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. |