# October 2003

**GEN-03-12**

# 

# Subject: NSLDS Calculation of Aggregate Loan Amounts 

**Summary: In this letter and its enclosures, we describe new procedures
that are used by NSLDS to calculate aggregate loan limits for the FFEL
and Direct Loan programs when a student has consolidated some or all of
their student loans. We also respond to several related questions to
assist schools in using the financial aid history functions of NSLDS.**

Dear Partner:

The National Student Loan Data System (NSLDS) when reporting (on its Web
site and on ISIRs) aggregate loan amounts for Subsidized Loans,
Unsubsidized Loans, and combined loans, bases its calculations on
disbursed amounts and outstanding balances of the individual Subsidized
and Unsubsidized loans reported for the student. In addition, since
consolidation loans in the Direct Loan program are reported to NSLDS as
either subsidized or unsubsidized (and a student can have both), those
amounts are also included in the appropriate aggregate amount. However,
NSLDS cannot treat FFEL Consolidation Loans the same way since, unlike
Direct Consolidation Loans, they are not reported to NSLDS with any
indication of what portion of the loan is subsidized and what is
unsubsidized. Therefore, prior to 2003-2004, NSLDS simply reported the
amount of any FFEL Consolidation Loan received by the borrower, leaving
the school to determine what portion should be applied to the subsidized
loan limit and what amount was unsubsidized and should be applied only
to the combined loan limit (See Q 30-5 and 52-55 from DCL GEN-96-13 --
available on IFAP under Archived Publications -- Dear Partner/ Colleague
Letters or directly at
<http://www.ifap.ed.gov/dpcletters/doc0501_bodyoftext.htm>). This
practice placed a significant burden on schools and they have
continually asked that NSLDS perform the calculation to reduce their
workload.

In response to those requests, starting with 2003-04 processing, NSLDS
allocates FFEL Consolidation Loans to Subsidized, Unsubsidized, and
combined aggregate totals, using a specific algorithm and certain
assumptions. As explained more fully below, while this process works
well in most cases, there still are instances when NSLDS is unable to
determine if a portion of a FFEL Consolidation Loan should be counted as
subsidized or unsubsidized. When that occurs, the amount is reported by
NSLDS as "Unallocated". The sum of the Subsidized, Unsubsidized and
Unallocated equals the combined total that is reported by NSLDS.

The information included on the enclosures to this letter, provided in a
Question and Answer (Q&A) format, should provide sufficient guidance so
that schools can properly determine if an applicant for Title IV Federal
student aid has exceeded, or is close to exceeding, one or more of the
aggregate loan limits that apply to the FFEL and Direct Loan programs.

We thank you for your continued support of the Title IV student
assistance programs and your recommendations for improvement to the
services that NSLDS provides. If you have any questions or comments on
the information contained in this letter and the enclosures, please
contact the NSLDS Customer Service Center at 1-800-999-8219, from 8:00
A.M. to 8:00 P.M. eastern time, except Federal Holidays. Or, you can
e-mail your question to
[mailto:nsldscoe@raytheon.com](mailto:nsldscoe@raytheon.com)

Sincerely,

Matt Fontana, Director

National Student Loan System Group

Federal Student Aid

U.S. Department of Education

# Enclosure to Dear Partner Letter GEN-03-12

# NSLDS Calculation of Aggregate Loan Amounts

# Q1: What are the aggregate loan limits for the FFEL and Direct Loan programs?

# 

# A1: For all undergraduate students the aggregate Subsidized loan limit is \$23,000. For dependent undergraduate students the combined loan limit is also \$23,000. For independent undergraduate students (and certain dependent students whose parents have applied for but are not eligible for a PLUS loan) the combined aggregate is \$46,000.

The Subsidized aggregate limit for graduate students is \$65,500 and the
combined limit is \$138,500. All loans received by the student,
including those received as an undergraduate student, count toward these
limits. Note also, that certain health professions students have
eligibility for extra unsubsidized loans and thus, their aggregate
combined loan limit is \$189,125. Detailed information on loan limits
can be found in the Federal Student Aid Handbook.

# 

# Q2: Do FFEL and Direct Loan have separate aggregate loan limits?

A2: No, the aggregate loan limits discussed above apply to a student's
total combined borrowing under both the FFEL and Direct Loan Programs.

**Q3: Are amounts of FFEL and Direct Loans that have been consolidated
included in the calculation of a student's aggregate borrowing for
purposes of determining if a student has exceeded loan limits?**

A3: Yes, the Higher Education Act provides that the portion of a
consolidation loan that is attributed to an underlying FFEL or Direct
Loan (except for a PLUS loan from either program) be included in
determining the amount of Subsidized and combined loans that have been
borrowed by the student.

**Q4: Are there portions of a consolidation loan that are not included
in the FFEL/Direct Loan aggregates?**

A4: Yes, a student may have included in his or her FFEL or Direct Loan
consolidation loan outstanding balances from PLUS loans, from the
Federal Perkins Loan Program, or from one or more of the Department of
Health and Human Services (HHS) educational loan programs. Portions of a
consolidation loan that are attributed to PLUS, Perkins or HHS loans are
not included when calculating a student's FFEL and Direct Loan
outstanding aggregate balances.

Note also, while Perkins and PLUS loans are reported to NSLDS, HHS loans
are not. This is important to the discussion that follows beginning with
Q&A #9.

**Q5: What is an underlying loan?**

A5: An underlying loan is a loan that was consolidated into either an
FFEL or Direct Loan consolidation loan. For purposes of calculating a
student's total aggregate borrowing, NSLDS had been treating a loan as
an underlying loan if (1) the Loan Status Code of the underlying loan is
PC, PN or DN (one of the paid-by-consolidation status codes) and (2) the
Loan Status Date of the underlying loan is within 210 days (plus or
minus) of the date the consolidation loan was made. See Q&A #6 below for
a description of a recent change to this definition.

# NSLDS Calculation of Aggregate Loan Amounts

# Page 2

Q6: I sometimes see what appear to be underlying loans reported with a
Loan Status Code of PF or DP (paid-in-full). Shouldn't these loans also
be included in the allocation of underlying loans to a consolidation
loan?

A6: NSLDS has worked with the FFEL, Direct Loan, and Perkins communities
to ensure that underlying loans that are included in a consolidation
loan are properly reported with a Loan Status Code of PC, PN, or DN
(paid-by-consolidation). However, it has become clear that some loans
that were "paid off" by a consolidation loan were reported by the loan
holder with a Loan Status Code of PF (Paid-in-Full) or DP (Defaulted
Paid-in-Full) rather than with one of the paid-by-consolidation
statuses. Therefore, beginning on August 25^th^ of this year, NSLDS
modified its process for determining underlying loans to include the
paid-in-full Loan Status Codes of PF and DP. This change should reduce
the instances where NSLDS is unable to find one or more of a
consolidation loan's underlying loans. We continue to work with our data
providers to ensure that future reporting is consistent with the
original directive.

# 

Q7: I recently ran across a student who had a new FFEL Consolidation
Loan, but no loans that met the definition of an underlying loan, as
discussed above. How can that be?

A7: The process of consolidation involves multiple parties. The
consolidating lender must obtain loan payoff information from each of
the student's loan holders. Payoff checks have to be issued and loan
records updated. Sometimes this process can take many weeks. Thus, you
may see a new consolidation loan in NSLDS, but the underlying loans have
not yet been updated as having been "paid". In other words such loans
continue to have an active loan status and a positive outstanding
balance. Generally, these circumstances resolve themselves within a
month or two. However, to reduce the incidence of this situation causing
"double counting" when NSLDS calculates aggregate amounts, we are
modifying the aggregate formulas to exclude from the calculation of
aggregate amounts any consolidation loan that has been made in the past
60 days and where none of the underlying loans show having been paid off
(NSLDS Loan Status Code of PC, PN, DN, PF, or DP). Since the underlying
loans are still in an open status, they will be reflected in the
aggregate totals, but the consolidation loan will not. This change went
into production on August 25^th^.

Q8: What happens when some, but not all, of the underlying loans have
been updated by the loan data provider?

A8: Schools may find cases where one or more of the underlying loans
have been updated, thus triggering the inclusion of the consolidation
loan, but other underlying loans are still in an open status with a
positive outstanding principal balance. Since students generally
consolidate all of their open loans, schools can usually determine, by
looking at the amount disbursed of the consolidation loan and comparing
it to the student's remaining open loans, which loans were likely
included in the consolidation loan. Schools may then re-calculate the
aggregate totals, and award new loans as may be appropriate for that
student. It is not necessary to wait until the rest of the underlying
loans have been updated in NSLDS. (Note: See Q&A #18 and #19 below for
additional information on resolving NSLDS eligibility issues.). Again,
we continue to work with the loan data providers to find ways to
minimize cases of "double counting".

# NSLDS Calculation of Aggregate Loan Amounts

# Page 3

**Q9: How does NSLDS allocate an FFEL consolidation loan between
subsidized and unsubsidized?**

A9: As noted in Q&A #5 and #6 above, for each FFEL consolidation loan,
NSLDS identifies the underlying loans and uses those loan amounts to
allocate the current outstanding principal balance of the consolidation
loan between subsidized, unsubsidized, and combined amounts. NSLDS does
this by taking the total amount originally disbursed for all of the
identified underlying Subsidized loans and dividing that amount by the
originally disbursed amount of the consolidation loan. This results in
an approximation of the percentage of the total original consolidation
loan that can be attributed to the Subsidized loans. This percentage is
then applied to the current outstanding balance of the consolidation
loan with the result being the amount that is included in the NSLDS
calculation of the total amount of Subsidized loans for the student. A
similar process is followed to allocate the unsubsidized amount.

## Q10: Will the calculation of the subsidized and unsubsidized portions of an FFEL Consolidation Loan always total the actual outstanding balance of that loan? 

A10: It depends. If the only loans that were included in the
consolidation loan were FFEL or Direct subsidized and unsubsidized loans
and if all of those loans have been reported by their data provider in a
timely manner with the proper Loan Status Codes, the calculation
described above would account for the full amount of a consolidation
loan's outstanding principal balance. However, as is described more
fully below, that is not always the case. Therefore, NSLDS subtracts the
total of the calculated subsidized and unsubsidized outstanding balance
amounts from the actual outstanding balance of the consolidation loan.
Any balance is considered to be "unallocated".

# Q11: What does "unallocated" mean?

A11: Unallocated amounts occur when, with the information that has been
provided by data providers, and after eliminating underlying Perkins and
PLUS loans, NSLDS is unable to account for the full amount of the
outstanding balance of the FFEL Consolidation Loan. Refer the attachment
to this document for an example of how NSLDS calculates the portion of a
consolidation loan's outstanding balance that applies to the subsidized,
unsubsidized, and combined limits, and the portion that is
"unallocated".

Q12: Where does NSLDS report the amount of an FFEL Consolidation Loan
that is "unallocated"?

A12: Because, by definition NSLDS cannot determine where an unallocated
amount actually belongs, it assumes the amount was borrowed from the
FFEL or Direct Loan programs and is included in the total combined
balance. However, none of the 'unallocated" amount is included in the
Subsidized balance as it is unlikely to have come from a Subsidized
Loan, as explained in Q&A #13 below.

# NSLDS Calculation of Aggregate Loan Amounts

Page 4

Q13: If all loans were reported to NSLDS, why would there ever be an
"unallocated" amount?

A13: Unallocated amounts can occur for a number of reasons, as follows
--

-   The unallocated amount may represent capitalized interest included
    in the consolidation loan. Note that capitalized interest does not
    count toward a borrower's aggregate limits. Therefore, if the school
    determines that all or a portion of the unallocated amount reported
    by NSLDS represents capitalized interest, it may deduct that portion
    from the reported aggregate amounts.

-   The underlying loan may have been closed with a PF or DP status code
    instead of a PC, PN, or DN code and therefore, not included in the
    computation. (See Q&A #6 for a change made on August 25^th^ that
    resolved this situation.)

-   There may be an HHS loan included in the consolidation loan. As
    noted earlier, unlike Perkins and PLUS loans which like HHS are
    excluded from the aggregate computations, HHS loans are not reported
    to NSLDS. Therefore, the system is not able to automatically exclude
    them.

-   In the case of a joint consolidation loan there may be underlying
    loans from the borrower's spouse.

-   PLUS loans may have been included in the consolidation loan. (See
    Q&A #16 below for an upcoming change for the handling of PLUS
    loans.)

-   An FFEL or Direct Loan did not yet get added to NSLDS because of an
    edit condition that hit when the loan was being added to NSLDS.

Q14: If I determine that all, or a portion, of the "unallocated" amount
represents capitalized interest or an HHS loan, may I exclude the
"unallocated" amount from aggregate totals and possibly award additional
loans?

A14: Yes. Of course, you should document your findings or calculations
for audit purposes. Also, note that, as discussed in Q&A #12,
unallocated amounts are not initially included by NSLDS in the
subsidized calculations. See Q-37 and Q-39 from GEN-96-13 for more
information.

# Q15: Is it necessary to review every Consolidation Loan that has an unallocated amount?

A15: In general, schools only need to review unallocated amounts if the
student is near his or her aggregate limit(s) and reducing or
eliminating the unallocated amount would enable the student to borrow
additional loans.

> For example, a school could determine what the affect on additional
> Subsidized loan eligibility would be if it assumed that the
> consolidation loan's entire unallocated amount was subsidized. If,
> under such an assumption, there would not be an impact on the amount
> of Subsidized loan the student would be eligible for, then no
> additional action would be necessary. Similarly, the school could
> consider the affect on eligibility if all of the consolidation loan\'s
> balance were assumed to be unsubsidized.

**Q16: On occasion, it appears a PLUS loan is included in a
Consolidation loan and therefore is reflected in the student's aggregate
loan amounts. Shouldn't PLUS loans be excluded when determining
aggregate limits?**

# NSLDS Calculation of Aggregate Loan Amounts

Page 5

A16: Yes, PLUS loans should be excluded when determining aggregate
amounts borrowed. NSLDS will exclude them from the FFEL Consolidation
Loan calculations starting in with 2004-05. In the meantime, schools can
document their findings and recompute aggregate totals to determine if
the student is eligible for additional loans. (Note that in the Direct
Loan Program a PLUS loan that has been consolidated is maintained
separately and, therefore is automatically excluded from the aggregate
calculations.)

# Q17: What happens if a student exceeds one or both of the aggregate limits?

A17: Under the HEA, a student is ineligible for additional Title IV aid
if he or she has borrowed in excess of an annual or aggregate loan
limit. If the receipt of the excess loan funds was inadvertent on the
student\'s part, only the amount that exceeded the annual or aggregate
program maximum must be repaid by the borrower. The student may also
regain eligibility for additional Title IV aid by making arrangements,
satisfactory to the holder of the loan, to repay the excess loan amount.
However, the holder of the loan may choose to develop a repayment plan
that has the borrower reaffirm that he or she will repay the excess
according to the terms and timing of the original promissory note.

**Q18: Must the school make certain that any excess borrowing or other
negative information in be cleared in NSLDS before it can disburse Title
IV student aid?**

A18: No, if the school obtains written documentation from a loan holder
that the student is eligible for Title IV aid despite such negative
information being contained in the NSLDS, it may award and disburse aid.
For example, if NSLDS shows that the student has borrowed in excess of
loan limits or has defaulted on a Title IV loan, but the school has
obtained written documentation from the holder of the loan(s) that the
borrower had made \"satisfactory arrangements to repay\", the school may
award and disburse additional aid without waiting for NSLDS to be
updated.

**Q19: What if a school believes that data in the NSLDS may be in
error?**

A19: If a school believes that data in the NSLDS for a student are in
error it should contact the data provider included in the NSLDS record
and provide it with any information that will assist in correction of
the error. As noted above, if he school receives written documentation
from the data provider that the student is not ineligible for additional
aid, it may go ahead and disburse without waiting for NSLDS to be
updated.

**Q20: What are a school\'s responsibilities and possible liabilities if
a student received loan funds in excess of annual or aggregate maximums
(or if the student was in default or owed an overpayment) and that
information was not available from NSLDS at the time the\
SAR and ISIR were produced?**

A20: A school will only be responsible for the financial aid history
information it had at the time it disbursed aid to the student. However,
once a school becomes aware, through the NSLDS or any other means, that
a student is not eligible and/or was not eligible for aid previously
disbursed, it must (1) not disburse or deliver additional funds and (2)
assist the Department or lender in requiring the student to make
arrangements to repay any funds the student was not eligible to receive.

# NSLDS Calculation of Aggregate Loan Amounts

Page 6

**Q21: I have a student who got loans as a graduate student, but is now
an undergraduate. NSLDS appears to be including the graduate loans when
determining if the student exceeds aggregates. Can this be changed?**

A21: Yes, a change is planned for the 2004-05 processing year that will
exclude from the calculation of undergraduate loan amounts, loans
received while the student was a graduate or professional student.

> See NSLDS Newsletter #8, found at
> <http://ifap.ed.gov/nsldsmaterials/Newsletter8.html>, for more
> information.

We hope that the information provided above is useful and that the
changes we have recently made result in less burden and more accurate
information. We also know that the requirements and these computations
are complex. For these reasons, we continue to work with both the school
and lender communities to continually monitor, review, and enhance the
capabilities of NSLDS. And, we thank you for your patience and
cooperation. If you have any questions or comments on the information
contained in this letter and the enclosures, please contact the NSLDS
Customer Service Center at 1-800-999-8219, from 8:00 A.M. to 8:00 P.M.
eastern time, except Federal Holidays. Or, you can e-mail your question
to [mailto:nsldscoe@raytheon.com](mailto:nsldscoe@raytheon.com).

**Attachment to Enclosure from Dear Partner Letter GEN-03-12**

Example of Allocation of a Consolidation Loan

In this example, the student has \$5,500 in underlying Subsidized Loans
and \$5,000 in underlying Unsubsidized Loans. The student consolidated
those loans into a FFEL consolidation loan, which has a total
disbursement amount of \$11,373. However, the aggregate outstanding
principal balance of the FFEL consolidation loan is now only \$11,294.

To determine the portion of the consolidation loan that should be
allocated to subsidized for the borrower, the \$5,500 that was disbursed
as a Subsidized Loan is divided by the \$11,373 total disbursed amount
of the consolidation loan. The resulting ratio if .4836 is then
multiplied by the \$11,294 current outstanding principal balance of the
consolidation loan, resulting in an allocation of \$5,461 of that
balance to subsidized.

To determine the portion of the consolidation loan that should be
allocated to unsubsidized, the \$5,000 that was disbursed as an
Unsubsidized Loan is divided by the \$11,373 total disbursed amount of
the consolidation loan. The resulting ratio if .4396 is then multiplied
by the \$11,294 current outstanding principal balance of the
consolidation loan, resulting in an allocation of \$4,965 of that
balance to subsidized.

Both the \$5,461 subsidized portion and the \$4,965 unsubsidized portion
are subtracted from the \$11,294 outstanding principal balance of the
consolidation loan, leaving an unallocated amount of \$868. Most likely,
the \$868 is capitalized interest from the underlying loans.

Thus, NSLDS will report for this borrower that the amount of subsidized
outstanding balance is \$5,461 plus any subsidized loans that were not
consolidated, if any. \$4,965 will be reported as unsubsidized
outstanding principal balance plus any unsubsidized loans that were not
consolidated, if any. And, \$868 will be reported as unallocated. Note
that the amount of combined outstanding principal balance reported by
NSLDS will be the sum of all three allocations or \$11,294, plus any
other FFEL or Direct Loans that were not consolidated, if any.

The following displays the NSLDS web page loan history and loan detail
screens used for this example.

**Loan History**

  --------------------------------------- ------------------------------------------------------ --------
  ![](media/image1.png){width="0.375in"   **Aggregate Loan Information**                          
  height="0.21875in"}                                                                            

  --------------------------------------- ------------------------------------------------------ --------

  --------------------------------------- --------------- ----------------- -------------
  **Loan Type**                           **Outstanding   **Pending         **Total**
                                          Principal       Disbursements**   
                                          Balance**                         

  Subsidized Loans                        \$5,461         N/A               \$5,461

  Unsubsidized Loans                      \$4,965         N/A               \$4,965

  FFEL Consolidation Loans, Unallocated   \$868                             \$868

  Combined Loans                          \$11,294        N/A               \$11,294

  FFEL Consolidation Loans                \$11,294                          \$11,294

  Perkins Loans                           N/A                               N/A
  --------------------------------------- --------------- ----------------- -------------

NSLDSFAP Loan History page

  ------------------ ----------------------------------------------------
                     

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NSLDS CL Loan Detail Page

+----------------------------------------------------------+-----------+
| **Amounts for Loan**                                     |   ------- |
|                                                          |   **1**   |
|                                                          |           |
|                                                          |   ------- |
+----------------------------------------------------------+-----------+