The New 150% Limit on Subsidized Direct Loans - How it Affects Both Your School and Your Students

Transcription

1 The New 150% Limit on Subsidized Direct Loans - How it Affects Both Your School and Your Students U.S. Department of Education April 23, 2014 Laws and Regulations 2 1

2 Higher Education Act of 1965 has been Amended Resulting from the Moving Ahead for Progress in the 21st Century Act (MAP-21) 150% Direct Subsidized Loan Limit Interim Final Rule Published May 16, 2013 Comment Period Ended on July 1, 2013 Revised Final Rule published on January 16 Electronic Announcement Posted on January 17 3 MAP-21 Limits the length of time a student borrower may enjoy the subsidy on a Direct Loan Intent is to encourage students to progress through their academic programs in a timely manner Intent is to save money 2

3 Helpful Definitions and Terms 5 Subsidized Direct Loan DL that ED pays, or subsidizes, the interest while the borrower is in school at least half time Also for certain other statuses Borrower must have need to qualify COA-EFC=Need The subsidized interest is a benefit to the borrower and does not get repaid Unsubsidized DL ED does not pay the interest Either paid by borrower while in school or capitalized into the loan itself and is paid by borrower in repayment 3

4 SULA Subsidized Usage Limit Applies Used to describe applicable loans and borrowers Definition of Academic Year Title IV Academic Year The AY defined for Title IV purposes Minimum of 900 clock hours AND 26 weeks of instruction Minimum of 24 semester/36 quarter credit hours and 30 weeks of instruction AY Used to determine DL Annual Loan Limits Borrower Based Academic Year (BBAY) Scheduled Academic Year (SAY) SULA usually uses the second definition One exception 4

5 First-Time Borrower and Consequences 9 First-Time Borrower Applies only to first-time borrowers as of July 1, 2013: Student who has no outstanding balance on a FFEL or Direct Loan when receiving a Direct Loan on or after July 1, Example A Student has never borrowed before Student enrolls in August 2013 Example B Student receives a Direct Loan Student is a first-time borrower Student received FFEL and Direct Loans prior to July 1, 2013 Student pays off all FFEL and Direct Loans in 2015 Student enrolls in 2017 Student receives a new Direct Loan in 2017 Student is a firsttime borrower 10 5

6 Consequence 1: Eligibility Loss Borrower loses eligibility for additional Direct Subsidized Loans when borrower has received Direct Subsidized Loans for 150% of their current academic program Generally measured in time, not dollars. If eligibility is lost, borrower still eligible for Direct Unsubsidized Loans 11 Consequence 2: Interest Subsidy Loss Lost eligibility due to 150% limit Did not complete program Enrolls in program of equal or shorter length Subsidy loss Based on enrollment, not borrowing or requesting aid 12 6

7 First Consequence: Loss of Eligibility for Further Subsidized Direct Loans 13 Determining When Eligibility is Lost Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 150% limit is met and further eligibility is lost when Remaining Eligibility Period is zero (or less). 14 7

8 Maximum Eligibility Period Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 150% limit is met (eligibility is lost) when remaining eligibility period is zero (or less). 15 Maximum Eligibility Period Maximum eligibility period is 150% of the published length of borrower s current or upcoming academic program Varies by program Multiply published length of program by 1.5 Measured in academic years or portions ED will calculate using school-reported information 16 8

9 Converting Months/Weeks To Years This is the exception where Title IV AY is used 17 Subsidized Usage Period Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 150% limit is met (eligibility is lost) when remaining eligibility period is zero (or less). 18 9

10 Subsidized Usage Period A Subsidized Usage Period is the period of time for which a borrower receives a Direct Subsidized Loan Calculated loan-by-loan Measured in academic years or portions Rounded, up or down, to nearest tenth of a year Includes only periods when Direct Subsidized Loan received ED will calculate using school-reported information 19 Calculating Subsidized Usage Period Loan Period: Period of enrollment for which loan is intended Academic Year: Period used to track annual loan limits (SAY/BBAY) 20 10

11 Example 1a: Usage-Credit Hour Program is semester-based. Scheduled academic year includes the fall and spring semesters. Student receives one term loan for fall semester only. Begin Date End Date Number of Days Loan Period August 27, 2013 December 21, Academic Year August 27, 2013 May 17, Subsidized Usage Period = 117/264 =.44 Years Rounded to.4 Years 21 Example 1b: Usage-Clock Hour Program is 600 clock hours and 20 weeks of instruction. Scheduled academic year is 900 clock hours and 26 weeks of instruction. Student receives a subsidized DL for the program. Begin Date End Date Number of Days Loan Period August 27, 2013 January 13, Academic Year August 27, 2013 February 24, Subsidized Usage Period = 140/182 =.76 Years Rounded to.8 Years 22 11

12 Enrollment Status Exception Under interim regulations, two exceptions occurred: Annual Limit Exception Part-time Exception If the Annual Limit exception applied, the Part-time Exception didn t The Final regulations both exceptions apply Clock hour and Non-term credit hour students are all considered to be full time for this purpose 23 Annual Loan Limit Exception Only circumstance where dollars are considered is when a student receives a Direct Subsidized Loan in the amount of the annual loan limit. Borrow full annual loan limit Received for less than 1 AY Subsidized Usage Period = 1 Can only occur for standard-term programs or for nonstandard-term programs that are substantially equal and are each at least nine weeks in length

13 Loan Period & Academic Year Determines the Subsidized Usage Period Covered in DCL GEN-13-13, applies to all Direct Loans Loan Period period of enrollment for which borrower received loan Must be updated if student s actual enrollment or eligibility doesn t match originally reported loan period 25 Loan Period & Academic Year Academic year period to which the annual loan limit applies For credit-hour programs that use standard terms or non-standard SE9W terms, corresponds to calendar period of terms in SAY or BBAY For clock-hour programs or credit-hour programs that use non-standard NSE9W terms or do not use terms, corresponds to period of time required for borrower to complete a Title IV academic year s worth of coursework (BBAY3) 26 13

14 Example 2 Program: 18 weeks, clock hours, non-term, ~35 clock hours/week Academic year: 26 weeks, 900 clock hours, BBAY Borrower enrollment: Full program; borrower progresses through payment periods on schedule Loan period: Beginning and ending of 18 week program Academic year: Beginning of enrollment in program through end of the later of borrower s completion of 26 weeks of instruction or 900 clock hours 27 Updating Loan Periods Student does not enroll for a payment period covered by the originally reported loan period Student withdraws from a payment period and all loan funds associated with the payment period are returned (R2T4) Student cancels all of a disbursement of a loan that is attributable to a payment period 28 14

15 Updating Loan Periods - Continued Student is not otherwise eligible for a loan for a payment period covered by the loan period The student (in clock-hour programs, non-term programs, and non-standard term NSE9W programs) is not progressing to the next payment period as scheduled *This is a non-exhaustive list 29 Updating Academic Years If you have terms and use a scheduled academic year (SAY) and Student is attending a program for which summer is not a required term, and Attends summer, and Receives a loan for summer Academic year must be updated to include the summer 30 15

16 Updating Academic Years Student (in clock-hour programs, non-term programs, and non-standard term NSE9W programs) is not progressing to the next payment period as scheduled Academic year must be updated to reflect the increased time it is taking 31 Scope of Guidance Applies to all Direct Loans first disbursed on or after July 1, 2013 Applies to all Direct Loan types Applies to all students Applies to all eligible programs and coursework ED will monitor compliance with loan period and academic year date reporting 32 16

17 Determining When Limit Is Met Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 150% limit is met and further eligibility is lost when Remaining Eligibility Period is zero (or less). 33 Remaining Eligibility Period How much eligibility a borrower has left under the 150% limit. Accounts for Direct Subsidized Loans received for all enrollment in all programs (except teacher certification programs) Eligibility for subsidy is lost when remaining eligibility is zero or less ED will calculate using school-reported information 34 17

18 Example 3: Remaining Eligibility Student receives 5 full years of Direct Subsidized Loans while enrolled in a 4-year program. Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period 6 Years 5 Years 1 Year 35 Example 4: Remaining Eligibility Student receives 3 years of Direct Subsidized Loans while enrolled in a 2 year program. Student then transfers to a 4 year program. Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period After year 3 of 2-year program Upon transfer to 4-year program Maximum Eligibility Period 3 Years 6 Years All Subsidized Usage Periods 3 Years 3 Years Remaining Eligibility Period 0 Years 3 Years 36 18

19 Example 5: Remaining Eligibility Student receives 1 year of Direct Subsidized Loans while enrolled in a 2-year program. Student transfers to a 1-year clock-hour program. Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period After year 1 of 2- year program Upon transfer to 1- year cert. program Maximum Eligibility Period 3 Years 1.5 Years All Subsidized Usage Periods 1 Year 1 Year Remaining Eligibility Period 2 Years 0.5 Years Minimum loan period length in a clock-hour program is lesser of length of program or academic year. School cannot disburse a Direct Subsidized Loan to this student. 37 Second Consequence: Loss of Interest Subsidy on Subsidized Loans Student Already Owns 38 19

20 Loss of Interest Subsidy Benefits No Remaining Eligibility Period No Completion Enroll Subsidy loss Subsidy loss is effective on the date of the triggering enrollment 39 Enrollment Types: Subsidy Loss Student lost eligibility Student lost eligibility Student had remaining eligibility Enrolled at least ½ time in same undergraduate program Enrolled at least ½ time in an undergraduate program of equal or lesser length Student enrolled at least ½ time in shorter undergraduate program where usage maximum 40 20

21 ED s responsibility 4/30/2014 Periods of Interest Subsidy Borrower with interest subsidy: In-school Grace Repay - Std. Defer. Forbear. Repay - IBR/PAYE* Borrower who lost interest subsidy: In-school Grace Repay. Std. Defer. Forbear. Repay IBR/PAY E Subsidized Period Unsubsidized Period 41 Which interest is the borrower s? Interest accrued before subsidy loss Interest accrued after subsidy loss Borrower s responsibility Subsidy loss is not retroactive to the date of disbursement or from the date of the loss of eligibility. Loss of subsidy is from the date of the enrollment that caused the loss of subsidy

22 Example 6: Subsidy Loss Student received 6 years of Subsidized Loans while enrolled in a 4 year program. Student does not complete and enrolls for a 7 th year. No Remaining Eligibility Period No Completion Enrolls Subsidy Loss Maximum Eligibility Period All Subsidized Usage Periods Remaining Eligibility Period Subsidy Loss 6 Years 6 Years 0 Years Yes, enrolled with no remaining eligibility and without completing 43 Example 7: Subsidy Loss Student is enrolled in a 2 year program and received 3 years of Subsidized Loans. Student enrolls for one more semester in the same program, and then transfers to a 4-year program. Before transfer Upon transfer Maximum Eligibility Period 3 Years 6 Years All Subsidized Usage Periods 3 Years 3 Years Remaining Eligibility Period 0 Years 3 Years Subsidy Loss Yes, borrower enrolled after eligibility loss. No, borrower enrolled in a longer program. Student regains eligibility for Subsidized Loans upon transfer. Any new Subsidized Loans will have interest subsidy. Prior Subsidized Loans that lost subsidy do not regain subsidy

23 Example 8: Subsidy Loss Student received 5 years of Subsidized Loans while enrolled in a 4-year program. Student completes the program and then enrolls in a 2-year program. End of year 5 Upon transfer Maximum Eligibility Period 6 Years 3 Years All Subsidized Usage Periods 5 Years 5 Years Remaining Eligibility Period 1 Year -2 Years Subsidy Loss No, borrower has remaining eligibility. No, borrower graduated from prior program. 45 Example 9: Subsidy Loss Student received 5 full years of Direct Subsidized Loans while enrolled in a 4-year program. Student does not complete and then enrolls in a 2-year program. No Remaining Eligibility Period No Completion Enrolls Subsidy Loss End of year 5 Upon transfer Maximum Eligibility Period 6 Years 3 Years All Subsidized Usage Periods 5 Years 5 Years Remaining Eligibility Period 1 Year -2 Years 46 Subsidy Loss No, borrower has remaining eligibility. Yes, transfer caused borrower to exceed max. 23

24 DL Lost Subsidy Subsidized DL that has lost subsidy is still considered a subsidized loan Does not become an unsubsidized loan Important for calculating aggregate DL limits Special Provisions 48 24

25 Enrollment Status in Used to prorate Subsidized Usage Periods : Schools will report enrollment status to COD, including three-quarter time enrollment : COD does not have enrollment status and NSLDS does not have three-quarter time enrollment status NSLDS reported enrollment status will be used - half-time if reported as at least half-time but less than full-time More information in 150% EA #3 49 Now let s see, how much is that unsub going to be? Unsubsidized Loan Eligibility 50 25

26 Eligibility for Direct Unsub. Loans A student cannot receive Direct Unsubsidized Loans for a loan period until the student has received all Subsidized Loan eligibility Is the student able to receive Direct Unsub. Loan? Did student receive all Direct Sub. Loans for which eligible? Yes No Student may receive Direct Unsub. Loan Student may NOT receive Direct Unsub. Loan 51 Example 10: Eligibility for Unsub. Based on COA and EFC, a second-year dependent student is eligible for a Direct Subsidized Loan in the amount of the full annual loan limit of $4,500 Scenario 1 Amount Scenario 2 Amount Received full subsidized loan amount Base amount (sub. loan) Base amount (unsub. loan) Add l amount (unsub. loan) $4,500 N/A $2,000 Base amount (sub. loan) Base amount (unsub. loan) Add l amount (unsub. loan) $4,000 $0 $0 Did NOT receive full subsidized loan amount 52 26

27 Example 11: Eligibility for Unsub. Based on COA and EFC, a second-year dependent student is eligible for a Direct Subsidized Loan in an amount that is less than the full annual loan limit: $4,000 Received full subsidized loan amount that he/she was eligible for Scenario 1 Base amount (sub. loan) Base amount (unsub. loan) Add l amount (unsub. loan) Amount $4,000 $500 $2,000 Scenario 2 Base amount (sub. loan) Base amount (unsub. loan) Add l amount (unsub. loan) Amount $3,800 $0 $0 Did NOT receive full subsidized loan amount that he/she was eligible for 53 School Reporting to ED 54 27

28 COD Reporting Requirements Existing Loan Period Dates Academic Year Dates New for CIP Credential Level Program Length Length of Title IV Academic Year Flags for Prep Coursework Flag for Teacher Certification Enrollment Status (full, ½, ¾) Payment Period Begin Date See April 4, 2014 EA and Attachment 55 Other Changes to COD The borrower is a first-time borrower School submits origination record to COD Subsidized Usage Period > Remaining Eligibility Period COD will reject the loan 56 28

29 Other Changes to COD Each time school submits an origination or disbursement record COD will: Calculate Subsidized Usage Periods, including the new loan Inform school of borrower s Maximum Eligibility, Subsidized Usage, and Remaining Eligibility periods COD will also inform borrower in disclosure statement Watch for EA in April describing the COD SULA enhancements 57 NSLDS Reporting Requirements Existing Enrollment Status ½ and FT New for CIP Credential Level Program Length Length of Title IV Academic Year Flags for Prep Coursework Flag for Teacher Certification Enrollment Status - FT, ¾, ½ See DCL GEN

30 Other Changes to NSLDS Modify professional access and student view to display 150%-related information Modify reports available to schools to include 150%-related information Pass information about student s current Subsidized Usage Period and whether the student has lost interest subsidy to CPS, for inclusion on the SAR/ISIR Inform Direct Loan servicers of borrowers enrollment and loss of interest subsidy 59 Loan Counseling 60 30

31 Entrance Counseling Entrance Counseling regulations have been amended to include these new requirements: Possible loss of eligibility for additional Direct Subsidized Loans How a borrower s maximum eligibility period, remaining eligibility period, and subsidized usage period are determined 61 Entrance Counseling Potential for a borrower becoming responsible for all accruing interest on Direct Subsidized Loans during in-school periods, grace periods, and periods of authorized deferment AND The impact of borrower responsibility for accruing interest on the borrower s total debt 62 31

32 Exit Counseling Exit Counseling regulations have been amended to include these new requirements: The sum of the borrower s subsidized usage periods at the time of the exit counseling How to get information from NSLDS on whether he or she has become responsible for accruing interest on any of his or her Direct Subsidized Loans and whether the borrower is eligible to receive additional Direct Subsidized Loans Exit Counseling The possible consequences of receiving additional Direct Subsidized Loans for additional undergraduate programs The potential for a borrower becoming responsible for all accruing interest on Direct Subsidized Loans during in-school periods, grace periods, and periods of authorized deferment, even if the borrower does not receive an additional Direct Subsidized Loan 32

33 Entrance Counseling Resources 65 Let s Put This In Perspective! 66 33

34 Perspective ED will keep track of student eligibility ED will notify students of eligibility issues ED will set up a process, in the near future, for dispute resolution ED will share eligibility data with the CPS so it appears on ISIRs and SARs Perspective Schools will report the length of program to COD in loan origination record Schools will ensure that students are counselled with new SULA provisions Schools will make eligibility determinations for the remainder of award year for first-time borrowers who pursue to short programs in the award year 34

35 Perspective Exceeding SULA will not end student s eligibility for unsubsidized DLs Annual and aggregate loan limits still apply Loss of subsidy will usually not be the deciding factor for student in whether to pursue a program or not Resources Watch for Electronic Announcement in April describing the new COD release which will allow for SULA reporting. IFR Final Regs DCL GEN FAQs Three Recorded Webinars EAs 35

36 QUESTIONS? Subject: Include organizational affiliation 71 Trevor Summers Training Officer Region VI If you would like a copy of this presentation, please me. Please complete ED s survey regarding this presentation: 36

37 Your Region VI Training Team Trevor Summers, Training Officer Kevin Campbell, Training Officer Rick Renshaw, Training Officer