Chapter 7

Packaging Aid

In this chapter we explain how to package a student’s aid once you’ve received the student’s FAFSA information, including the expected family contribution (EFC), and have calculated the student’s aid eligibility. The general rule in packaging is that the student’s need-based aid must not exceed the student’s financial need, and total financial aid and other Estimated Financial Assistance (EFA) must not exceed the student’s cost of attendance (COA). If you discover that a student’s aid package exceeds the student’s financial need or COA, you must attempt to adjust the aid package to eliminate the overaward. See Volume 4, Chapter 3 for guidance on handling overawards and overpayments.

Chapter 7 Highlights
  • Related software: EDExpress Packaging Module

    Available on the Knowledge Center at https://fsapartners.ed.gov/knowledge-center/topics/software-and-other-tools.

  • Packaging principles

  • Iraq & Afghanistan Service Grants

  • Treatment of need-based earnings

  • Treatment of other aid: special cases

    • AmeriCorps and veterans educational benefits

    • Vocational rehabilitation assistance

    • Bureau of Indian Affairs grants

Packaging Overview

For some Title IV programs, eligibility is limited to students who have financial need. Students are considered to have financial need if their COA exceeds their EFC. These “need-based” programs include the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), and Direct Subsidized Loan programs. The total aid that a student receives from need-based programs may not exceed the student’s financial need. Pell Grants are considered to be the first source of aid for students with financial need. A student’s eligibility for aid from the other need-based programs is then determined by subtracting the student’s EFC and EFA (including the student’s Pell Grant) from the COA (COA – EFC – EFA = remaining need).

For other Title IV programs, eligibility is not based on the student’s EFC. These “non-need-based” programs include the Teacher Education for College and Higher Education (TEACH) Grant, Direct Unsubsidized Loan, and Direct PLUS Loan programs. A student’s eligibility for non-need-based aid is determined by subtracting EFA (including any need-based aid) from the COA (COA – EFA = eligibility for non-need-based aid). As explained later in this chapter, non-need-based aid may be used to replace the EFC.

Depending on individual circumstances, students may receive only need-based aid, only non-need-based aid, or a combination of need-based and non-need-based aid. In general, the total amount of need-based aid cannot exceed the student’s financial need and the total amount of all aid cannot exceed the student’s COA. However, there are some exceptions to the normal packaging process under certain circumstances or for certain Title IV programs, as will be explained later in this chapter.

The COA for the Campus-Based, TEACH Grant, and Direct Loan programs is based on the student’s enrollment status and costs for the period for which the aid is intended. The COA used for Pell Grants and Iraq & Afghanistan Service Grants is always the full-year costs for a full-time student, so you may have to prorate actual or average costs up for students who are attending less than an academic year (or who are part-time in a term program) or prorate down for students who are attending for periods longer than an academic year.

The process of awarding aid without exceeding the student’s financial need (for need-based aid) or COA (for total aid received) is traditionally called packaging. Packaging is a process that varies from school to school, depending on the types of scholarship and other aid available at the school, and the characteristics of the student population. Schools may have different packaging philosophies, but they generally try to find the best combination of aid to meet the financial need of the students they serve.

To help you package federal student aid with your other aid awards, we provide a packaging module in EDExpress. You can enter information about your school’s student aid programs and set up factors to be considered in packaging, and then use the software to automate the packaging process. Most schools use some form of packaging software, whether EDExpress or software from a commercial vendor. You are not required to use EDExpress to package Title IV awards, and you do not have to report the student’s aid package to the Common Origination and Disbursement (COD) system.

Direct Loan Packaging Considerations

  • Before you originate a Direct Subsidized Loan or Direct Unsubsidized Loan for an undergraduate student, you must determine the student’s eligibility for a Pell Grant.

  • You may originate a Direct Subsidized Loan only for the amount of the student’s financial need—the student’s costs, minus the student’s EFC and estimated financial assistance.

  • A student may qualify for a combination of Direct Subsidized and Unsubsidized Loans.

  • If they meet program requirements, the parents of a dependent student can take out a Direct PLUS Loan to pay for the student’s COA. There is no fixed loan limit for Direct PLUS Loans.

  • If the student is independent, or if a dependent student’s parents can’t borrow a Direct PLUS Loan, the student is eligible for additional Direct Unsubsidized amounts.

  • Direct Unsubsidized Loans and Direct PLUS Loans (as well as TEACH Grant funds) can be used to replace the EFC, as well as to cover the student’s unmet need.

  • Direct Subsidized Loans are available only to undergraduate students.

  • Direct PLUS Loans are available to parents of dependent undergraduate students and to graduate and professional students.

  • You may not limit Direct Loan borrowing by students or parents on an across-the-board or categorical basis (for more information, see “Refusing to originate a loan or originating for less than maximum eligibility” in Chapter 5 of this volume).

Pell Grants As First Source Of Aid

Pell Grants are considered to be the first source of aid to the student, and packaging Title IV funds begins with Pell eligibility. Pell Grant awards are determined by using the appropriate Pell Payment Schedule for a student’s enrollment status, COA, and EFC. A correctly determined Pell Grant is never adjusted to take into account other forms of aid. When awarding aid from the other Title IV programs, you must ensure that the student’s need or COA is not exceeded.

You must also adjust non-federal aid awards (e.g., institutional aid or private education loans), if necessary, to ensure that the student’s financial need is not exceeded. In some cases a student who receives a Pell Grant may receive a scholarship or other aid that you can’t adjust and that is large enough (in combination with the Pell Grant) to exceed the student’s COA. In this case, the student is still eligible for a Pell Grant based on the appropriate payment schedule. However, you can’t award any Title IV funds other than the Pell Grant.

For instance, the National Collegiate Athletic Association’s rules for athletic aid sometimes permit a school to award athletic aid that covers a student’s full COA (see “NCAA Considerations” in Chapter 2 of this volume for more information). You must still pay the full Pell Grant to the student, but you may not pay other Title IV funds to the student.

Pell can’t be used to pay a loan

If a Pell Grant recipient’s aid package includes a loan and the package must be adjusted to prevent an overaward, the Pell Grant funds can’t be used to pay back the loan—a loan repayment isn’t an educational expense.

Packaging Rules

Campus-Based Aid

You should consider a number of things when developing a packaging policy. For instance, some schools give more grant assistance to beginning students, who may have more difficulty adjusting to campus life, increasing the proportion of loans and work-study in subsequent years. For the Campus-Based Programs and other programs where the available funds may not be sufficient to meet every eligible student’s need, some schools decide to give a higher proportion of aid to the neediest students. Other schools award funds as an equal proportion of each student’s need.

Many schools use software, such as the Packaging module in EDExpress, that can be configured to implement the school’s packaging philosophy. For instance, in EDExpress, you can specify the order in which aid sources are to be applied to the student’s unmet need, and set overall percentage limits on the amount of gift (grants/scholarships) and self-help aid that will be included in the aid package.

Iraq & Afghanistan Service Grants

An Iraq & Afghanistan Service Grant awarded to an ineligible student is an overaward, as is a grant based on a Pell Grant Payment Schedule for an enrollment status different than that for which a student is enrolled. Finally, an Iraq & Afghanistan Service Grant that by itself exceeds the student’s COA is an overaward. All of these Iraq & Afghanistan Service Grant overawards must be corrected (for more detail on how to resolve overawards, see Volume 4, Chapter 3 of the FSA Handbook).

Pell and Iraq & Afghanistan Service Grant Lifetime Eligibility Used

You must check the COD common record or COD Web to make sure students close to the 600% lifetime limit on a Pell Grant are not packaged in such a way as to go over 600% of the LEU for either program; to do so would be to overaward the student. The Department will also provide weekly reports in the SAIG mailbox (message class PGLEXXOP, where XX=year) for your school’s Pell-eligible applicants that have a Pell LEU greater than or equal to 450%. See Chapter 3 for more detail on the effects of various levels of Pell/Iraq & Afghanistan Service Grant LEU.

Packaging Direct PLUS Loans for graduate/professional students

A Direct PLUS Loan does not count against a graduate/professional student’s Direct Unsubsidized Loan annual or aggregate loan limits.

Use net FWS earnings when packaging

To determine the net amount of a student’s FWS earnings that will be available to help pay for the student’s costs, you must subtract estimated taxes and job-related costs from the student’s gross FWS earnings (see Chapter 6 of this volume).

Estimated Financial Assistance (EFA)

In contrast to Pell & Iraq and Afghanistan Service Grants, you must take other aid into account when awarding TEACH Grant funds, Campus-Based aid, or Direct Loans. As noted earlier, the other aid that must be considered is called “estimated financial assistance” (EFA). EFA is generally used in the same way for the Direct Loan Program as for the TEACH Grant and Campus-Based programs. However, there are differences in the treatment of AmeriCorps benefits (discussed later in this chapter).

In general, EFA as defined for the Direct Loan, Campus-Based, and TEACH Grant programs refers to aid from the Title IV programs, as well as other grants, scholarships, loans, and need-based employment that you can reasonably anticipate at the time you award aid to the student, whether the assistance is awarded by the school or by an individual or organization outside the school.

If aid is excluded from either EFA or COA, that amount must be excluded from both EFA and COA. For Direct Loans, the regulations specify that “estimated financial assistance” is aid that the student will receive for the same period of enrollment as the loan. As noted in Chapter 1, it’s usually best to originate a loan for a period that matches the academic year or other period that you’re using to award funds from other Title IV programs. The amount of a private education loan which exceeds the EFC when substituting for the EFC is considered EFA.

When classifying non-FSA sources of aid, if a student receives the award because of postsecondary enrollment (for example, a scholarship from a local social club that requires a student to be attending a postsecondary school), it counts as EFA if it is not considered wages for employment according to federal or state rules, or if it is considered wages and is based on need. Any amount that appears as income on the tax return will also be included on the appropriate line of item 44 or 93 on the FAFSA. If the award is considered wages for employment but is not based on need, then it is not EFA and it remains in income.

Estimated Financial Assistance Data
34 CFR 673.5(c)
HEA: Sec. 428(a)(2)(C)(ii)
DL: 34 CFR 685.102(b)

Prepaid tuition plans

Prepaid tuition plans are not considered EFA; instead, they are treated the same as Coverdell education and 529 savings accounts. Their value is considered an asset of the owner of the account, unless the owner of the account is a dependent student. When the owner is a dependent student, the value of the account is reported as an asset of the parents on the FAFSA. For more detail, see Volume 1, Chapter 2, under the heading “Qualified Education Benefits.”

Estimated financial assistance provided by a state

If the assistance provided by a state is not considered Title IV assistance (such as a LEAP Grant), and is designated by the state to offset a specific component of the student’s COA, the amount of that assistance may be excluded from both COA and Estimated Financial Assistance. You may exclude such assistance on a student-by-student basis, but if it is excluded, it must be excluded for both COA and Estimated Financial Assistance. If the amount excluded is less than the allowance provided in the student’s COA, you must exclude the lesser amount. For more detail, see HEA Sec. 480(j).

Examples of Estimated Financial Assistance

Counted as EFA

Any educational benefits paid because of enrollment in postsecondary education, such as:

  • Pell Grants;

  • Direct Subsidized Loans (gross amount, including origination fees);

  • Direct Unsubsidized and PLUS Loans (gross amount, including origination fees), except amounts used to replace the EFC (see below);

  • Long-term need-based loans, including loans made by the school (short-term emergency loans are not considered to be Estimated Financial Assistance);

  • Grants, including Federal Supplemental Educational Opportunity Grants (FSEOGs) and state grants;

  • Scholarships, including athletic scholarships and scholarships that require future employment but are given in the current year;

  • Employer reimbursement of employee’s tuition

  • Waivers of tuition and fees;

  • Fellowships or assistantships, except non-need-based employment portions of such awards;

  • Income from insurance programs that pay for the student’s education;

  • Net income from need-based employment such as FWS;

  • AmeriCorps awards or post-service benefits (except when determining eligibility for Direct Subsidized Loans);

  • McNair Postbaccalaureate Achievement Program;

  • TEACH Grants (except amounts used to replace the EFC - see “Not counted as EFA”); and

  • Private education loans (except amounts used to replace the EFC - see “Not counted as EFA”).

Not counted as EFA

  • Iraq & Afghanistan Service Grants;

  • Wages from non-need based employment;

  • Veterans education benefits listed in Appendix A at the end of this chapter;

  • When awarding Campus-Based or TEACH Grant funds, the amount of any Direct Subsidized Loan that is equal to or less than the amount of the student’s AmeriCorps national service education awards or post-service benefits paid for the student’s COA;

  • When determining eligibility for Direct Subsidized Loans, AmeriCorps national service education awards or post-service benefits; and

  • The amounts of any TEACH Grants, Direct Unsubsidized Loans, Direct PLUS Loans, and non-federal non-need-based loans, including private, state-sponsored, and institutional loans, that are used to replace the EFC (amounts that exceed the EFC must be treated as EFA).

Packaging Aid For Dependents Of Deceased Iraq & Afghanistan Soldiers Or Public Safety Officers

Pell-eligible dependents of deceased Iraq and Afghanistan soldiers

As described in Chapter 3 of this volume, a student whose parent or guardian died as a result of U.S. military service in Iraq or Afghanistan after September 11, 2001, may receive increased amounts of Title IV aid, if, at the time of the parent or guardian’s death, the student was 1) less than 24 years old, or 2) enrolled at an institution of higher education. The aid award and the method of packaging depends upon whether a student who meets the above criteria has a Pell-eligible EFC.

If a student who meets the above requirements has a Pell-eligible EFC, you must award and package all Title IV aid based on an EFC of zero, without regard to the student’s calculated EFC. (Note that the zero EFC is only used for packaging purposes; you don’t actually change the student’s EFC).

If a student who meets the above requirements has an EFC that is too high to qualify for a Pell Grant, the student is potentially eligible to receive an Iraq & Afghanistan Service Grant.

Pell-eligible dependents of deceased public safety officers (Children of Fallen Heroes)

Chapter 3 of this volume also explains that beginning with the 2018-19 award year, an otherwise Pell-eligible student whose parent or guardian died as a result of active service in the line of duty as a public safety officer may receive the maximum Pell Grant amount and increased amounts of other federal student aid if, at the time of the parent’s or guardian’s death, the student was less than 24 years old, or was enrolled at an institution of higher education. For a student who meets these requirements and has a Pell- eligible EFC, you must use an EFC of zero to package all federal student aid, the same as described above for Pell-eligible students who are the dependents of deceased Iraq and Afghanistan soldiers. As is the case with dependents of deceased Iraq and Afghanistan soldiers, the zero EFC is used only for packaging purposes. There is no change to the student’s calculated EFC.

Non-Pell-eligible dependents of deceased Iraq & Afghanistan soldiers (Iraq & Afghanistan Service Grants)

The amount of the Iraq and Afghanistan Service Grant (IASG) is determined by enrollment status only (see Chapter 3). For students receiving IASGs, you include the student’s normally calculated EFC when packaging other Title IV aid. The IASG is not based on need and is not considered EFA (for purposes of awarding aid from other Title IV programs). COA is only taken into account if the student’s COA is less than the maximum IASG. For more detail on the IASG, including calculating an award for a payment period, see Chapter 3 of this volume.

An IASG is not adjusted to take into account other forms of aid. Additionally, as the IASG is not considered EFA, it does not affect other aid in the student’s Title IV aid package. In the rare instance where an IASG, by itself, would exceed the student’s Title IV COA for a period of enrollment, the total amount of the of the IASG paid to the student must be reduced to the COA for the period of enrollment (reduce each payment for each payment period by an equal amount).

Maximum Pell packaging example - dependent of a deceased Iraq & Afghanistan soldier
Maximum Pell packaging example

Juanita is a third-year undergraduate student at Bohannon College. Juanita’s COA is $17,300, and her EFC for the current year is 3,957. In 2004, when Juanita was four years old, her parent died as a result of U.S. military service in Iraq. As a result, Juanita is eligible to receive Title IV funds as if her Pell-eligible EFC were zero. The packaging process begins with a $6,345 Pell Grant. Bohannon then awards Juanita a state grant and a $5,500 Direct Subsidized Loan. No overaward is created, and no form of aid must be reduced.

If Juanita’s parent had died as a result of service as a public safety officer, she would have qualified for the same treatment of her EFC under the Children of Fallen Heroes Scholarship Act and the packaging example would be the same.

IASG packaging example
IASG packaging example

Joe is a dependent first-year undergraduate student, enrolled at Bohannon College. Joe’s COA is $9,000, and his EFC for the current year is 8,000. Due to his parent’s death in service in Iraq and his non-Pell-eligible EFC, Joe is eligible to receive an IASG. The packaging process begins with a $5,970.65* IASG. Bohannon can then award Joe a $1,000 Direct Subsidized Loan and a $4,500 Direct Unsubsidized Loan. (If Joe were an independent student, he could receive a $1,000 Direct Subsidized Loan and an $8,000 Direct Unsubsidized Loan.) Although the amount of IASG and Direct Loans combine to exceed Joe’s COA, the IASG is not EFA, and thus does not affect Joe’s other aid in his Title IV aid package. No overaward is created, and neither form of aid must be reduced.

1The $5,970.65 IASG amount reflects a 5.9% reduction of the 2020-2021 statutory award amount of $6,345 as required by the Fiscal Year 2020 Sequester for IASG awards first disbursed on or after October 1, 2019 and before October 1, 2020. For IASG awards first disbursed on or after October 1, 2020 and before October 1, 2021, the Fiscal Year 2021 Sequester requires a 5.7% reduction in the statutory award amount. For more details, see the “The Sequester and Iraq & Afghanistan Service Grants” in Chapter 3 of this volume and the June 23, 2020 Electronic Announcement.

Packaging When Choosing Not To Borrow Subsidized Or Unsubsidized Direct Loans

If a graduate Direct PLUS Loan borrower has not requested the maximum Direct Unsubsidized Loan amount for which he or she is eligible, you must:

  • Notify the borrower of his or her maximum Direct Unsubsidized Loan eligibility;

  • Provide the borrower with a comparison of the maximum interest rates for Direct Unsubsidized Loans and Direct PLUS Loans;

  • Explain when a Direct Unsubsidized Loan enters repayment and when a Direct PLUS Loan enters repayment; and

  • Give the borrower the opportunity to request the maximum Direct Unsubsidized Loan for which the borrower is eligible.

If a dependent student for whom a parent is borrowing a Direct PLUS Loan chooses not to apply for a Direct Subsidized or Unsubsidized Loan, the Direct Subsidized/Unsubsidized Loan amount that the student would have been eligible to receive is not counted as EFA when determining the amount of the Direct PLUS Loan. The same principle applies when a graduate/ professional student is eligible for a Direct Unsubsidized Loan but chooses to borrow only a Direct PLUS Loan.

Packaging Teach Grants

TEACH Grants are not considered to be need-based aid. The amount of a student’s TEACH Grant, in combination with the student’s EFA from all other Title IV programs, may not exceed the COA. You may optionally use a TEACH Grant to replace the EFC (see the “Substituting for the EFC” section below).

Considering Grants And Subsidized Loans First

The law requires aid administrators to find out whether the student is eligible for certain other Title IV programs that would reduce the need for borrowing. If your school participates in the Federal Pell Grant Program, you must include the student’s estimated Pell Grant eligibility as EFA when making Campus-Based awards, whether or not the student has received the Pell Grant at the time you make your Campus-Based award.

Similarly, you must determine an undergraduate student’s Pell Grant eligibility before originating a Direct Subsidized or Unsubsidized Loan for that student, and you must package Campus-Based funds and Direct Subsidized Loans before unsubsidized loans. In addition, a student may not receive a Direct Unsubsidized Loan unless the student has received a Direct Subsidized Loan for the maximum amount for which the student is eligible (see Chapter 5 of this volume for an explanation of the difference between Direct Subsidized Loans and Direct Unsubsidized Loans). However, if a student has received a determination of need for a Direct Subsidized Loan that is $200 or less, you have the option of including that amount as part of a Direct Unsubsidized Loan and are not required to originate a separate Direct Subsidized Loan for the student.

For a dependent student, you may originate and disburse a parent Direct PLUS Loan without determining the student’s Pell Grant and Direct Subsidized Loan eligibility. Determining Pell eligibility is not relevant when awarding Direct PLUS Loans to graduate or professional students, but your school must determine a graduate/professional student’s maximum Direct Unsubsidized Loan eligibility before you originate a Direct PLUS Loan for the student.

Requirement to consider Federal Pell Grants first reference
34 CFR 685.200(a)(iii)

FSEOG & Pell Grant LEU

A student who receives a Pell Grant at any time in the award year may be awarded an FSEOG for that award year; the student does not have to receive a Pell Grant in the same payment period as the FSEOG. For example, in the case of a student who receives a Pell Grant for the fall semester only due to reaching his lifetime eligibility used (LEU), the student may be awarded an FSEOG for both the fall semester and subsequent spring semester.

Students who have reached or exceeded 600% of their Pell or Iraq & Afghanistan Service Grant LEU may still be eligible to receive FSEOG, however, they must be considered in the second selection group (see “Selecting FSEOG recipients” in Chapter 6 of this volume).

You must keep documentation of the eligible EFC that was calculated for the student, and you must confirm Pell Grant eligibility prior to disbursement of the FSEOG. For more details on Pell Grant LEU, see Chapter 3 of this volume.

Substituting For The EFC

A school may substitute certain types of aid for the student’s EFC. Forms of aid that may replace the student’s EFC include Direct Unsubsidized Loans, TEACH Grants, Direct PLUS Loans, state loans, private education loans, or any other non-need-based loans. Note that annual loan limits for Direct Unsubsidized Loans still apply, and the total aid received (including amounts used to replace the EFC) cannot exceed the COA.

Substituting for the EFC reference
34 CFR 686.21(d)
34 CFR 685.200(e)
Basic packaging example
Basic Packaging Example 1

Ricki is a dependent student, returning as a sophomore to Dwight College. For academic purposes, Dwight College considers him to be a 2nd-year student. His COA is $12,500, and his EFC for the current year is 2,500; therefore, the packaging process begins with $10,000 in unmet need.

Basic-packaging-example2

The aid administrator at Dwight College begins by awarding Pell Grants and applying an outside scholarship before awarding Campus-Based aid. Ricki’s Estimated Financial Assistance is a $3,895 Pell Grant and a $400 outside scholarship.

Basic-packaging-example3

Ricki has sufficient need for the maximum awards that the aid administrator can make under Dwight’s policy for Campus-Based funds: $800 FSEOG, and $1,800 in FWS employment, leaving him with $3,105 in remaining need.

Basic-packaging-example4

The aid administrator at Dwight College finishes the packaging process by awarding a Direct Subsidized Loan in the amount of $3,105 to fully meet his financial need. As a dependent 2nd-year student, Ricki’s combined Direct Subsidized Loan and Direct Unsubsidized Loan limit is $6,500 (maximum of $4,500 subsidized). Ricki’s financial aid package now fully covers his financial need of $10,000. However, Ricki could also receive up to $2,500 in Direct Unsubsidized Loan funds to replace the EFC and completely cover his COA.

Graduate/Professional PLUS Packaging Example

Kent enrolls in a graduate-level program at McCausland University with a total COA of $31,000. As a graduate student, he has an annual loan limit of $20,500 for Direct Unsubsidized Loans, and is also eligible for Direct PLUS Loans.

Eligibility for Direct Unsubsidized Loans is determined by subtracting EFA from the COA. The EFC is not taken into consideration. Kent has already been awarded a graduate scholarship of $5,000. Subtracting this EFA from the COA leaves Kent with $26,000 in unmet costs that McCausland partially covers by awarding Kent a $20,500 Direct Unsubsidized Loan. Kent now has $5,500 in remaining costs.

As with Direct Unsubsidized Loans, eligibility for Direct PLUS Loans is determined by subtracting EFA from the COA. Subtracting the scholarship and Direct Unsubsidized Loan from the COA allows Kent to receive a Direct PLUS Loan for $5,500 to fully cover his COA.

Graduate/Professional PLUS Packaging Example
Using Unsubsidized Loan Funds to Replace the EFC: Dependent example

Nichelle is a first-year dependent student at Sandberg Community College. Her COA is $10,800 and her ISIR shows that she has an EFC of 8,000, so her financial need is $2,800. Nichelle’s EFC makes her ineligible for a Pell Grant, and Sandberg does not participate in the Campus-Based Programs. The combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limit for a first-year dependent student is $5,500 (maximum $3,500 subsidized). Nichelle qualifies for a $2,800 Direct Subsidized Loan to fully cover her financial need.

$10,800 Cost - 8,000 EFC = $2,800 Need

Eligibility for Direct Unsubsidized Loan is determined by subtracting EFA from the COA (the EFC is not taken into consideration).Subtracting the$2,800 Direct Subsidized Loan from the$10,800 COA, leaves $8,000 in unmet costs. However, Nichelle cannot cover this full amount with a Direct Unsubsidized Loan because of the $5,500 combined Direct Subsidized Loan/Direct Unsubsidized Loan annual loan limit. Nichelle is eligible to borrow an additional $2,700 in the form of a Direct Unsubsidized Loan to cover part of the EFC ($5,500 combined subsidized/unsubsidized annual loan limit - $2,800 Direct Subsidized Loan = $2,700 in remaining Direct Unsubsidized Loan eligibility under the annual loan limit).

$10,800 Cost - 2,800 Direct Sub - 2,700 Direct Unsub - 5,300 Direct PLUS = $0 Unmet Cost

Her parents could then borrow $5,300 in Direct PLUS Loan funds to cover the remaining portion of the EFC and fully cover her COA. As with Direct Unsubsidized Loans, eligibility for Direct PLUS Loans is determined by subtracting EFA from the COA ($10,800 COA - $2,800 Direct Subsidized Loan - $2,700 Direct Unsubsidized Loan = $5,300 in Direct PLUS Loan eligibility).

As an alternative to Nichelle taking out a $2,700 Direct Unsubsidized Loan, Nichelle’s parents could borrow up to $8,000 in the form of a Direct PLUS Loan to replace the EFC and fully cover the COA ($10,800 - $2,800 Direct Subsidized Loan = $8,000 in Direct PLUS Loan eligibility). Another option (to eliminate the need for Nichelle to incur any student loan debt at all) would be for her parents to take out a Direct PLUS Loan in the amount of $10,800.

Using Unsubsidized Loan Funds to Replace the EFC: Independent example

Allen enrolls in Aim College of Engineering and Animal Husbandry as a 1st-year independent student with an $8,500 cost of attendance, and Aim has received an ISIR for him with an EFC of 2,050. He is eligible for a $3,895 Pell Grant, and Aim also awards him a $1,000 FSEOG. Allen’s remaining need is $1,555, so he can receive that amount in a Direct Subsidized Loan. Allen’s financial need is fully covered by the Pell Grant, FSEOG, and Direct Subsidized Loan.

The combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limit for a first-year independent student is $9,500 (maximum $3,500 subsidized).

Allen can also receive a Direct Unsubsidized Loan in the amount of $2,050 to replace the EFC and fully cover his COA ($8,500 COA - $3,895 Pell - $1,000 FSEOG - $1,555 Direct Subsidized Loan = $2,050 Direct Unsubsidized Loan eligibility).

$8,500 Cost - 2,050 EFC = $6,450 Need

Unmet Need + EFC

$8,500 Cost - 3,895 Pell Grant - 1,000 FSEOG - 1,555 Direct Subsidized - 2,050 Direct Unsubsidized = $0 Unmet Cost

Recalculation

Any time a student begins attendance in at least one course but does not begin attendance in all the courses he or she was scheduled to attend and on which eligibility for Title IV Aid was based, the school must recalculate the student’s eligibility for Pell Grants, Iraq and Afghanistan Service Grants, and TEACH Grants, based on the revised enrollment status and COA. For the Campus-Based programs, the school may need to recalculate the student’s eligibility based on a revised COA.

A school may adopt a recalculation policy that is stricter than what the regulations require (e.g., a policy that requires recalculation up to a census date or anytime within a term or period of enrollment). If a school adopts a policy of recalculating Pell Grants, Iraq and Afghanistan Service Grants, and TEACH Grants when a student’s enrollment status changes within a term or period of enrollment, the policy must be applied consistently to all students. Therefore, if your school chooses to recalculate Pell, Iraq & Afghanistan Service Grants and TEACH Grants for a student whose enrollment status in a program increases (e.g., from half-time to full-time), it must also recalculate for a student whose enrollment status decreases.

Once the school has recalculated the student’s eligibility, Title IV funds in excess of the amount the student is eligible to receive must be returned or reawarded, as applicable. For guidance on handling excess cash resulting from recalculations of aid eligibility due to enrollment status changes, see Volume 4.

Recalculation and Direct Loans

If a student’s enrollment status changes after the student has already received one or more Direct Loan disbursements, no recalculation of the previously disbursed Direct Loan amount is required. For information on how changes in enrollment status may affect a student’s eligibility to receive pending Direct Loan disbursements, see Chapter 5 of this volume.

Recalculation and Pell Grants

Since Pell Grants are always based on the full-time COA, recalculation means that you are looking at the student’s revised enrollment status and using the Pell Payment Schedule appropriate for the student’s revised enrollment status. For more detail on recalculating Pell Grants, see Chapter 3 of this volume.

Recalculating COA

When performing a recalculation a school may not include in the COA costs associated with any classes the student failed to begin. In addition, in determining a student’s COA a school may not include any costs for a period when the student was not enrolled in and attending any Title IV eligible classes (other than costs for a brief period of time between regularly scheduled terms or semesters). Note that some components of COA are not included if a student is enrolled less than half time (see Chapter 2 of this volume).

A school that performs a Return of Title IV Funds calculation on a period of enrollment basis for a student enrolled in a program offered in modules may not include in the recalculated COA any costs associated with a future payment period for which the student has not confirmed attendance at the time of withdrawal and that does not start within 45 days.

COA changes between payment periods

A school may have a policy of recalculating awards when the COA changes from one payment period to the next—for example, because of changes to the student’s tuition and fee costs, or because a student’s living situation changes (such as when a student moves off campus). Schools also have the option to establish a policy to recalculate financial aid awards when a student’s costs change within an award year, as long as the recalculation policy is carried out for all students whose costs change.

COA changes within a payment period

You may establish a policy of recalculating for cost changes from one payment period to the next (as described above), and at the same time, have a policy of not recalculating for cost changes within a payment period. However, you also have the option to establish a policy of recalculating financial aid awards when a student’s costs change within a payment period. For instance, if a student with no dependents moves from a dormitory to off-campus housing at midterm, the school may wish to recalculate the student’s award for that payment period.

For Pell purposes, such a policy is acceptable if it’s carried out for all students whose costs change within the payment period.

You may not recalculate the payment for a payment period that took place before the cost change. For instance, if a student lives in the dormitory during the first quarter and then moves off campus for the second and third quarters, the recalculation would only affect the payments for the second and third quarters.

Counting need-based earnings as estimated financial assistance

The treatment of earnings from a job sometimes presents a problem— should the earnings be reported as income in need analysis or should they be counted as a form of student aid in the packaging process? Only net earnings from _need-based employment are considered to be EFA. “Need- based employment” means employment that is awarded by the school itself or by another organization to a student on the basis of financial need to meet educational expenses for the award year.

A Federal Work-Study job is clearly a form of need-based student aid. Employment with a state is considered to be EFA if that employment is based on the student’s financial need for assistance to pay for educational expenses.

Non-need-based earnings are not to be considered as EFA for the current award year because they will be reported as income on the Free Application for Federal Student Aid (FAFSA) for a subsequent award year and will be used in calculating the future EFC. An example of non-need-based employment would be a job a student obtains with a private employer such as a local grocery store. Another example would be a job cleaning the labs in the chemistry department on campus, if the chemistry department hired the student using non-need-based criteria and funds.

Crossover Periods

Crossover periods are payment, award, or loan periods that overlap two award years. In general, you may choose which award year EFC to use for a student, with one exception:

  • When awarding FWS to a student not attending classes, the EFC for the next period of enrollment must be used.

The following chart summarizes the options for handling crossover payment periods in the major Title IV programs. Note that for the award year selected, the student must have an official EFC calculated by the CPS, and for a Pell Grant the CPS must also have processed a valid SAR or ISIR. For crossover payment periods, you must use the same EFC, COA, and need for all programs except Pell; for Pell, use the EFC for the award year from which the student will be paid.

Pell crossover issues

For Pell Grant purposes, you may assign crossover payment periods to the award year that best meets the needs of your students and maximizes a student’s eligibility over the two award years in which the crossover payment period occurs. You may assign the Pell award to a different award year than the award year used for awarding the rest of the student’s Title IV aid. For more detail on calculating Pell awards in crossover, summer, minisession, and transfer situations, see Chapter 3 of this volume.

EFCs for periods other than 9 months

For information on EFCs for periods other than 9 months, see the Application and Verification Guide, Chapter 3.

Crossover period EFCs and Title IV aid

In a crossover payment period, when using Pell from a different award year than the award year used to award other Title IV aid, you must use the same EFC, COA, and need for all programs except Pell. For Pell, you use the EFC, COA, and need for the award year from which the student will be paid, and use the amount of Pell received in determining remaining need when packaging aid from other Title IV programs.

Handling Crossover Periods for Title IV Programs
Financial Aid offers and notification requirements

Many schools use a financial aid offer, in either paper or electronic format, to notify students of their proposed aid package. Whether you use a paper letter or other electronic means such as email, you must fulfill the consumer information requirements, as described in Volume 2, Chapter 6. You are also responsible for certain notifications and authorizations at the time of disbursement, as described in Volume 4, Chapter 1.

Schools may direct students toward the following website for information on interpreting their financial aid package: https://www2.ed.gov/policy/highered/guid/aid-offer/index.html

Packaging Veterans Benefits, Americorps, Vocational Rehabilitation Funds, & BIA Grants

Veterans education benefits

For FSA purposes, federal veterans education benefits, as defined under Section 480(c) of the HEA, are not treated as estimated financial assistance (EFA). You can ask the student to provide the specific program or benefit under which they are receiving their veterans benefits. Veterans education benefits are also not to be counted as income, and therefore are not reported as income on the FAFSA. For a full list of federal veterans education benefits, see Appendix A at the end of this chapter.

Noneducational veterans benefits are not counted as estimated financial assistance. Noneducational veterans benefits include Death Pension and Dependency and Indemnity Compensation (DIC) benefits, and income from the Veteran’s Affairs Student Work-Study Allowance Program (VASWSAP). The student must report these noneducational benefits as nontaxable income on the FAFSA.

The income earned from the VASWSAP is not treated as a veterans education benefit. It should be reported as untaxed income (not income earned from work) on the FAFSA.

Veterans benefits not EFA reference
EA August 13, 2009
HEA 480(c)

Americorps benefits

AmeriCorps benefits are not included in the EFA when determining eligibility for Direct Subsidized Loans. All AmeriCorps benefits are included as EFA when determining eligibility for Direct Unsubsidized Loans.

When packaging Campus-Based or TEACH Grant awards, you may exclude from the EFA any portion of a Direct Subsidized Loan that is equal to or less than the amount of the student’s AmeriCorps benefits.

For example, a 3rd-year dependent student has a COA of $15,000 and an EFC of 2,400, and is receiving $3,995 in Pell, $3,000 in AmeriCorps benefits and $1,000 in FSEOG Because AmeriCorps benefits are not counted as EFA when determining eligibility for Direct Subsidized Loan, you may award the student $5,500 in Direct Subsidized Loan funds ($15,000 COA – 2,400 EFC – $3,995 Pell Grant – $1,000 FSEOG = $7,605 Direct Subsidized Loan eligibility, but limited to $5,500 because of the annual loan limit).

In contrast, AmeriCorps benefits are considered EFA when determining eligibility for Direct Unsubsidized Loans. Therefore, the student may receive an additional $1,505 in Direct Unsubsidized Loan funds to replace part of the EFC and fully cover the COA ($15,000 COA -- $3,995 Pell -- $1,000 FSEOG -- $3,000 AmeriCorps benefits -- $5,500 Direct Unsubsidized Loan = $1,505 Direct Unsubsidized Loan eligibility).

Vocational rehabilitation funds

If you have a student who qualifies for both Title IV funds and for vocational rehabilitation assistance funds, you should determine the student’s aid package without including costs related to the student’s disability in the student’s COA, and without including anticipated vocational rehabilitation assistance as EFA. In this way, a student with disabilities will be offered the same aid package as a student who is in the same financial situation but who doesn’t have disabilities; the student with disabilities will also receive the maximum amount of vocational rehabilitation aid to which he or she is entitled. If the vocational rehabilitation agency doesn’t fully meet the student’s disability costs, you may wish to include the unmet disability expenses in the student’s COA, and increase the aid award.

Vocational rehabilitation agreements with state agencies

Some state vocational rehabilitation agencies have established agreements with schools that specify how vocational rehabilitation assistance will be coordinated with other forms of financial aid. Check with your school’s vocational rehabilitation coordinator to see if it has such an agreement.

Although vocational rehabilitation funds shouldn’t be considered estimated financial assistance when you initially package aid for a student, you must coordinate funds available from the vocational rehabilitation agency and from institutional, state, and federal student financial assistance programs to prevent an overaward. The amount of assistance from the vocational rehabilitation agency must be documented in the student’s file.

Coordination with Bureau of Indian Affairs grants

When packaging Campus-Based aid for a student who is or may be eligible for a Bureau of Indian Affairs (BIA) grant, you must first develop a financial aid package without considering any BIA funds. If the total aid package—after BIA funds are added—does not exceed the student’s need, no adjustment may be made to the aid package. If the total package plus the BIA grant does exceed need, you must eliminate the excess in the following sequence: loans, work-study awards, and grants other than Pell Grants. (You may not reduce a Pell Grant or BIA grant.) You may alter this sequence of reductions upon the student’s request if you believe it would benefit the student. We encourage you to consult with area officials in charge of BIA postsecondary financial aid when packaging Title IV funds with BIA grants. For more details on BIA Grants, see 34 CFR 673.6.

Vocational rehabilitation packaging

Lee, a 3rd-year dependent undergraduate with no financial need, will receive $4,000 in vocational rehabilitation aid for the 2020-21 academic year. The original COA at Lee’s school is $5,000. In determining the original COA, the school coordinates funding with the vocational rehabilitation agency and chooses to exclude all disability-related expenses that will be covered by the vocational rehabilitation aid. However, Lee has $2,000 in additional disability-related expenses that his vocational rehabilitation aid will not cover, so the school increases the COA to $7,000 and awards Lee a Direct Unsubsidized Loan for that amount.

Although the combined amount of the $7,000 Direct Loan and the $4,000 in vocational rehabilitation aid exceeds the COA, there is no overaward. This is because the $7,000 COA does not include $4,000 in disability-related expenses that are covered by Lee’s vocational rehabilitation aid. Since the $4,000 in vocational rehabilitation aid is not covering any component of Lee’s COA, it must also not be counted as EFA. Note, however, that if the school had not initially excluded from Lee’s COA all of the disability-related expenses that were covered by the $4,000 in vocational rehabilitation aid, the amount of the vocational rehabilitation aid that exceeded the excluded disability expenses would have to be counted as EFA.

Treatment of Overawards

If, at any time during the award period, the student receives additional EFA that was not considered in calculating the student’s eligibility for Campus-Based aid, and if the EFA combined with the expected financial aid will exceed the student’s need, the amount in excess of the student’s need is considered an overaward.

The treatment of overawards in the Direct Loan Program depends on whether the loan has been fully disbursed—if you discover that there’s going to be an overaward before Direct Loan funds are disbursed, you must eliminate the overaward through the packaging process by canceling or reducing the amount of the Direct Loan, or by reducing/canceling other aid over which you have direct institutional control.

If the overaward situation occurs after Direct Loan funds have been disbursed to the borrower, there is no Direct Loan overaward that needs to be addressed; however, you might need to adjust the student’s aid package to prevent an overaward of Campus-Based funds.

See Volume 4 of the FSA Handbook, Chapter 3, for a full discussion of overawards for all programs.

Campus-Based overaward thresholds

Campus-Based aid need not be reduced if the overaward doesn’t exceed $300, which is the overaward threshold for all Campus-Based programs. Note that the $300 threshold is allowed only if an overaward occurs after Campus-Based aid has been packaged and the school was unaware the student would receive additional funds. The threshold does not allow a school to deliberately award Campus-Based aid that, in combination with other resources, exceeds the student’s financial need.

Appendix A

Federal Veterans Education Benefits To Be Excluded From EFA, As Listed In Section 480(C) Of The Higher Education Act

  • Chapter 103 of Title 10, United States Code (Senior Reserve Officers’ Training Corps)

  • Chapter 106A of Title 10, United States Code (Educational Assistance for Persons Enlisting for Active Duty)

  • Chapter 1606 of Title 10, United States Code (Selected Reserve Educational Assistance Program)

  • Chapter 1607 of Title 10, United States Code (Educational Assistance Program for Reserve Component Members Supporting Contingency Operations and Certain Other Operations)

  • Chapter 30 of Title 38, United States Code (All-Volunteer Force Educational Assistance Program, also known as the “Montgomery GI Bill—active duty”)

  • Chapter 31 of Title 38, United States Code (Training and Rehabilitation for Veterans with Service-Connected Disabilities)

  • Chapter 32 of Title 38, United States Code (Post-Vietnam Era Veterans Educational Assistance Program)

  • Chapter 33 of Title 38, United States Code (Post-9/11 Educational Assistance)

  • Chapter 35 of Title 38, United States Code (Survivors’ and Dependents’ Educational Assistance Program)

  • Section 903 of the Department of Defense Authorization Act, 1981 (10 U.S.C. 2141 note) (Educational Assistance Pilot Program)

  • Section 156(b) of the “Joint Resolution making further continuing appropriations and providing for productive employment for the fiscal year 1983, and for other purposes” (42 U.S.C. 402 note) (Restored Entitlement Program for Survivors, also known as “Quayle benefits”)

  • The provisions of Chapter 3 of title 37, United States Code, related to subsistence allowances for members of the Reserve Officers Training Corps

Published: 03/28/2021