsidized (above base) Annual Base Amount $2,000 (dependent student) or $3,500 x 22 = $3,208 $6,000 (independent student) 24 Applicable limit = 22 24 36

37. Remaining Periods Shorter than an AY Program length is 30 semester credits and 45 weeks Academic year defined as 24 semester credits and 30 weeks 12 credits and15 weeks 12 credits and15 weeks Year 1 Loan Limits 6 credits and 15 weeks Year 2 Loan Limits Remaining portion of program must be $4,500 x 6/24 = $1,125 prorated $ 2,000 x 6/24 = $ 500 37 Unlike proration for programs shorter than an academic year, only the hours are used

38. Transfer Students 38

39. Overlapping Academic Years – Transfer Students Must adjust for any loans received at previous school if academic year overlaps new school’s academic year Initially restricted to grade level annual loan limit at transfer school minus funds used at original school Ineligible for new loan limit until student completes academic year from original school Student is limited to remaining portion of annual loan limit at new until completion of the academic year from previous. When the student completes previous school’s academic year at new school, new loan period may begin If new loan period is less than a defined academic year then it must be prorated Must obtain prior school’s academic year dates 39

40. Transfer Student Example Original School 9/8/145/15/15 Withdraws 11/13/14 Sub: $1,750 Unsub: $1,000 Withdrawn Not Disbursed Loan Limit $3,500 / $2,000 FALLSpring Transfer School 11/17/145/22/15 Sub: $875 Unsub: $500 Sub: $875 Unsub: $500 Remaining $1,750 / $1,000 WinterSpring New Loan Limit 40

41. Resources 41

42. Resources FSA Handbook Volume 3, Chapters 1 and 5 Dear Colleague Letters and Electronic Announcements Federal Register dated May 16, 2013 (FR 28953) Site Links https://studentaid.ed.gov/types/loans https://studentloans.gov 42

43. Resources Direct Loan Training on IFAP www2.ed.gov/offices/OSFAP/training/specific.html Clock-Hour Issues recorded webinar www2.ed.gov/offices/OSFAP/training/downloads.html 43

44. Resources Research and Customer Care Center 800-433-7327 fsa.customer.support@ed.gov Reach FSA 855-FSA-4FAA -- 1 number to reach 10 contact centers! Campus-Based Call Center eZ-Audit COD School Eligibility Service Group CPS/SAIG Foreign Schools Participation Division NSLDS Research and Customer Care Center G5 Nelnet Total & Permanent Disability Team 44

45. Questions? 45