Maintained for Historical Purposes

This resource is being maintained for historical purposes only and is not currently applicable.

Federal Family Education Loan Program - Making Loans

AwardYear: 1998-1999
EnterChapterNo: 10
EnterChapterTitle: Federal Family Education Loan Program
SectionNumber: 2
SectionTitle: Making Loans
PageNumbers: 11-30


THE LOAN APPLICATION
------------------------

To receive a Federal Stafford Loan, a student must complete a Free
Application for Federal Student Aid
(FAFSA) and a loan application.
A student may obtain an application from a guaranty agency, lender,
or school that participates in the Federal Family Education Loan
(FFEL) Program.

To receive a Federal PLUS Loan, a parent must complete a PLUS
Loan application. The student benefitting from the PLUS Loan must
complete a portion of the application, but is not required to complete
a FAFSA unless applying for additional aid under the Student
Financial Assistance (SFA) programs, unless a late disbursement will
be made (see pages 10-5 and 10-6).

There is a common loan application/promissory note that the U.S.
Department of Education has approved. A student must use this form
to apply for a subsidized and/or unsubsidized Federal Stafford Loan
and a common loan application/promissory note that a parent must
use to apply for a PLUS Loan.

Applications/promissory notes that a school receives may or may not
have a guaranty agency's name in the upper right corner. Even if a
guaranty agency's name appears in the upper right corner of the form
the student uses, another guaranty agency may process the form and
insure the loan.

If a guaranty agency uses the common form as part of a renewal
application process, borrower information and a prior lender's name
and code number may be preprinted on the form.

A guaranty agency may use an electronic application process. If the
guarantor chooses to do so, it must require that the borrower
complete the common loan application data elements that the agency
did not receive from the FAFSA. The guaranty agency must also
provide the borrower with a promissory note and notification of the
borrower's rights and responsibilities.

Schools should direct any questions about the common loan
application/promissory note or electronic application processing to
the guaranty agency or particular agencies with which it works.

If a student is unable to find a lender willing to make a Stafford
Loan, he or she should contact the guaranty agency that serves his or
her state of residence for assistance in finding a lender of last resort
(LLR). See page 10-8 for more information about the LLR.

A Stafford Loan application comprises three sections: one to be filled
out by the borrower, one to be filled out by the school, and one to be
filled out by the lender. A PLUS Loan application has these three
sections and a section that requires the student who is benefitting
from the loan to provide information.
The Borrower's Portion of the Application

Some of the information a borrower must provide are his or her
name, address, date of birth, Social Security Number, and driver's
license number, as well as two personal references. The borrower
may provide a lender's name if he or she has a preference because the
law gives a borrower a choice of a lender. The borrower must read
and sign the promissory note. If the borrower previously borrowed or
the agency uses electronic application processing, some of this
information may be preprinted on the application.
The School's Portion of the Application

[[School determines eligibility]]
The school must provide the student's cost of attendance (COA),
Expected Family Contribution (EFC), and estimated financial
assistance (EFA). The school must also determine the loan period.
The EFC appears on the Student Aid Report (SAR) that the student
receives after completing and submitting a FAFSA for processing.
Determining a student's COA, EFA, loan period, and recommended
loan amount based on annual and aggregate limits is the financial aid
administrator's responsibility. The financial aid administrator is also
expected to confirm the student's dependency status and Social
Security Number. The school, not the lender, determines the
student's or parent's eligibility for a Stafford or PLUS loan.

An eligible foreign school is also responsible for determining eligibility,
although such a school generally contracts with a guaranty agency or
a consultant for assistance.)

Chapter 2 provides information on the EFC and on determining a
student's dependency status and COA.
The Lender's Portion of the Application

The lender reviews the Stafford Loan or PLUS Loan application and
completes the lender portion of the loan application.

A lender is prohibited from discriminating against an applicant on
the basis of race, national origin, religion, sex, marital status, age, or
handicapped status. However, a lender may decline to make loans to
students who do not meet the lender's credit standards or to students
at a particular school, or to students enrolled in a particular program
of study. A lender may decline to make FFELs for less than a
specified amount; for example, a lender could refuse to make a loan
for less than $500.

A lender may not approve a loan for more than the least of the
following amounts:

- the amount the borrower requests

- the student's unmet financial need (in the case of a subsidized
loan)

- the student's COA

- the borrower's maximum borrowing limit (explained later in this
section)

The lender must receive approval of the guaranty agency for an
FFEL in order for the lender to disburse the loan and, if applicable,
be eligible for payment of federal interest benefits. A lender or
guaranty agency may not make or guarantee a Stafford Loan or
PLUS Loan until it reviews its records and finds no indication that
the applicant (and the student, if the loan is a PLUS) is in default on
an SFA loan made for attendance at any school or owes a refund on
an SFA grant received at any school. Once guaranty agency
approval is obtained, the lender will send the Stafford Loan proceeds
(or the first disbursement of the proceeds) to the school's financial
aid office for delivery to the student; or the lender will send the
proceeds directly to the student if he or she is enrolled in a foreign
school. For a PLUS, loan proceeds are sent in at least two
disbursements to the school by EFT or by a check made copayable to
the school and the parent borrower. See Section 3 for more
information on loan disbursement.


DETERMINING THE LOAN PERIOD
-------------------------------

The period of enrollment or loan period to which the application
refers is the period for which the FFEL is intended. This period must
coincide with one or more of a school's academic terms (such as
academic year, semester, trimester, quarter or nonstandard term) for
schools that use terms. Loan periods for schools that do not use terms
are generally based on the length of the program or academic year.
The COA, EFA, and EFC provided on the application must relate to
the loan period.

The minimum period for which a school that measures academic
progress in credit hours and uses terms may certify a loan is a single
academic term. For a clock-hour school or a credit-hour school that
does not use terms, the minimum period for which the school may
certify a loan is

- the shortest of the following three periods

1) the academic year as defined by the school in accordance with
the General Provisions regulations

2) the length of the student's program at the school

3) the remaining portion of the student's program that exceeds the
school's academic year.

The maximum loan period is generally the school's academic year
but cannot exceed a 12-month period.

[[Sessions overlapping award years]]
If a school session overlaps two award years (that is, it begins before
July 1 and ends after July 1), the financial aid administrator has the
discretion to decide to which of the two award years the loan period
will apply. This is the only case in which a financial aid
administrator has such discretion. If a student in a session that
overlaps two award years is also receiving campus-based aid (a
Federal Perkins Loan, a Federal Supplemental Educational
Opportunity Grant [FSEOG], or Federal Work-Study [FWS]), both
the FFEL and the campus-based aid must apply to the same award
year.

If a student's loan is certified after the beginning of an enrollment
period, the FFEL may retroactively cover the entire period of
enrollment, as long as that period of enrollment does not exceed the
maximum loan period allowed. For example, suppose a school's
academic term begins on September 6 and runs through December
20. A student who is admitted to a program contingent on the receipt
of an acceptable academic transcript from a previous school begins
the academic term on September 6. The school receives the transcript
on October 15. The school may certify the loan for the full period of
enrollment (September 6 through December 20). If the student plans
on enrolling for the subsequent term and that term is part of the same
academic year as the first term, the school may certify the loan to
cover the period from September 6 to the end of the second term.

[[Charging tuition and fees at the start of a program longer than an
academic year]]

If a school charges tuition and fees to a student at the beginning of a
program that is longer than an academic year, the COA for the FFEL
Program should include the full amount of the tuition and fees
charged in the period of enrollment in which the loan is
made. For example, suppose a school with a 1,350-clock-hour
program defines its academic year as 900 clock hours and charges
each student the full $3,000 in tuition and fees at the beginning of the
program. An enrolling student may receive two Federal Stafford
Loans during the program (provided all eligibility criteria are met)
because the program exceeds one academic year. The tuition and
fees component of the COA for the first Stafford Loan is $3,000;
there is no tuition and fees component in the COA for the second
Stafford Loan. The second Stafford Loan must be prorated because
the remainder of the program (450 hours) is shorter than the school's
academic year. See page 10-23 for more information on loan
proration.

The amount of a student's subsidized Stafford Loan depends on his
or her financial need and borrowing limit. The amount of an
unsubsidized Stafford Loan depends on the student's COA, EFA, and
borrowing limits. See Section 1 for information on financial need.
Loan limits are discussed later in this section. Chapter 2 provides
detailed information on COA and EFA. The amount of a parent's
PLUS Loan depends on the benefitting student's COA. See page 10-
21 for further information.


CERTIFYING A LOAN APPLICATION
---------------------------------

[[Getting previous financial aid information]]
During the loan application process, a financial aid administrator
must request a financial aid transcript (FAT) from each eligible
school a student previously attended or must use the National
Student Loan Data System (NSLDS) to obtain the student's previous
financial aid information. It is the financial aid administrator's
responsibility to determine whether a student previously attended an
eligible school and to obtain the proper information. The financial
aid administrator may certify a loan application (but is not required
to do so) before receipt of any or all of a student's FATs but must not
deliver loan proceeds to the student until the school receives an FAT
from each of the student's previous eligible schools. In the case of a
PLUS Loan, the financial aid administrator must not certify the
application until the school receives an FAT from each of the
benefitting student's previous eligible schools.

[[School refusal to certify]]
A financial aid administrator may refuse to certify an otherwise
eligible FFEL borrower's loan application if the reason for the refusal
is documented and provided in writing to the student. Similarly, the
financial aid administrator may certify a loan for an amount less than
that for which the student would otherwise be eligible if reasons for
doing so are documented and explained to the student in writing.

Before certifying a Stafford Loan, the financial aid administrator
must

- certify that the loan disbursement schedule provided with the
application meets the disbursement requirements for Stafford
Loans (see Section 9 for more information) and

- prorate Stafford Loans for programs of study that are shorter than
an academic year and for programs in which the remaining period
of study is less than an academic year in length.

A school may not certify a Stafford Loan or PLUS Loan application
until the following requirements are also met:

- The school has determined the student's dependency status,
enrollment status, and satisfactory academic progress.

- A student (or both the student and parent in the case of a PLUS
Loan) certifies that he or she is not in default on any SFA loan and
does not owe a refund on any SFA grant or scholarship.

- The school determines the student's Pell Grant eligibility (for
Stafford Loan applicants), and if eligible, the student has applied
for the grant.

- The school reviews its academic and financial aid records, verifies
the information that the borrower (and the student, in the case of a
PLUS Loan) certified concerning previous loans or grants, and
determines that the total loan or loans certified for the period of
enrollment will not cause the borrower to exceed annual or
aggregate loan limits. The school must also ensure that

- for subsidized Stafford Loans, the loan amount or amounts will
not exceed the student's financial need as determined by an
approved need analysis system and

- for unsubsidized Stafford Loans or PLUS loans, the loan
amount or amounts will not exceed the difference between the
student's COA and his or her EFA.

A financial aid administrator should be aware of the responsibility
incurred in certifying a loan application. If the financial aid
administrator certifies a loan for an ineligible student, the school will
be responsible for purchasing the loan and for reimbursing the
Department for all interest and special allowance paid on behalf of
the borrower.

A school may not certify a loan for more than the least of the
following amounts:

- the amount the borrower requests

- the student's unmet financial need (in the case of a subsidized
loan)

- the student's COA

- the borrower's maximum borrowing limit (explained later in this
section)

If the financial aid administrator certifies that a student is eligible for
a loan larger than that to which he or she is entitled, the school must
reimburse the lender for the difference between the loan amount
certified and the loan amount to which the student is entitled. The
school must also reimburse the Department for the excess interest
and special allowance payments made on the incorrect loan amount.

[[Common certification errors]]
Some of the most common errors schools make are

- certifying a loan for more than the amount allowed;

- certifying a loan to a student not making satisfactory academic
progress (see Chapter 2);

- certifying a loan to a student in an ineligible program or attending
an ineligible branch campus;

- certifying a loan to an ineligible student, such as a foreign student
on a student visa (see Chapter 2); and

- certifying more than one application for the same student for the
same loan period (resulting in a loan exceeding the student's need
and annual loan limit).

If a subsidized Stafford Loan applicant has been selected for
verification, a school may refuse to certify the Stafford Loan
application until verification has been completed, or the school may
certify the application, if there is no information which conflicts with
that provided by the applicant. A school that chooses to certify the
application may not deliver the loan proceeds to the borrower until
verification has been completed.

After completing the school's portion of an application, a financial
aid administrator must certify that the information he or she provided
is correct and that the information the student and/or parent provided
is accurate to the best of the financial aid administrator's knowledge.
The school must keep one copy of the application on file. The
student (or the school on behalf of the student) sends the other copies
of the application to the lender or guaranty agency along with the
promissory note, if included. The date of loan certification is the date
the school official signs the loan application and submits it to the
lender or agency--unless the school uses another means of
documenting the date it submits the application.
Preventing Overawards When Aid Will Exceed Need

An overaward is an award in excess of need that occurs when the
financial aid administrator learns of additional financial assistance
(such as a grant or scholarship) available to the student for the same
period of enrollment after a school determines EFA and receives
Stafford Loan funds. See page 10-37 for more information on
handling potential Stafford Loan overawards that are identified after
FFEL funds are received.

If, after the loan has been certified but before the school receives the
loan proceeds, the school becomes aware of additional financial
assistance that could result in the student's aid package exceeding his
or her need, the school must eliminate the overaward. The school
must do this by requesting that the lender cancel or reduce the
Stafford Loan or by canceling or reducing aid over which it has
control, such as institutional or campus-based aid, instead of (or in
addition to) canceling or reducing the Stafford Loan amount. A $300
overaward tolerance is permitted if the student's financial aid
package includes a Stafford Loan plus Federal Work-Study (FWS).
If there is no FWS in the student's financial aid package, no tolerance
is allowed under FFEL. See Chapter 7, Section 2 for more
information on this tolerance.


ANNUAL LOAN LIMITS
---------------------

An undergraduate student who has not yet completed the first year of
an undergraduate program may borrow

- up to $2,625 per academic year of study for a program that is at
least an academic year in length;

- up to $1,750 per academic year of study for a program that is at
least two-thirds of an academic year but less than a full year;

- up to $875 per academic year of study for a program that is at
least one-third but less than two-thirds of an academic year.

A student may not receive a Stafford Loan for a program that is less
than one-third of an academic year in length.

A student who has completed the first year of study but has not
completed the remainder of the program may borrow up to $3,500
per academic year of study for a program that is at least an academic
year in length.

A student who has completed the first and second years of study but
has not completed the remainder of the program may borrow up to
$5,500 per academic year of study for a program that is at least an
academic year in length.

An undergraduate student who has an associate or baccalaureate
degree that is required for admission into his or her current program
may borrow up to $5,500 per academic year of study for a program
that is at least an academic year in length.

A loan for a borrower at any level of study must be prorated, as
discussed on page 10-23, when

- a program is less than an academic year in length or

- a program is more than an academic year and the remaining
portion of the program is less than an academic year in length.

These loan limits represent the total of all subsidized and
unsubsidized Stafford Loans a dependent undergraduate student may
borrow at each level of study. A dependent undergraduate student
who takes out both subsidized and unsubsidized Stafford Loans must
not exceed the annual and aggregate limits allowed under the
Stafford Loan Program. An unsubsidized Stafford Loan amount,
subject to the loan limits described above, is the difference between
the borrower's COA for the loan period and the borrower's EFA
(including any subsidized Stafford Loan amount he or she will
receive). This example shows how to determine the amount of an
unsubsidized Stafford Loan for a dependent undergraduate student.

Gary, a first-year dependent student at Reid State U., applies for a
Stafford Loan to attend a term beginning in September 1998. His
COA is $8,000, and, based on his need, he qualifies for a
subsidized Stafford Loan of $1,000. He may also apply for an
unsubsidized Stafford Loan of $1,625, which is the difference
between the maximum Stafford Loan allowed him ($2,625) and
the amount of his subsidized Stafford Loan. (Gary's parents may
borrow a PLUS Loan to cover the remainder of his COA.)

Following are loan limits for unsubsidized Stafford Loans made to
independent undergraduate students (or to dependent students whose
parents are unable to borrow PLUS Loans due to exceptional
circumstances such as adverse credit histories). The following
unsubsidized Stafford Loan limits may be added to the borrower's
subsidized Stafford Loan limits.


- A student who has not completed the first two years of
undergraduate study may borrow

- up to $4,000 for a program of study at least an academic year in
length;

- up to $2,500 for a program at least two-thirds of an academic
year but less than a full year;

- up to $1,500 for a program at least one-third of an academic
year but less than two-thirds of an academic year.

- A student who has completed the first and second years but who
has not completed the remainder of the program may borrow up to
$5,000 for a program of study at least an academic year in length.
The loan must be prorated for programs less than an academic
year in length or for programs more than an academic year when
the remaining portion of the program in excess of an academic
year is less than an academic year in length.

- An undergraduate student who has an associate or baccalaureate
degree that is required for admission into his or her current
program may borrow up to $5,000 per academic year of study for
a program that is at least an academic year in length.

Here is an example of how to determine the amount of an
unsubsidized Stafford Loan for an independent undergraduate
student.

Jennifer is a first-year independent undergraduate student at
Riverfront Community U. Her COA is $7,000. Jennifer qualifies
for a subsidized Stafford Loan of $1,500. She may apply for an
unsubsidized Stafford Loan of $5,125 ($1,125 remaining under
her initial Stafford Loan limit, plus a $4,000 unsubsidized Stafford
Loan). Her total loan limit for her subsidized Stafford Loan and
her unsubsidized Stafford Loan is $6,625.

A student's academic year level for loan limit purposes is set
according to the school's standards for the time normally required to
complete a given grade level. However, if the school determines a
program normally can be completed in two years of full-time study,
a student in that program can never receive more than the second-
year annual loan limit of $3,500 in any given year, no matter how
long it takes the student to finish.

The subsidized loan limit for a graduate or professional student is
$8,500 per academic year. The additional unsubsidized loan limit for
graduate or professional students is $10,000 per academic year.

[[Teacher certification or recertification programs]]
Students enrolled in teacher certification or recertification programs
are considered the same as fifth-year undergraduate students for the
purpose of determining annual loan limits. See the chart on page
10-22 for more information on annual loan limits.

A student enrolled at least half time on a non-degree seeking basis
for a single consecutive 12-month period taking coursework that the
school has determined to be necessary for the student to enroll in an
undergraduate, graduate, or professional program may borrow

- at the first-year undergraduate loan level to take the necessary
undergraduate program prerequisite coursework or

- at the fifth-year undergraduate loan level to take the necessary
graduate or professional program prerequisite coursework.
Federal PLUS Loans

A PLUS Loan may not exceed the student's estimated COA minus
other financial aid awarded during the period of enrollment. This is
the only borrowing limit for PLUS Loans.

[[This file contains the chart "Maximum Annual Loan
Amounts Federal Stafford Loan Program and Federal Direct Stafford
Loan Program," on page 10-22 in Portable Document Format (PDF).
It can be viewed with version 3.0 or greater of the free Adobe Acrobat
Reader software.]]


PRORATED ANNUAL LOAN LIMITS--SUBSIDIZED AND
UNSUBSIDIZED STAFFORD LOANS

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

[[Proration applies only to undergraduates]]
Generally, a dependent or independent undergraduate may borrow
up to the annual limit applicable to the student's year in school.
However, the maximum amount an undergraduate student may
borrow must be reduced, or prorated, in certain situations.
Note that PLUS Loans and loans for graduate or professional
students are not subject to proration.


Loans must be prorated when a student is enrolled

- in a program containing fewer weeks, clock hours, or credit hours
than the statutory minimum academic year; or

- in a program that is longer than an academic year, but the final
period of study is shorter than an academic year.1

1 Proration must also be done in certain cases where a program is
exactly one academic year long: For example, a student withdraws
from a one-year program and later, in a new academic year,
completes the program (either re-enrolling at the original school or
enrolling at another school). In this case, the student is enrolled in a
final period of study that is shorter than an academic year.

There are two types of proration--fixed and proportional:

- Fixed prorated loan limits are set dollar amounts based on the
length of a student's program (or final period of study) in relation
to a full academic year.

- Proportional prorated loan limits are calculated amounts
based on the ratio of the credit or clock hours in a final period of
study to the credit or clock hours in the school's academic year.

[[Program less than AY--fixed proration]]
Schools use fixed proration when students are enrolled in programs
containing fewer weeks, clock hours, or credit hours than the
statutory minimum academic year. Chapter 3 contains extensive
information about academic year requirements. Briefly, an academic
year must contain at least 30 weeks of instructional time2
and 24 semester or trimester hours, 36 quarter hours, or 900 clock
hours. To determine the length of a student's program in relation to a
full academic year, schools must compare two fractions: the number
of clock or credit hours in the program divided by the number of
hours in the academic year, and the number of weeks of instructional
time in the program divided by the number of weeks in the academic
year. The lesser of these fractions determines the relation of program
length to academic year length and is used to calculate the prorated
loan amount.

2 The Department may waive this requirement for some programs
fewer than 30 weeks.

Fixed proration example

Hector, an independent student, has enrolled in a 650-clock hour,
28-week program. The school defines the academic year for the
program as 900 clock hours and 30 weeks of instructional time.
Because Hector's program is shorter than an academic year, his
Stafford Loans must be prorated. The school compares the two
fractions:

650 clock hours in 28 weeks instructional
program time in program
------------------- ----------------------
900 clock hours in 30 weeks instructional
academic year time in academic year

650/900=.72 28/30=.93

Of the two fractions, the smaller is 650/900 (.72); the school
uses .72 as the length of Hector's program when determining the
prorated loan amount. The program is less than a full year but
greater than 2/3 (.66) of an academic year. Therefore, Hector may
borrow up to $1,750 in combined subsidized and unsubsidized
Stafford Loans (see the loan limits chart on page 10-22). Because
he is an independent student, he may be eligible for an additional
prorated unsubsidized Stafford Loan of up to $2,500.

[[Final period of study less than AY]]
Schools must prorate a student's loan if the final period of study is
shorter than an academic year. A final period of study is one at the
end of which a student will complete a program. At a term-based
credit hour
(where the academic year is measured in semesters, trimesters,
quarters, or other terms), a final period of study is considered shorter
than an academic year if the final period consists of fewer terms than the
school's scheduled academic year. At a term-based clock hour school
(where the academic year is measured in semesters, trimesters,
quarters, or other terms), a final period of study is considered shorter
than an academic year if the final period consists of fewer terms than
the school's scheduled academic year OR fewer clock hours than the
minimum statutory requirements for a full academic year. Terms
within the same academic year as the student's final term are
considered part of the final period of study, even if separated from
the final term by a term in which the student is not enrolled.

Rousimoff College has an academic year that consists of three
quarters: fall, winter, and spring. Laurel will be enrolling in the
fall and spring quarters, but not the winter quarter, and will
graduate at the end of the spring quarter. Because the fall quarter
is in the same academic year as Laurel's final quarter, it is part of
the final period of study, even though there is a term between the
final quarter and the fall quarter in which Laurel will not enroll.
Because the fall quarter is part of the final period of study, the
loan Laurel receives in the fall must be prorated, just as her spring
loan must be prorated.

At a nonterm school (where programs are measured only in clock
or credit hours), a final period of study is considered less than an
academic year if the final period consists of fewer clock or credit
hours or weeks of institutional time than the minimum statutory
requirements for a full academic year.

To prorate the loan for a program that exceeds an academic year but
has a final period of study less than a full academic year in length,
schools must calculate what proportion of a full academic year the
final period of study represents. The loan amount is then prorated on
that basis.
Final period example

Jose is an independent third-year student at Van Dam College.
Van Dam has 36 quarter hours and three quarters. Jose needs to
complete only 24 quarter hours to finish his program and enrolls
in the fall and winter quarters. Because his final period of study (2
quarters) is less than an academic year (3 quarters), his Stafford
Loans must be prorated. The school determines the proportion of
the academic year the final period of study represents by dividing
the credit hours in this period by the number in a full academic
year:

24 quarter hours in final period
---------------------------------
36 quarter hours in academic year

The school then multiplies the loan limit for all third-year students
($5,500) by 24/36 to determine the maximum subsidized Stafford
Loan Jose can receive:

24/36 X $5,500 = $3,667

Jose can receive up to $3,667 in combined subsidized and
unsubsidized Stafford Loans. Because Jose is an independent
student, he may be eligible for an additional unsubsidized Stafford
Loan. To determine the amount, Van Dam multiplies the
unsubsidized limit for independent students ($5,000) by 24/36:

24/36 X $5,000 = $3,333

Jose may be eligible for an additional prorated unsubsidized
Stafford Loan of up to $3,333.

In some cases, the school will use both fixed and proportional
proration to determine the loan amount for a final period of study.
See the example on the next page.

[[Enrollment status changes]]
If a student drops or adds a course after the school has originated a
prorated loan, the school may readjust the loan amount but is not
required to do so. Of course, a student who drops courses must still
be enrolled at least half time to be eligible for any loan amount.

Mixed proration example

Laurel is an independent second-year student at Rousimoff
College. She has 16 quarter hours to complete in her program and
will enroll in the fall and spring quarters. Each quarter at
Rousimoff consists of 10 weeks of instructional time. Laurel will
graduate at the end of the spring quarter. Because this final period
of study is shorter than an academic year, Laurel's Stafford Loans
must be prorated. Rousimoff determines the length of the final
period by dividing the number of quarter hours in the period by
the number of hours in the academic year:

16 quarter hours in
final period
---------------------
36 quarter hours in
academic year

The school then multiplies the loan limit for all second-year
students ($3,500) by 16/36 to determine the maximum amount
Laurel can receive in combined subsidized and unsubsidized
Stafford Loans:

16/36 X $3,500 = $1,556

Because Laurel is an independent student, she may be eligible for
an additional unsubsidized Stafford Loan. The school compares
the two fractions required for fixed proration:

16 quarter hours in 20 weeks instructional
final period time in final period
---------------------- -------------------------
36 quarter hours in 30 weeks instructional
academic year time in academic year

16/36 = .44 20/30 =.67

Of the two fractions, the smaller is .44; the school uses .44 as the
length of Laurel's final period of study when determining the
prorated loan amount. The period is less than 2/3 of an academic
year (.66) but greater than 1/3 (.33). Therefore, Laurel may be
eligible for an additional prorated unsubsidized Stafford Loan of
up to $1,500.


TYPE OF ACADEMIC YEAR AND FREQUENCY OF ANNUAL LOAN LIMITS
-----------------------------------------------------------------

The annual limit for Stafford Loans limits how much a student can
borrow in a single academic year. Once the student has reached the
annual loan limit, he or she cannot receive another Stafford Loan
until he or she begins another academic year. There are two types of
academic years a school can use in determining when another year
will begin for the student: a scheduled academic year (SAY) or a
borrower-based academic year (BBAY). Only term-based credit-
hour programs can use SAYs. Clock-hour and nonterm credit-hour
programs must use BBAYs. If a program at a term-based credit-hour
school contains fewer than 30 weeks of instructional time in a year
(unless the Department grants a waiver for an academic year of less
than 30 weeks), the school must use only SAYs for borrowers in that
program.
Scheduled Academic Year

An SAY is a fixed period of time that generally begins and ends at
the same time each calendar year (for example, beginning on the first
day of the fall semester and ending on the last day of the spring
semester). The SAY generally corresponds to the academic year or
calendar that is published in the school's catalog or other materials.
An SAY must meet the statutory requirements of an academic year,
as described in Chapter 3.

[[Summer terms]]
For a program that uses SAYs, a summer term may be part of the
academic year that preceded that term (that is, it may be a "trailer"),
or it may be part of the academic year that follows that term (that is,
it may be a "leader"). The school can

- use a strict policy that summer terms are always trailers or leaders,

- determine whether a summer term is a trailer or leader on a
program-by-program basis, or

- determine whether a summer term is a trailer or leader on a case-
by-case basis.

Summer mini-sessions can be grouped together as a single trailer or
leader, or they can be treated separately and assigned to different
SAYs. If the summer mini-sessions are grouped and treated as a
single term, the summer cost of attendance cannot include costs for a
mini-session for which the student was not enrolled.
Borrower-based Academic Year

A BBAY is not a set period like an SAY; instead, the BBAY's
beginning and end dates depend on an individual student's
enrollment and progress. For example, a school that has new students
beginning enrollment every month might use a BBAY for each
student that begins in the month the student enrolls, rather than using
an SAY that begins in the fall regardless of when the student actually
begins classes. Like an SAY, the BBAY must meet the minimum
statutory requirements for an academic year (see the next page for
one exception to this requirement for term-based credit-hour
programs.)

As noted previously, a school must use BBAYs for clock-hour and
nonterm credit-hour programs. A school may choose to use a BBAY
instead of an SAY for a term-based credit-hour program unless the
program contains fewer than 30 weeks of instructional time in a year;
in this case, as mentioned earlier, the school must use an SAY for the
program.

[[Term-based credit-hour programs]]
For a term-based credit-hour program, the school can use BBAYs for
all its students or just for students enrolled in certain programs, or it
may use BBAYs on a student-by-student basis. The school can also
alternate BBAYs with SAYs for a student, but the academic years
must not overlap. A school that has these choices for academic year
standards must have a written policy that explains how it applies
these options when calculating loan eligibility.

The BBAY must include the same number of terms as the SAY the
school would otherwise use (not including any summer trailer or
leader). The BBAY may include terms and/or mini-sessions the
student does not attend if the student could have enrolled at least half
time in those terms or mini-sessions; however, unlike an SAY, the
BBAY must begin with a term in which the student actually enrolled.
Also, any mini-sessions (summer or otherwise) that run
consecutively must be combined and treated as a single term. If the
BBAY includes a summer term, the BBAY need not meet the 30-
week minimum requirement for an academic year.

[[Clock-hour programs, nonterm programs]]
For a clock-hour or nonterm program, the BBAY begins when the
student enrolls. Because the BBAY must meet the minimum
statutory requirements for an academic year, the BBAY must contain
at least 30 weeks of instructional time and the appropriate number of
credit or clock hours (24 semester or trimester hours, 36 quarter
hours, or 900 clock hours). The BBAY does not end until the student
has completed the number of weeks and the number of hours in the
academic year. A student who is attending less-than-full-time will
take longer to complete the academic year than a full-time student.
Eligibility for Further Loans

In general, once a student has reached the annual loan limit, he or she
cannot receive another Stafford Loan until he or she begins a new
academic year. A student who has already received one Stafford
Loan within an academic year may receive another loan if he or she
has not yet reached the annual limit. In addition, a student who has
already borrowed up to the annual limit within an academic year can
receive another loan if his or her annual limit is increased, either
because he or she progresses to a grade level with a higher limit or
because his or her dependency status changes to independent. In all
cases, the student may borrow the difference between the amount
already borrowed within the academic year and the student's loan
limit.

Note that for a nonterm program, the student will never progress to a
higher grade level within an academic year and, thus, will only have
a change in the loan limit if his or her dependency status changes.
The student moves to a higher grade level only when he or she
completes the BBAY.


AGGREGATE LOAN LIMITS
------------------------

The maximum outstanding total subsidized and unsubsidized Stafford
Loan debt allowed is

- $23,000 for a dependent undergraduate student,

- $46,000 for an independent undergraduate student, and

- $138,000 for a graduate or professional student (including loans
for undergraduate study).

Note that these maximums include any amounts borrowed under the
William D. Ford Federal Direct Loan Program (Direct Loans) and
that any outstanding Federal Supplemental Loans for Students (SLS)
that a borrower has count as unsubsidized loans against the
borrower's aggregate loan limit.

The aggregate limit (or sum total) for both undergraduate and
graduate/professional students must include the amounts a student
has outstanding in subsidized and unsubsidized loans under
both the Direct Loan and FFEL programs
, even if the
student has consolidated any of these loans under either program. A
student should contact his or her consolidation loan holder to
determine the makeup of the loan--that is, the amount and
information on Federal Consolidation Loans. See Chapter 11 for
more information on Direct Consolidation Loans.

A borrower who has reached his or her aggregate borrowing limit
may not receive additional loans. Once the loans are repaid in full or
in part, the borrower may apply for additional Stafford Loans.

[[This file contains the chart "Total Cumulative Loan
Limits for FFELs and Direct Loans" on page 10-29 in Portable Document
Format (PDF). It can be viewed with version 3.0 or greater of the free
Adobe Acrobat Reader software.]]


INCREASED LOAN LIMITS FOR HEALTH EDUCATION ASSISTANCE LOAN
(HEAL) STUDENTS

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

An increase in annual unsubsidized Stafford Loan limits is
permitted for students who could have borrowed under the Health
Education Assistance Loan (HEAL) Program but who are no longer
eligible because they did not borrow under that program before
October 1, 1995. Students in this category who are enrolled full
time
in schools that participate in the HEAL Program are eligible
for the higher unsubsidized Stafford Loan amounts. Obversely,
students who remain eligible to borrow under HEAL (students who
did receive HEALs before October 1, 1995) may not receive the
increased Stafford Loan amounts.

A school that participates in HEAL is one that made HEAL
disbursements during Fiscal Year 1995 (October 1, 1994 through
September 30, 1995). Schools that have withdrawn from the HEAL
Program--or have simply stopped making HEALs--after FY 95 may
certify unsubsidized Stafford Loans at the increased limits for any
loan period that begins before July 1, 1998.

When determining additional unsubsidized Stafford Loan limits,
participating HEAL schools must use the current HEAL Program
and Discipline loan limits, described in the Department of Health and
Human Services Student Financial Aid Guidelines Notebook in
Section 104.3.2. Note that, unlike in HEAL, no need analysis is
required for the extra unsubsidized Stafford Loan amounts.

The aggregate unsubsidized Stafford Loan limit for these health
profession students is $189,125 less the aggregate amount of the
subsidized loans made to students.