# Presentation: 349345

## Slide 1

## Session 4

**FFEL and Direct Loans:**
**Loan Limit Overview**

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## FFEL & DL: Loan Limit Overview

- Annual/aggregate limits
- Proration
- Frequency of borrowing
- SAY and BBAY
- Modules (Miniterms)
- Common loan limit issues

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Annual & Aggregate Loan Limits

- Annual loan limit = maximum FFEL/DL student may borrow in AY
- Aggregate loan limit = maximum outstanding FFEL/DL loan debt allowed
- Annual and aggregate limits are for both FFEL and DL

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Annual Loan Limits

- Vary based on:
- Grade level
- Dependency status
- Higher limits for certain health professions students

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Annual Loan Limits:Dependent Undergraduates

- Limits are for sub/unsub (any combination)
- _Grade Level_			_Loan Limit_
- 1st year				$2,625
- 2nd year				$3,500
- 3rd year & beyond		$5,500

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Annual Loan Limits: Independent Undergraduates

- Also for dependent undergrads whose parents can’t borrow PLUS
- School may not award based on school’s non-participation in PLUS
- _Grade Level_		_Loan Limit_
- 1st year			$6,625  ($2,625 sub)
- 2nd year			$7,500  ($3,500 sub)
- 3rd year & beyond	$10,500  ($5,500 sub)

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Annual Loan Limit: Graduate/Professional Students

- $18,500 ($8,500 sub) for all
- Only for students who:
- Have been admitted into grad/professional program
- Are enrolled at least 1⁄2 time in courses that count toward completion of program

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limits: Teacher Certification

- Exception to “regular student” requirement
- Must be at least 1⁄2 time in program required by state for teacher certification/recertification
- May borrow at 3rd year and beyond undergrad level

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limits: Preparatory Coursework

- Exception to “regular student” requirement
- For single period of up to 12 months:
- 1st year undergrad level if required for admission to undergrad program
- 3rd year and beyond undergrad level if required for admission to grad program

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Annual Loan Limits: Health Professions Students

- Increased annual unsub limits for certain health professions students
- Must be enrolled at least 1⁄2 time in program that was or would have been eligible under HEAL
- Program must be accredited by approved agency

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Annual Loan Limits: Health Professions Students

- Increased unsub amounts same as HEAL limits
- Vary by program and AY length
- Are in addition to “regular” FFEL/DL loan limits
- For eligible programs, loan limits, and accrediting agencies, see FSA Handbook, Vol. 8, GEN-99-21, GEN-98-18

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Aggregate Loan Limits

- Once aggregate reached, no further borrowing unless paid down
- Aggregate limits –
- Include consolidated FFEL/DL loans
- Do not include capitalized interest
- Grad/professional aggregates include loans for undergrad study
- Increased unsub aggregates for health professions students

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Aggregate Loan Limits

- _Grade Level_			_Aggregate Limit_
- Dep Undergrad		$23,000 (sub/unsub)
- Indep Undergrad		$46,000 ($23,000 sub)
- Grad/Prof				$138,500 ($65,500 sub)
- Health Prof Undergrad	$70,625 ($23,000 sub)
- Health Prof Grad/Prof	$189,125 	($65,500 sub)

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limits: Important Points

- For program shorter than full AY, undergraduate student may not borrow more than prorated limit
*Example:*
- 600 clock hour, 20-week program
- Student limited to single prorated loan, even if takes more than 20 weeks to complete program

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limits: Important Points

- For 2-year undergrad program, student may not borrow more than 1st  / 2nd year limit
*Example:*
- 2-year associate’s degree program
- Student takes 2 1⁄2 years to complete
- For final 1⁄2 year, may receive prorated loan at 2nd year level

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limits: Important Points

- If undergrad program requires prior associate’s or bachelor’s degree, student may borrow at 3rd year and beyond level
- School may not link separate programs to support higher loan limit

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limits: Important Points

*Example:*
- 1-year program “A” required for admission to 1-year program “B”
- 1st year loan limits apply to “A” and “B”
- Students in “B” may not borrow at 2nd year level based on requirement to complete “A”

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Proration

- Proration = reduction in annual loan limit
- Required by law/regulations in some situations
- Applies only to undergrad loan limits
- Not required for grad/prof or PLUS

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Proration

- Required when:
- Program is shorter than AY
- Program is equal to or longer than AY, but student is in final period of study that is shorter than AY

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Proration

- Minimum AY standards:
- 30 weeks of instructional time
- 24 semester/trimester hours
- 36 quarter hours
- 900 clock hours

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Proration: Final Period of Study

- Final period of study = period at end of which student will complete program
- Shorter than AY if:
- For term-based, credit hour programs, fewer terms than school’s SAY
- For nonterm-based and all clock hour programs, fewer hours than minimum AY standard

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Proration: Final Period of Study

*Example:*
- 4-yr, term-based, credit hour program
- 24 hrs remaining
- SAY = fall-winter-spring (3 terms)
- Student enrolls for 12 hrs fall / 4 hrs winter / 8 hrs spring
- Final period of study = fall + winter + spring (3 terms)
- Proration NOT required

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Proration Method: Program Shorter Than AY

- Step 1

- Determine smaller fraction:

- _Hrs in program_
- Hrs in AY

*OR*

- _Weeks in program_
- Weeks in AY

- Step 2

- Multiply 1st year loan limit by smaller fraction:

- $2,625  x  Smaller Fraction  =  Prorated Loan Limit

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Proration Method: Program Shorter Than AY

- Step 1

- Determine smaller fraction:

- _400_
- 900

*OR*

_**12**_
**30**

- Step 2

- Multiply 1st year loan limit by **smaller fraction**:

- $2,625  x  .40  =  $1,050

*Example:*
-  Program  =  400 clock hours / 12 weeks
-  AY = 900 clock hours / 30 weeks

- (= .44)

**(= .40)**

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Proration Method: Final Period Shorter Than AY

- Full Annual Loan Limit

- x

- _Hrs in Final Period_
- Hrs in AY

- =

- Prorated Loan Limit

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Proration Method: Final Period Shorter Than AY

- $3,500

- x

- _6_
- 24

- =

- $875

*Example:*
-  2nd year undergrad
-  Final period  of study =  fall semester
- 6 semester hours in final period of study
-  AY  =  24 semester hours

- (= .25)

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Frequency of Annual Loan Limits

- Borrower may receive maximum annual loan limit each AY
- Loan period not always same as AY
- Loan limits apply to AY, not loan period
- Student who receives maximum may not borrow again until next AY
- Two AY standards:
- Scheduled Academic Year (SAY)
- Borrower-Based Academic Year (BBAY)

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Scheduled Academic Year(SAY)

- Term-based programs only
- Fixed calendar period published in school materials
- Usually begins/ends at same time each year
- Must meet minimum AY standards

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## SAY

- Student need not be enrolled in all terms
- Summer term may be “trailer” or “header”
- Always / by program / case-by-case
- Summer miniterms may be:
- Combined as one term
- Assigned to different SAYs

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## SAY

*Examples:*
- Fall-Spring + Summer
- Summer + Fall-Spring
- Fall-Spring + Summer Miniterm #1
- Summer Miniterm #2 + Fall-Spring

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Borrower-Based Academic Year (BBAY)

_**May**_ be used for term-based programs
_**Must**_ be used  for nonterm programs
- Different rules for term-based and nonterm
- Does not begin/end at same time
- Floats with student’s attendance/progression in program

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## BBAY: Term-Based

- May use if SAY meets minimum AY standards
- May use for:
- All students
- Some students
- Some programs
- May alternate SAY and BBAY if no overlap
- BBAY may allow student to borrow sooner

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## BBAY: Term-Based

- Must include same # of terms as SAY (excluding summer)
- May include terms when student does not attend
- Student must be enrolled in first term
- All terms must _**allow**_ at least 1⁄2 time enrollment

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## BBAY: Term-Based

- BBAY that includes summer term need not meet AY minimum weeks/hours
- Summer header/trailer concept does not apply to BBAY
- Unlike SAY, miniterms must be combined and treated as single term
- Annual loan limit applies to BBAY

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## BBAY: Term-Based

*Example:*
- School’s SAY = fall-winter-spring (3 terms)
- BBAY = any 3 consecutive terms
- If student starts BBAY in spring:
- BBAY #1 = spring-summer-fall
- BBAY #2 = winter-spring-summer
- BBAY #3 = fall-winter-spring
- BBAY #4 = summer-fall-winter

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Switching SAY to BBAY

*Example:*
- SAY = fall-spring + summer trailer
- Student receives maximum loan for fall-spring
- No summer loan eligibility with SAY
- Eligible for new annual loan limit if school switches student to BBAY (= summer-fall)

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## BBAY: Nonterm-Based

_**Must use BBAY**_
- BBAY must meet minimum AY standards
- No eligibility for new loan limit until student completes:
- Hours in BBAY _**and**_
- Weeks of instruction in BBAY

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## BBAY: Nonterm-Based

*Example:*
- 2-year, 1800 clock hour program
- First BBAY = 900 hours / 30 weeks completed
- Second BBAY = 900 hours / 30 weeks completed

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility: SAY and BBAY

*Term-based:*
- Student regains eligibility for new annual loan limit after end of SAY/BBAY calendar period
- Enrollment status does not affect frequency
*Nonterm-based:*
- Student regains eligibility for new annual loan limit only after completing hours _**and**_ weeks in BBAY
- Enrollment status affects frequency

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility: Term-Based SAY

*Example:*
- SAY = fall-spring + summer trailer
- Student receives maximum annual loan for fall-spring; does not attend summer
- Eligible for new annual loan limit in fall (start of new SAY)

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility: Term-Based BBAY

*Example:*
- BBAY = summer-fall-winter
- Student receives maximum annual loan for summer-fall-winter
- Eligible for new annual loan limit in spring (start of new BBAY)
- New BBAY = spring-summer-fall

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility:Nonterm-Based BBAY

*Example:*
- 2-year, 1800 clock hour program
- Student receives maximum loan at 1st year level for first 900 hours/30 weeks
- Attends less than fulltime and completes fewer than 900 hours in first 30 weeks
- Not eligible for new loan limit at 2nd year level until completion of 900 hours

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility During AY:Term-Based Programs

- Student who receives annual maximum during AY may not borrow again until next AY unless –
- Progresses to grade level with higher annual loan limit
- Enrolls in program at grade level with higher annual loan limit
- Changes from dependent to independent
- May borrow difference between higher limit and amount already received for same AY

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility During AY:Term-Based Programs

*Example:*
- SAY = fall-spring + summer trailer
- 2nd year dependent receives $3,500 for fall-spring
- Progresses to 3rd year status at beginning of spring
- For spring + summer, may borrow $5,500 minus $3,500 already received
- $2,000 additional eligibility for spring + summer

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility During AY:Nonterm-Based Programs

- Student who receives maximum annual loan during BBAY may not borrow again until next BBAY unless changes from dependent to independent
- No increased eligibility within BBAY based on grade level progression
- Student does not advance to next grade level until hours/weeks in BBAY are completed

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility During AY:Nonterm-Based Programs

*Example 1:*
- 2-year, 1800 clock hour program
- Dependent student receives $2,625 for first BBAY (900 hours/30 weeks)
- During first BBAY, student becomes independent
- May receive additional $4,000 unsub for first BBAY

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Regaining Eligibility During AY:Nonterm-Based Programs

*Example 2:*
- 2-year, 1800 clock hour program
- Dependent student receives $2,625 for first BBAY (900 hours/30 weeks)
- Student completes 900 hours in 25 weeks
- Does not progress to 2nd year level until completes 5 additional weeks

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Transfer Students

- If student borrowed at previous school, current school must determine if current loan period overlaps AY at previous school
- Overlap exists if:
- Current school’s loan period begins before prior school’s loan period ends, or
- Current school’s loan period begins after prior school’s loan period ends, but less than 30 weeks have elapsed since prior loan period began

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Transfer Students

- If overlap exists, current school may award loan for difference between annual loan limit and amount borrowed at previous school
- If no overlap, current school may award up to annual loan limit

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

- Sometimes called miniterms
- Two or more within a term
- Courses are sequential, not concurrent
- Modules may overlap
- Enrollment may begin with any module
- Students may skip one or more modules within term

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

- Enrollment status:
- Based on combined enrollment from all modules within term
- General Title IV rules for standard terms apply when there are modules within a standard term

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

- Special treatment:
- Use earliest attendance for 1st disbursement
- COA excludes periods of non-attendance

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

- Return of Title IV Aid:
- Leaving after completion of at least one module is **NOT** a withdrawal
- Return of Title IV regs do not apply
- Leaving before completion of at least one module **IS** a withdrawal
- Return of Title IV regs apply

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

*Example 1:*
- Term-based program
- School offers three 4-week modules within summer session
- Student registers for one 4-credit class in 2nd and 3rd modules
- Student does not attend fall

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

*Example 1 (continued):*
- Enrollment status = 8 credits (1/2 time)
- 1st disbursement based on attendance beginning on 1st day of 2nd module
- COA based only on time covered by 2nd and 3rd modules

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

*Example 1 (continued):*
- Student completes course in 2nd module, but does not attend course in 3rd module
- Not a withdrawal
- No return of aid

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

*Example 2:*
- Same as Example 1, but student completes course in 2nd module, starts course in 3rd module, but then withdraws
- Not a withdrawal
- No return of aid

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Modules 

*Example 3:*
- Same as Example 1, but student drops course in 2nd module, and fails to attend in 3rd module
- Considered a withdrawal
- Return of aid calculation required

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues:Changing From Higher to Lower Loan Limit

- Loans received for graduate study do not count toward undergraduate annual/aggregate limit
- Additional unsub based on PLUS denial does not count toward dependent annual/aggregate limits
- Additional unsub for health professions students does not count toward regular annual/aggregate limits

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues:Changing From Higher to Lower Loan Limit

*Example 1:*
- For first undergraduate program, student borrowed $20,500 sub and $10,000 unsub
- For graduate program, borrowed $45,000 sub and $40,000 unsub
- Now enrolled in second undergraduate program

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues:Changing From Higher to Lower Loan Limit

*Example 1 (continued):*
- Only loans for first undergraduate program ($30,500) count toward undergraduate aggregate
- Remaining eligibility for second undergraduate program = $15,500 unsub ($46,000 minus $30,500
- Combined sub aggregate ($65,500) already borrowed, so no remaining sub eligibility

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues:Changing From Higher to Lower Loan Limit

*Example 2:*
- Dependent undergraduate in 4-year program
- Receives additional unsub for first 3 years based on PLUS denial
- In year 4, parent is approved for PLUS

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues:Changing From Higher to Lower Loan Limit

*Example 2 (continued):*
- Student borrowed $24,625 for first 3 years, including $13,000 additional unsub
- For year 4, $13,000 additional unsub does not count toward dependent aggregate limit
- Total borrowed toward dependent aggregate limit = $11,625
- Remaining eligibility under dependent aggregate limit = $11,375

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues:PLUS and Additional Unsub

- If parent receives PLUS at beginning of AY, but later in year applies for more PLUS and is denied, student may receive additional unsub
- PLUS must be counted as EFA

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues:PLUS and Additional Unsub

- If student receives additional unsub based on PLUS denial at beginning of AY, but later in year parent applies for PLUS and is approved, school may award PLUS
- Must cancel any pending additional unsub disbursements
- Additional unsub already disbursed must be counted as EFA

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues:Multiple Loans at Same Grade Level

- No federal limit on number of times student may receive maximum loan at same grade level
- Student must meet all eligibility requirements, including SAP
- School may place limit
- Must be same for all students in same program
- Cannot be applied case-by-case
- For FFEL, GA may also place limit

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues: Refusing/Limiting Loans

- A school may not have a general policy that:
- Limits loan amounts based on enrollment status or length of AY attended by student
- Limits loan amounts to institutional charges

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues: Refusing/Limiting Loans

*Examples:*
- School policy may not:
- Prohibit half-time students from receiving more than half of the annual loan limit
- Reduce loan eligibility for students who are enrolled for only one term of an AY that is not a final period of study

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Loan Limit Issues: Refusing/Limiting Loans

- School may refuse to award loan or award less than borrower’s eligibility only if:
- Reason is documented and given to borrower in writing
- Action is taken on case-by-case basis
- Documentation is kept in student’s file
- Action is not based on race, gender, color, religion, national origin, age, disability status, or income

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## References/Contacts

- FSA Handbook, Volume 8
- Dear Colleague Letter GEN-97-3
- Patricia.Newcombe@ed.gov
- Jon.Utz@ed.gov

- Session 4: FFEL and Direct Loans - Loan Limit Overview

## Slide 72