If	you	discover	that,	due	to	an	error,	a	student	borrower	has	received	Direct	Subsidized	Loan	funds	in	excess	of	their
financial	need,	and	the	student	is	still	enrolled	for	the	loan	period,	you	must	return	the	subsidized	loan	amount	for	which
the	student	was	ineligible	and	ask	the	student	if	they	wish	to	replace	the	subsidized	funds	with	a	Direct	Unsubsidized
Loan.	If	the	student	agrees	to	accept	the	unsubsidized	loan	funds	and	they	also	received	a	Direct	Unsubsidized	Loan	for
the	same	loan	period	as	the	Direct	Subsidized	Loan,	you	may	increase	the	amount	of	the	Direct	Unsubsidized	Loan
disbursements	by	the	amount	of	the	Direct	Subsidized	Loan	that	the	student	was	ineligible	to	receive.	If	the	student	did
not	receive	a	Direct	Unsubsidized	Loan,	you	may	originate	a	new	Direct	Unsubsidized	Loan	for	the	amount	of	the	Direct
Subsidized	Loan	that	the	student	was	ineligible	to	receive.	The	new	Direct	Unsubsidized	Loan	must	have	the	same	loan
period	and	disbursement	dates	as	the	Direct	Subsidized	Loan.
If	the	student	does	not	agree	to	have	the	excess	subsidized	loan	funds	replaced	by	a	Direct	Unsubsidized	Loan,	you	must
still	return	the	ineligible	Direct	Subsidized	Loan	amount.
If	you	discover	that	a	student	received	Direct	Subsidized	Loan	funds	in	excess	of	financial	need	after	the	student	is	no
longer	enrolled	for	the	loan	period,	you	are	not	required	to	take	any	action	to	eliminate	the	excess	subsidized	loan
amount.
If	you	discover	that,	due	to	an	error,	a	student	borrower	who	was	eligible	for	a	Direct	Subsidized	Loan	instead	received	a
Direct	Unsubsidized	Loan,	you	must	correct	the	error	(even	if	the	loan	period	has	ended)	by	submitting	a	downward
adjustment	to	reduce	or	eliminate	the	Direct	Unsubsidized	Loan,	as	appropriate,	and	replacing	it	with	the	same	amount	of
Direct	Subsidized	Loan	funds.	You	may	do	this	either	by	adjusting	an	existing	Direct	Subsidized	Loan	upwards,	or,	if	the
student	does	not	have	an	existing	Direct	Subsidized	Loan,	by	originating	a	new	Direct	Subsidized	Loan.	Replacing	a	Direct
Unsubsidized	Loan	with	a	Direct	Subsidized	Loan	in	this	circumstance	does	not	require	obtaining	the	student9s	consent.
Direct	Loan	Overawards
As	explained	in	
Volume	4,	Chapter	3,	an	overaward	exists	when	a	student9s	aid	package	exceeds	their	need	or	overall
COA.	If	you	discover	that	a	student	who	received	Direct	Loans	has	been	overawarded	and	your	school	has	already
received	and	disbursed	some	or	all	of	the	Direct	Loan	funds,	you	have	the	following	options:
If	the	student9s	aid	package	includes	a	Direct	Unsubsidized	Loan,	a	Direct	PLUS	Loan,	or	a	nonfederal	education	loan,
and	the	aid	package	doesn9t	already	apply	these	loans	toward	the	student9s	SAI,	you	may	choose	to	adjust	the	aid
package	to	have	all	or	a	portion	of	these	loans	replace	the	SAI,	thus	reducing	or	eliminating	the	overaward	(for	more
detail	and	examples,	see	<Substituting	for	the	SAI=	in	Volume	3,	Chapter	3).
If	you	have	not	yet	made	the	second	or	subsequent	disbursement	of	a	Direct	Loan,	you	can	reduce	or	cancel	the
second	or	subsequent	disbursement.
If	the	overaward	situation	occurs	after	the	full	amount	of	a	Direct	Loan	has	been	disbursed,	you	do	not	need	to	adjust	the
amount	of	the	loan.	However,	you	might	have	to	adjust	the	aid	package	to	prevent	an	overaward	of	Campus-Based	funds
or	to	prevent	the	total	aid	package	from	exceeding	the	student9s	need.
Although	a	school	isn9t	required	to	return	Direct	Loan	funds	that	were	disbursed	to	the	borrower	(either	directly	or	by
applying	them	to	the	student's	account)	before	the	overaward	situation	occurred,	the	law	doesn9t	prevent	your	school
from	returning	funds	that	were	applied	to	the	student	account	if	you	choose	to	do	so.	A	borrower	who	receives	a	direct
payment	of	loan	funds	is	not	required	to	repay	an	overawarded	amount,	unless	the	overaward	was	caused	by	the
borrower9s	misreporting	or	withholding	of	information.
Loan	Periods
The	loan	period	(also	referred	to	as	the	<period	of	enrollment=)	is	the	period	for	which	a	Direct	Loan	is	intended.	It	must
coincide	with	an	academic	period	established	by	the	school	for	which	institutional	charges	are	generally	assessed	(e.g.,
semester,	trimester,	quarter,	length	of	the	student9s	program,	or	academic	year).	It9s	important	to	define	the	loan	period
at	the	beginning	of	the	loan	awarding	process,	because	the	timing	and	amount	of	Direct	Loan	disbursements	are	tied	to
the	loan	period.
Generally,	the	loan	period	may	not	include	terms	in	which	a	student	is	ineligible	(for	example,	if	the	student	is	not	enrolled
during	a	particular	term	or	is	enrolled	less	than	half	time	during	a	term).	There	is	a	limited	exception	to	this	rule	if	the	loan
period	begins	and	ends	with	a	term	in	which	the	student	is	eligible	for	Direct	Loans,	but	the	first	and	last	terms	of	the	loan