1 FFELP Loan Amount Eligibility Scenarios Below are various loan eligibility scenarios. In every case you will see that the aid offered never exceeds the cost of attendance. Remember that for both the Stafford and PLUS loans, the school must have in writing the amount that they would like to borrower for their respective loans. Applicants are not required to borrower the maximum loan eligibility. The information below reflects the increases made to borrower eligibility through the Ensuring Continued Access to Student Loans Act of Determining Subsidized Stafford Loan Eligibility The formula to determine eligibility for a subsidized Stafford loan is as follows: Cost of Attendance - Expected Family Contribution Financial Assistance = Calculated Need (Loan Eligibility) The subsidized federal Stafford loan is offered only to meet the calculated need. The amount will be lesser the annual limit or the calculated need, whichever is less. When the calculated need is zero or less, the student is eligible only for an unsubsidized Stafford loan. * Financial assistance includes any other funds received or awarded by the institution to cover the cost of the student s education. This assistance could consist of institutional scholarships, tuition waivers, work-study, private scholarships, private alternative loans or Canadian aid awarded due to dual citizenship. Determining Unsubsidized Stafford Loan Eligibility The formula to determine eligibility for an unsubsidized Stafford loan is as follows: Cost of Attendance Financial Assistance = Calculated Need An unsubsidized Stafford Loan is non-need-based. It may consist of the annual loan limits (for first through fifth year grade levels) as well as additional unsubsidized loan funds for independent students. As of July 1, 2008, all undergraduate borrowers, regardless of dependency, can receive an additional $2,000 in unsubsidized Stafford loan. The formula used to determine the student s unsubsidized eligibility does not include the expected family contribution (EFC). Like the subsidized Stafford loan formula, the amount of unsubsidized funds awarded may never exceed the student s total cost of attendance. Dependent Undergraduate Students A. $24,705 COA $18,705 EFC = $6,000 Calculated Need First year: $3,500 subsidized, $2,000 unsubsidized. Second year: $4,500 subsidized, $2,000 unsubsidized. Third fifth year: $5,500 subsidized, $2,000 unsubsidized. This student has a calculated need up to $6,000. The amount of loan is based on grade level. In this example, a student enrolled in the first year of a program is eligible for no more than $5,500, only $3,500 of which can be subsidized.
2 B. $24,705 COA $22,705 EFC = $2,000 Calculated Need First year: $2,000 subsidized, $3,500 unsubsidized, total $5,500. Second year: $2,000 subsidized, $4,500 unsubsidized, total: $6,500. Third fifth year: $2,000 subsidized, $5,500 unsubsidized, total: $7,500. Dependent Stafford loan borrowers may receive a combination of subsidized and unsubsidized funds, depending on the amount of eligibility. The above example illustrates a calculated need of $2,000. In this example, the borrower can receive the remaining $1,500 as unsubsidized as well as the additional $2,000 in unsubsidized loan funds. C. $24,705 COA $2,705 EFC $20,000 Scholarship = $2,000 Calculated Need All grade levels: $2,000 subsidized, $2,705 unsubsidized, total $5,500. If your students receive outside or even institutional funding for their studies, that amount should be entered into the eligibility equation for Stafford loan funding. Regardless of the grade level, the effect is the same: Stafford loan recipients may receive only an amount that equals the lesser of the cost of attendance less aid received and their maximum annual loan limit. D. $24,705 COA $28,705 EFC = -$4,000 Calculated Need First year: $5,500 unsubsidized. Second year: $6,500 unsubsidized. Third fifth year: $7,500 unsubsidized. Whenever the EFC is greater than the cost of attendance, the student is not eligible for a subsidized loan. The student still could borrow up to the annual loan limit/grade level maximum in unsubsidized funds or up to the cost of attendance, whichever is less. In this example, the student could receive a base amount as an unsubsidized loan, as well as the additional $2,000 unsubsidized loan amount. E. $24,705 COA $55,705 EFC $20,000 Scholarship = -$51,000 Calculated Need All grade levels: $4,705 unsubsidized. Just as in the previous example, a borrower with this calculation would not be eligible for a subsidized loan. The amount of additional aid the student is awarded would affect the students subsidized loan eligibility. As in Example C, the internal or external scholarship for $20,000 reduces eligibility regardless of the grade level. Independent Undergraduate Students To determine if a student is independent for the purposes of receiving U.S. federal financial aid, the student must meet at least one of the following criteria: At least 24 years old by December 31 of the award year. Enrolled in a master s or doctorate program. Married (includes students who are separated but not divorced).
3 Has a child who receives more than half of his or her financial support from the student. Has a dependent other than a child or spouse who lives with the student and receives more than half of his or her financial support from the student. An orphan or ward of the court, or was a ward of the court until age 18. A veteran of the U.S. Armed Forces. On active duty in the U.S. federal military or National Guard as of September Is determined to be an unaccompanied youth who is homeless at the time that the FAFSA is completed by any of the following agents: High school or school district homeless liaison. Director of an emergency shelter program funded by the U.S. Department of Housing and Urban Development. Director or a runaway or homeless youth basic center or transitional living program. If the student meets at least one of the criteria, he or she is considered independent according to federal student aid standards and is therefore eligible for additional unsubsidized Stafford loans. The total amount of additional unsubsidized funds is based on two other factors. The first is the following formula: Cost of Attendance Financial Assistance = Additional Unsubsidized Eligibility The expected family contribution is not included in this calculation. The additional loan amount will either meet all or a portion of the calculated need, as demonstrated in the examples below. The second factor in determining additional unsubsidized eligibility is the grade level of the student. An independent student enrolled in the first or second year of an undergraduate program is eligible for $4,000 in additional unsubsidized funds. An independent student enrolled in the third or subsequent year of an undergraduate program is eligible for $5,000 in additional unsubsidized funds. A. $24,705 COA $18,705 EFC = $6,000 Calculated Need First year: $3,500 subsidized, $6,000 unsubsidized. Second year: $4,500 subsidized, $6,000 unsubsidized. Third fifth year: $5,500 subsidized, $7,000 unsubsidized. This borrower has a calculated need of $6,000. The maximum in both subsidized and unsubsidized Stafford loans are available to the student, as well as additional unsubsidized funds. Once again, the total amount is based the student s grade level and the additional unsubsidized formula. Using this example, this first-year student could receive $3,500 in subsidized Stafford loans and $6,000 in additional unsubsidized funds. B. $24,705 COA $22,705 EFC = $2,000 Calculated Need First year: $2,000 subsidized, $7,500 unsubsidized. Second year: $2,000 subsidized, $8,500 unsubsidized. Third fifth year: $2,000 subsidized $10,500 unsubsidized. Independent students also may borrow a combination of subsidized and unsubsidized loans. In this scenario, the subsidized Stafford loan is determined based on the calculated need of $2,000. The student could also request an additional unsubsidized loan amount equal to the student s maximum eligibility. C. $24,705 COA $55,705 EFC = $31,000 Calculated Need
4 First year: $9,500 unsubsidized. Second year: $10,500 unsubsidized. Third fifth year: $12,500 unsubsidized. For all Stafford loan scenarios, if a borrower has an EFC that is greater than the cost of attendance, the borrower qualifies only for an unsubsidized loan. Using this example, the firstyear student would be eligible for $6,625, all of which is unsubsidized. Determining Parent PLUS Loan Eligibility The parent PLUS loan is designed to help parents meet their portion of the EFC. Parent PLUS loan funds combined with the student s other financial assistance may never exceed the cost of attendance. Parents may borrow only for their dependent undergraduate students. The parent borrower s eligibility is not based on financial need. Although the school may certify eligibility for a PLUS loan, the lender may deny a loan based on regulatory requirements related to adverse credit. Therefore, a credit check is performed every time the parent applies for a PLUS loan. The formula for determining PLUS eligibility is: Cost of Attendance All Aid Received = PLUS Eligibility $24,705 COA $2,625 EFC = $22,080 PLUS Eligibility (Stafford + Parent PLUS Loan = Cost of Attendance) A parent has decided to borrow PLUS loans to meet education costs not covered by a Stafford loan taken out by the parent's dependent. In this situation, the aid offered will be equal to the cost of attendance. Once the cost of attendance has been reached, neither the student nor the parent would be eligible for additional aid. $24,705 COA $0 EFC = $24,705 PLUS Eligibility Parents can also borrow the full cost of attendance. In this scenario, the student chooses not to take out Stafford loans. After the PLUS loan has been disbursed to the family, the Stafford loan no longer is available because the total costs have been covered by the PLUS loan. If a parent is denied a PLUS loan by the lender, the school may offer an additional unsubsidized Stafford loan to the student. The school must receive written confirmation from the lender of this denial before adjusting the student s aid package. Regardless of the amount that the parent requested, the student is eligible only for either the maximum annual unsubsidized Stafford loan the cost of attendance, whichever is less. Graduate Students The maximum Stafford loan that graduate students can receive is $20,500, of which only $8,500 can be subsidized. Graduate students are independent regardless of their age. Parental support is not prohibited, but parent income is not requested on the FAFSA for graduate students. The parents of a graduate student may not borrow PLUS loans, although graduate students may take out PLUS loans on their own behalf. A. $34,705 COA $0 EFC = $34,705 Calculated Need $8,500 subsidized; $12,000 unsubsidized. $14,205 unmet need.
5 This graduate student s low income determined an EFC of zero. Your institution would award the student $8,500 in subsidized funds and $12,500 in unsubsidized funds. The remaining calculated need of $14,205 would need to be covered by other resources such as a Graduate PLUS loan or a private loan. B. $34,705 COA $0 EFC $20,000 Graduate Fellowship = $14,705 Calculated Need $8,500 subsidized; $6,705 unsubsidized. Graduate student loans are subject to the same general rules as loans for undergraduate students. Because the borrower received additional aid, the borrower's loan eligibility is decreased. The total amount equals the borrower's cost of attendance. C. $34,705 COA $0 EFC $30,000 Grad Fellowship = $4,705 Calculated Need $4,705 subsidized; $0 unsubsidized. In this example, the amount of other financial assistance significantly decreased the student s Stafford loan eligibility. The remaining calculated need could be covered by a subsidized Stafford loan. Because the student's estimated costs are covered and because there is no EFC to offset, an unsubsidized loan is not offered. D. $34,705 COA $55,000 EFC = -$20,295 Calculated Need $20,500 unsubsidized. If the graduate student s EFC exceeds the cost of attendance, the student can receive only the unsubsidized Stafford loan. The student could request a Graduate PLUS Loan for up to the remaining cost of attendance. Determining Graduate PLUS Loan Eligibility Graduate and professional students may take out PLUS loans. To qualify, students must submit a FAFSA, be enrolled at least half time in an eligible degree program at a participating school, be creditworthy, and meet all other requirements of the loan program. There are no annual or aggregate PLUS loan limits, so students may borrow up to the remaining cost of attendance. Before awarding Grad PLUS loans, financial aid officers must first award Stafford loans. Once the award is offered, the student may choose to accept any combination of subsidized Stafford, unsubsidized Stafford and PLUS loans from the award, or they may choose to borrow only Grad PLUS loans. Students are not required to borrow the Stafford loans to receive a Grad PLUS loan. As with the parent PLUS loan, the Grad PLUS loan is made copayable to the student and the school, and is disbursed in multiple installments according to the scheduled terms within the loan period. Students continuously enrolled at least half time receive in-school deferment. Repayment on PLUS loans begins six months after the graduate student falls below half-time status. Interest accumulates beginning the first day of disbursement and will be added to the principal.
6 The formula to determine Grad PLUS eligibility is: Cost of Attendance Financial Assistance = Remaining Calculated Need The formula to determine Grad PLUS Loans omits the EFC. When combined, the total amount of subsidized and unsubsidized Stafford Loan and Grad PLUS loan funds awarded should equal the total cost of attendance or the student s requested loan amount, whichever is less. A. $34,705 COA $0 EFC = $34,705 Calculated Need $8,500 subsidized Stafford; $20,000 unsubsidized Stafford; $14,205 Grad PLUS In this example, the student is eligible for the maximum annual loan limit for Stafford loans of $20,500 ($8,500 subsidized and $20,000 unsubsidized). The student s remaining need of $14,205 can be borrowed in Grad PLUS loans. B. $34,705 COA $30,500 EFC = $4,205 Calculated Need $34,705-$30,500-EFC - $4,205 subsidized Stafford; $16,295 unsubsidized Stafford; $14,205 Grad Plus This student s EFC is enough to reduce eligibility for subsidized funds significantly. The student qualifies for only $4,205 in subsidized funds and may borrow up to the $20,500 Stafford loan limit in unsubsidized funds. The student could borrow the remaining $14,205 in a Grad PLUS loan. Alternative/Private Loans Similar to PLUS loans, the student can use alternative/private education loans to meet education costs. Because alternative loans are non-federal aid, a borrower can use these funds to offset the EFC. Unlike the federal loan programs, this loan is based solely on the borrower s creditworthiness. If your institution becomes aware that a student, or parent on behalf of a student, has received alternative/private education loan funds, the institution must consider these funds in the formula before determining a student s Stafford or PLUS loan eligibility. If the student s EFC is zero, the alternative/private loan would be considered financial assistance. When the student s EFC is greater than zero, the alternative/alternative loan is considered financial assistance or used to offset or replace the EFC, or it could be a combination of both. The following is an example in which a dependent undergraduate received an alternative/private loan. A dependent first-year undergraduate student s family takes out a $10,000 alternative/private loan for the academic year. The formula prior to determining Stafford or PLUS loan eligibility is: $13,000 EFC $10,000 Alternative Loan = $3,000 Remaining EFC Need The private alternative loan replaces all but $3,000 of the EFC. So the eligibility formula would look like this: $24,000 COA $3,000 EFC $10,000 Alternative Loan = $11,000 Remaining EFC Need
7 A first-year dependent student would be eligible for $5,500 in subsidized funds, and the parent could also borrow up to $9,375 in PLUS loans. The combined total aid offered would be based on: $10,000 Alternative + $5,500 Stafford + $10,500 PLUS = $26,000 COA Proration Any time an undergraduate student is enrolled in a program that is less than an academic year in length or enrolled in a program that is greater than an academic year but the remaining portion left to complete the program will occur in less than an academic year, you are required to prorate. Students meeting this definition are eligible to receive only a prorated portion of their annual Stafford loan limits or their remaining calculated need, whichever is less. There are two formulas used to determine the student s prorated eligibility for subsidized and additional unsubsidized Stafford loans; one for programs less than an academic year and one for programs greater than an academic year. Programs less than an academic year must consider the length of the program as well as the number of credits in the program and award the lesser amount. There are two calculations that must be determined. First you multiply the credits in your short program by the first-year student Stafford annual loan limit, then divide that amount by the number of credits in your standard academic year. Example: 12 Semester Credits X $5,500 divided by 24 Semester Credits = $2,750 Next you must multiply the number of weeks in your short program by the first year annual loan limit, then divide that amount by the number of weeks in your standard academic year. Example: 15 weeks X $5,500 divided by 36 weeks = $2,292 Prorated Maximum Programs greater than an academic year in length compare only the number of credits remaining multiplied by the student s annual grade level loan limit divided by the number of credits in your defined academic year. 12 Credits Remaining X $5,500 divided by 24 Academic Year Credits = $2,750 Prorated Maximum More information regarding proration can be found in the Federal Student Aid Handbook. Questions regarding this procedure can be directed to your guarantor contact. Return of Title IV Funds Students who receive Stafford loans receive the full benefit of those funds as long as they remain enrolled within the academic year. If a student receiving a Stafford loan is attending a term-based institution, and that student withdraws before the end of the term or enrollment period, the school must perform a Return of Title IV funds (R2T4) calculation. This calculation determines how much of the institutional costs paid by the
8 Stafford loan were earned based on the number of days the student remained enrolled compared to the number of days in the payment period or enrollment period. An R2T4 calculation is not required if the student simply drops classes, even if the student drops to less than half-time status. A withdrawal is considered to have occurred only when the student ceases to be enrolled in any classes for that term. You can refer to the Federal Student Aid Handbook for additional information.