Chapter	3
Direct	Loan	Origination,	Loan	Periods,	and	Disbursements
Origination	Overview
Origination	is	the	process	of	creating	a	Direct	Loan	award	in	the	school9s	system.	Before	originating	a	Direct	Loan,	a
school	must	determine	the	student9s	or	parent9s	eligibility	for	the	loan.	For	each	Direct	Loan	that	a	school	disburses	to	a
student	or	parent,	the	school	must	submit	a	loan	award	record	to	the	COD	System	that	includes	the	student9s	grade	level,
the	loan	period	and	academic	year	dates,	the	loan	amount,	the	anticipated	and	actual	dates	and	amounts	of	the	loan
disbursements,	and	other	information.	Submission	of	a	loan	award	record	serves	as	the	school9s	certification	that	it	has
determined	the	borrower9s	eligibility	for	the	loan.
The	specific	Direct	Loan	amount	that	a	student	or	parent	borrower	is	eligible	to	receive	is	determined	based	on	various
factors	such	as	the	student9s	COA,	Student	Aid	Index	(SAI),	OFA,	and	remaining	eligibility	under	the	annual	and	aggregate
loan	limits	(see	Chapter	4	for	guidance	on	annual	and	aggregate	loan	limits).	Some	of	these	factors	are	relevant	only
when	determining	eligibility	for	certain	types	of	Direct	Loans.	When	originating	a	Direct	Loan,	the	COA	used	in
determining	the	loan	amount	may	include	only	those	costs	associated	with	the	period	of	enrollment	(loan	period)	for
which	the	loan	is	being	originated.
Direct	Subsidized	Loans	and	Direct	Unsubsidized	Loans	have	annual	and	aggregate	limits	that	are	the	same	for	all
students	at	a	given	grade	level	and	dependency	status.	You	may	not	originate	a	Direct	Loan	for	an	amount	that:
Exceeds	the	amount	requested	by	the	borrower;
In	the	case	of	a	Direct	Subsidized	Loan,	exceeds	the	student9s	COA	minus	the	student9s	SAI	and	OFA;
In	the	case	of	a	Direct	Unsubsidized	Loan	or	Direct	PLUS	Loan,	exceeds	the	student9s	COA	minus	OFA;	or
In	the	case	of	a	Direct	Subsidized	Loan	or	Direct	Unsubsidized	Loan,	would	cause	the	student	to	exceed	the	annual	or
aggregate	limit.
See	Volume	3,	Chapter	3	for	more	information	on	packaging	Direct	Loans	as	part	of	a	student9s	financial	aid	award.
Originating	a	Loan
It9s	important	to	remember	that	your	school,	not	the	Department,	is	responsible	for	determining	a	borrower9s	eligibility	for
a	Direct	Loan.	Schools	that	originate	and	disburse	loans	to	ineligible	borrowers,	or	for	loan	amounts	that	exceed	loan
limits	or	financial	need,	are	subject	to	administrative	actions	such	as	a	fine,	limitation,	suspension,	and	termination,	as
well	as	liabilities	including	repayment	to	the	government	of	interest	and	costs	it	has	paid	on	the	ineligible	loans.
You	must	originate	a	Direct	Loan	while	the	student	is	enrolled	and	eligible	for	the	period	of	enrollment	for	which	the	loan
is	intended.	You	may	not	originate	a	loan	for	a	period	in	which	the	student	is	no	longer	enrolled.	For	example,	you	may
not	originate	a	loan	for	a	prior	academic	year	that	has	ended,	even	if	the	student	is	enrolled	and	eligible	for	the	current
academic	year.	Similarly,	if	a	student	who	was	enrolled	at	least	half	time	only	for	the	fall	and	spring	quarters	of	an
academic	year	consisting	of	fall,	winter,	and	spring	quarters	does	not	request	a	loan	until	the	spring,	you	may	not	at	that
time	originate	a	loan	for	the	previous	fall	quarter.
For	all	Direct	Loans,	you	must	document	the	student9s	COA,	SAI,	and	OFA	in	the	student9s	file.	This	information	must	be
made	available	to	the	Department	upon	request.
You	must	confirm	that	the	borrower	meets	the	definition	of	eligible	borrower	by	doing	the	following:
Determine	that	the	student	is	enrolled	at	least	half	time	and	making	satisfactory	academic	progress	(see	Volume	1);
Review	the	NSLDS	information	on	the	ISIR	or	the	NSLDS	Professional	Access	website	to	ensure	that	the	student	is	not
in	default,	does	not	owe	an	overpayment	on	a	Title	IV	grant	or	loan	(see	Volume	1),	and	will	not	exceed	the	annual	or
aggregate	loan	limits	(as	described	in	Chapter	4	of	this	volume);
Ensure	that	the	amount	of	the	loan,	in	combination	with	other	aid,	will	not	exceed	the	student9s	financial	need	or