Proration overview
The annual maximum loan amount an undergraduate student may receive must be prorated (reduced) when the borrower is:

Enrolled in a program that is shorter than a full academic year; or

Enrolled in a program that is one academic year or more in length, but is in a remaining period of study (a period of study at the end of which a student will have completed all requirements of the program) that is shorter than a full academic year.
With one exception (see "Proration of the annual loan limit for students who graduate early from clockhour programs" later in this chapter), the annual loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans are prorated only in these two situations (. Loan limits are not prorated based on a student’s enrollment status, such as when a student is enrolled less than full time or is enrolled for a period of less than a full academic year that is not a remaining period of study.
The annual loan limit for Direct Unsubsidized Loans is not prorated for students enrolled in graduate or professional level programs. Loan proration requirements also do not apply to students taking preparatory coursework or coursework necessary for teacher certification. The annual loan limit must be prorated only when a student is enrolled in a program or remaining portion of a program that is shorter than an academic year. For purposes of awarding Title IV aid, students taking preparatory coursework or coursework needed for teacher certification are not considered to be enrolled in a program.
It’s important to understand that loan limit proration determines the maximum loan amount that a student may borrow for a program or remaining balance of a program, not the loan amount that the student actually receives. In some cases, the actual loan amount that a student is eligible to receive (based on costs, EFC, and other aid) may be less than the prorated loan limit.
Loan limit proration
Use of fractions vs. decimals when prorating loan limits
As we explain in more detail below, proration involves multiplying the annual loan limit by a fraction. It’s acceptable to convert the fraction to a decimal and then multiply the annual loan limit by the decimal, but this conversion is not a requirement. However, you should be consistent in the method you use, since the fraction and decimal calculations sometimes result in slightly different prorated loan limits, as shown in the examples later in the chapter.
Using school’s definition of academic year if longer than the Title IV minimum
As explained above, proration of the annual loan limit is required when an undergraduate student is enrolled in a program that is shorter than an academic year or is enrolled in a remaining period of study that is shorter than an academic year. A school may choose to define its academic year as longer in weeks or hours than the minimum statutory requirements. If so, the school’s standard – not the statutory minimum – determines whether a program or a final period of study is shorter than an academic year.
Separate calculations for combined subsidized/unsubsidized annual loan limit and maximum subsidized annual loan limit
As explained in Chapter 4 of this volume, for undergraduate students there is a maximum combined annual loan limit for Direct Subsidized Loans and Direct Unsubsidized Loans, and a maximum portion of that combined annual loan limit that a student may receive in Direct Subsidized Loans. If the annual loan limit for an undergraduate student must be prorated, you must first determine the combined Direct Subsidized Loan and Direct Unsubsidized Loan prorated annual loan limit, and then separately determine the Direct Subsidized Loan prorated annual loan limit. This is illustrated in the proration examples below.
Prorating loan limits for programs of study shorter than an academic year
If an academic program is shorter than a full academic year in length, you must multiply the applicable loan limit(s) by the lesser of —
Semester, trimester, quarter, or clock hours enrolled in program
Semester, trimester, quarter, or clock hours in academic year
or
Weeks enrolled in program
Weeks in the academic year
The result is the prorated annual loan limit for that program.
Proration examples: programs shorter than an academic year
Examples 6 and 7 illustrate how the prorated annual loan limit is determined when a student is enrolled in a program that is shorter than an academic year.
EXAMPLE 6: CLOCKHOUR PROGRAM SHORTER THAN AN ACADEMIC YEAR
A dependent student is enrolled in a 400 clockhour, 12week program (a “shortterm program” as described in Volume 2, Chapter 2). The school defines the academic year for this program as 900 clock hours and 26 weeks of instructional time.
To determine the maximum loan amount the student can borrow, convert the fractions based on weeks and hours to decimals:
12/26 = 0.46
400/900 =0 .44
Multiply the smaller decimal (0.44) by the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limit for a firstyear dependent undergraduate ($5,500, not more than $3,500 of which may be subsidized):
$5,500 x 0.44 = $2,420 combined subsidized/unsubsidized prorated annual loan limit
To determine the maximum portion of the $2,420 prorated annual loan limit that the student may receive in subsidized loan funds, multiply the maximum subsidized annual loan limit of $3,500 by the smaller decimal (0.44):
$3,500 x 0.44 = $1,540 subsidized prorated annual loan limit
The maximum combined Direct Subsidized Loan and Direct Unsubsidized Loan amount the student can borrow for the program is $2,420, but no more than $1,540 of this amount may be in subsidized loans.
Note: In Example 6 above and in the other proration examples that follow, the fractions are converted to decimals. As an alternative you could choose to multiply the annual loan limit by the original fraction, though you should be consistent in using one method or the other. Using the fraction 400/900 in Example 6 instead of the decimal 0.44 would result in a slightly higher prorated loan limit: $5,500 x 400/900 = $2,444.
EXAMPLE 7: NONTERM CREDITHOUR PROGRAM SHORTER THAN AN ACADEMIC YEAR
An independent student is enrolled in a 24 quarterhour, 20week program. The school defines the academic year for this program as 36 quarter hours and 30 weeks of instructional time.
To determine the maximum loan amount the student can borrow, convert the fractions based on weeks and quarterhours to decimals:
20/30 = 0.67
24/36 = 0.67
Multiply the smaller decimal (in this case, both are 0.67) by the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limit for a firstyear independent undergraduate ($9,500, not more than $3,500 of which may be subsidized):
$9,500 x 0.67 = $6,365 combined subsidized/unsubsidized prorated annual loan limit
To determine the maximum portion of the $6,365 prorated annual loan limit the student may receive in subsidized loan funds, multiply the maximum subsidized annual loan limit of $3,500 by the same decimal (0.67):
$3,500 x 0.67 = $2,345 subsidized prorated annual loan limit
The maximum combined Direct Subsidized Loan and Direct Unsubsidized Loan amount the student can borrow for the program is $6,365, not more than $2,345 of which may be in subsidized loans.
Note: Using the fraction 24/36 in Example 7 instead of the decimal 0.67 would result in a slightly lower prorated loan limit: $9,500 x 24/36 = $6,333.
Prorating loan limits for remaining periods of study shorter than an academic year
You must also prorate loan limits for students enrolled in remaining periods of study shorter than an academic year. This circumstance can occur when a student is enrolled in a program that is one academic year or more in length, but the remaining period of study needed to complete the program (sometimes called a “final” period of study) will be shorter than an academic year.
Proration is required only when you know in advance that a student will be enrolled for a remaining period of study that is shorter than an academic year. If a student originally enrolls for a remaining period of study that is a full academic year in length, but completes the program early in less than a full academic year, you're not required to retroactively prorate the annual loan limit (but see the discussion under "Proration of the annual loan limit for students who graduate early from clockhour programs" later in this chapter for a limited exception to this general rule).
In a standardterm program, or a credithour program using SE9W nonstandard terms, a remaining period of study is considered shorter than an academic year if the remaining period contains fewer terms than the number of terms covered by the school’s Title IV academic year. For programs that are offered in a Scheduled Academic Year (SAY; see Chapter 6), the number of terms covered in the school’s Title IV academic year usually does not include a summer “header” or “trailer” term.
Consider a student who is enrolled in a fouryear program that is offered in an SAY consisting of three quarters plus a summer “trailer,” and who has completed four academic years of study. However, the student needs to attend an additional quarter term to complete the program requirements. The final quarter term would fall in a new academic year, and thus the annual loan limit would have to be prorated, because the remaining period of study (a single quarter) is less than a full academic year.
Similarly, if a student enrolled in a twoyear program not offered in an SAY (where the Title IV academic year covers two 15week semesters) has completed two academic years of study, but needs to return for an additional semester to complete the program requirements, the loan limit would have to be prorated if the student receives a loan for the final semester.
Note that for standardterm programs or credithour programs with SE9W nonstandard terms, the length of the loan period does not determine whether a student is enrolled in a remaining period of study that is shorter than an academic year. The determining factor is the length of the remaining period of study in which the student is enrolled, which may not be the same as the loan period. For example, if an undergraduate student is enrolled for a full SAY consisting of fall and spring semesters, and will complete the program at the end of the spring term, but is enrolled less than half time during the spring, the student is eligible to receive a Direct Loan only for the fall semester. Although the loan period (fall only) would be shorter than an academic year, the remaining period of study (fall through spring) is a full academic year. Therefore, if the student receives a Direct Loan in the fall, proration of the annual loan limit is not required.
In a clockhour program, nonterm program, or a program with nonSE9W nonstandard terms, a remaining period of study is considered less than an academic year if it consists of fewer clock or credit hours than the program’s defined Title IV academic year. In contrast to standard term and SE9W nonstandard term programs, if a student enrolled in a clockhour, nonterm, or nonSE9W nonstandard term program is in a remaining period of study shorter than an academic year and receives a Direct Loan, the loan period and the remaining period of study will always be the same. This is because for these programs the minimum loan period is the lesser of the length of the program (or remaining portion of a program) or the academic year.
For all types of programs, where there is a remaining period of study less than an academic year, the annual loan limit for the student’s grade level is multiplied by the following fraction to determine the prorated loan limit:
Semester, trimester, quarter, or clock hours enrolled in program
Semester, trimester, quarter, or clock hours in academic year
Unlike proration for programs that are shorter than an academic year, there is no comparison of weeks and hours. Only the credit or clock hours that the student is scheduled to attend or is actually attending at the time of origination are used in the calculation.
Proration examples: remaining periods of study shorter than an academic year
Examples 8 through 12 illustrate how the prorated annual loan limit is determined when a student is enrolled in a remaining period of study shorter than an academic year.
EXAMPLE 8: REMAINING PERIOD = ONE QUARTER
A dependent student is enrolled in a 2year credithour program offered in standard terms (quarters). The school defines the academic year for the program as 36 quarter hours and 30 weeks of instructional time (covering three quarters: fall, winter, and spring).
The student has attended the program for six quarters (two academic years), but to finish the program needs to complete an additional six hours (half time) in the fall quarter of the next academic year:
Fall (half time: 6 hours) 
Winter (not enrolled) 
Spring (not enrolled) 
To determine the prorated Direct Loan limit for the student’s remaining period of study (one quarter), convert the fraction based on the hours that the student is expected to attend and the hours in the academic year to a decimal:
6/36 = 0.17
Multiply this decimal by the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limit for a dependent secondyear undergraduate ($6,500, not more than $4,500 of which may be subsidized):
$6,500 x 0.17 = $1,105 combined subsidized/unsubsidized prorated annual loan limit
To determine the maximum portion of the $1,105 prorated annual loan limit that the student may receive in subsidized loan funds, multiply the maximum subsidized annual loan limit of $4,500 by the same decimal (0.17):
$4,500 x 0.17 = $765 subsidized prorated annual loan limit
The maximum combined Direct Subsidized Loan and Direct Unsubsidized Loan amount the student can borrow for the remaining portion of the program is $1,105, not more than $765 of which may be subsidized.
EXAMPLE 9: REMAINING PERIOD = TWO SEMESTERS, WITH LESS THAN HALFTIME ENROLLMENT IN ONE TERM
The student from Example 8 transfers to a BA program at a different school. The academic year for the program contains two semesters, fall and spring. During the student’s second year of study in the BA program, they will be enrolled full time in the fall and less than half time in the spring, and will graduate at the end of the spring term:
Fall (full time) 
Spring (less than half time) 
Although the student is not eligible to receive a Direct Loan for the spring term, the remaining period of study (two semesters) is equal to a full academic year. Therefore, proration of the annual loan limit is not required if the student receives a Direct Loan for the fall term.
EXAMPLE 10: REMAINING PERIOD SHORTER THAN AN ACADEMIC YEAR, WITH LESS THAN HALFTIME ENROLLMENT IN ONE OF THE TERMS
A dependent fourthyear undergraduate is enrolled in a program with a defined academic year of 36 quarter hours and 30 weeks of instructional time, covering three quarters (fall, winter, and spring).The student will be enrolling in the fall and winter quarters, but not the spring quarter, and will graduate at the end of the winter term.
The student will be enrolled for 12 quarter hours (full time) during the fall quarter, but will be enrolled for only three hours (less than half time) in the winter quarter:
Fall (full time: 12 hours) 
Winter (less than half time: 3 hours) 
Spring (not enrolled) 
The student’s final period of study (two terms) is shorter than an academic year, so the annual loan limit must be prorated. However, because the student will be enrolled less than half time during the winter quarter (and therefore ineligible to receive Direct Loan funds for that term), the loan period will cover the fall quarter only, and only the 12 quarter hours for the fall term are used to determine the prorated annual loan limit.
To determine the prorated loan limit for the final period of study, convert the fraction based on the hours that the student is expected to attend in the fall quarter and the hours in the academic year to a decimal:
12/36 = 0.33
Multiply this decimal by the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limit for a dependent fourthyear undergraduate ($7,500, not more than $5,500 of which may be subsidized):
$7,500 x 0.33 = $2,475 combined subsidized/unsubsidized prorated annual loan limit.
To determine the maximum portion of the $2,475 prorated annual loan limit that the student may receive in subsidized loan funds, multiply the maximum subsidized annual loan limit of $5,500 by the same decimal (0.33):
$5,500 x 0.33 = $1,815 subsidized prorated annual loan limit
The total prorated annual loan limit for the fall quarter loan is $2,475, not more than $1,815 of which may be subsidized.
EXAMPLE 11: REMAINING PERIOD = TWO QUARTERS, SEPARATED BY A PERIOD OF NONENROLLMENT
A school has an academic year that covers three quarters: fall, winter, and spring. An independent fourthyear undergraduate will be enrolling full time in the fall and spring quarters, but will not be enrolled in the winter quarter, and will graduate at the end of the spring quarter:
Fall (full time: 12 hours) 
Winter (not enrolled) 
Spring (full time: 12 hours) 
Because the fall quarter is in the same academic year as the student’s final quarter of attendance, it is part of the remaining period of study, even though there is a term between the fall and spring quarters in which the student will not be enrolled. The school must award separate loans for fall and spring.
The remaining period of study (two terms) is shorter than an academic year, so the annual loan limit for each loan must be prorated based on the number of hours for which the student is enrolled in each term.
The prorated loan limit is determined separately for each term by converting the fraction based on the number of hours in each term to a decimal:
12/36 = 0.33
Multiply this decimal by the combined Direct Subsidized Loan/Direct Unsubsidized Loan annual loan limit for an independent fourthyear undergraduate ($12,500, not more than $5,500 of which may be subsidized):
$12,500 x 0.33 = $4,125 combined subsidized/unsubsidized prorated annual loan limit for a single term (fall or spring)
To determine the maximum portion of the $4,125 prorated annual loan limit that the student may receive in subsidized loan funds for a single term, multiply the maximum subsidized annual loan limit of $5,500 by the same decimal (0.33):
$5,500 x 0.33 = $1,815 subsidized prorated annual loan limit for a single term (fall or spring)
The combined total prorated loan limit for the two singleterm loans (fallonly and springonly) in the remaining period of study is $4,125, not more than $1,815 of which may be subsidized. This means that the maximum loan amount the student may receive for the two terms in the final period of study combined is $8,250, not more than $3,630 of which may be subsidized.
EXAMPLE 12: CLOCKHOUR PROGRAM WITH REMAINING PERIOD SHORTER THAN AN ACADEMIC YEAR
A school has an 1800 clockhour program with a defined academic year of 900 clock hours and 26 weeks of instructional time. A dependent undergraduate student successfully completes the first 900 clock hours of the program in 22 weeks of instructional time. However, the student must complete an additional four weeks of instructional time before receiving a second loan (see Chapter 6 of this volume).
After 26 weeks of instructional time have elapsed, the student has successfully completed 1040 clock hours and may then receive a second loan. However, the loan limit must be prorated based on the number of clock hours remaining in her program at this point (760). To determine the prorated loan limit for the student’s second loan, convert the fraction based on the number of clock hours remaining to a decimal:
760/900 = 0.84
Multiply this decimal by the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limit for a dependent secondyear undergraduate ($6,500, not more than $4,500 of which may be subsidized):
$6,500 x 0.84 = $5,460 combined subsidized/unsubsidized prorated annual loan limit
To determine the maximum portion of the $5,460 prorated annual loan limit that the student may receive in subsidized loan funds, multiply the maximum subsidized annual loan limit of $4,500 by the same decimal (0.84):
$4,500 x 0.84 = $3,780 subsidized prorated annual loan limit
The total prorated loan limit for the remaining period of study is $5,460, not more than $3,780 of which may be subsidized.
Proration of the annual loan limit for students who graduate early from a clockhour program
Under the regulations that govern the treatment of Title IV funds when a student withdraws, a student who completes all the requirements for graduation from a program before completing the days or hours that they were scheduled to complete is not considered to have withdrawn, and no return of Title IV funds calculation is required (see Volume 5 for more detail). However, a school may be required to return a portion of the Direct Loan funds that were disbursed to a student who successfully completes the requirements for graduation from a clockhour program before completing the number of clock hours that they were scheduled to complete.
A student's eligibility to receive Title IV aid for a clockhour program is based, in part, on the total number of clock hours in the program. If a school allows a student to graduate from a clockhour program without completing all of the originally established hours for the program, the school has effectively shortened the program length and reduced a student's Title IV aid eligibility for the program. In this circumstance, the school must prorate (or reprorate) the annual loan limit for the student based on the number of hours the student actually completed, and after this recalculation, the school must return to the Department any portion of the Direct Loan funds the student received that exceed the newly prorated (or reprorated) annual loan limit. (For a student who received a Pell Grant, the school must also recalculate the student's Pell Grant award in this situation. See Volume 7 for more information.)
This requirement applies only to clockhour programs, and it applies regardless of the length of the program or remaining portion of a program. In some cases, this means that previously prorated annual loan limit must be reprorated.
Examples 13 and 14 illustrate the requirement described above.
EXAMPLE 13: PRORATION OF LOAN LIMIT FOR A STUDENT WHO GRADUATES EARLY FROM A CLOCKHOUR PROGRAM
A dependent student enrolls in a 900 clockhour program, with the academic year defined as 900 clock hours and 26 weeks of instructional time. The school assumes that the student will complete 900 clock hours.
Based on EFC and COA, the student qualifies to receive the maximum annual combined Direct Subsidized Loan/Direct Unsubsidized Loan limit of $3,500 in the form of a Direct Subsidized Loan and the maximum additional Direct Unsubsidized Loan amount of $2,000. Each loan is paid in two equal disbursements, as shown below.
Combined Subsidized/Unsubsidized Annual Loan Limit $3,500 
Direct Subsidized Loan First Disbursement $1,750 
Direct Subsidized Loan Second Disbursement $1,750 
Additional Unsubsidized Annual Loan Limit $2,000 
Direct Unsubsidized Loan First Disbursement $1,000 
Direct Unsubsidized Loan Second Disbursement $1,000 
The school considers the student to have met the requirements for graduation from the program after the student has completed only 750 of the originally scheduled 900 clock hours. As soon as practicable after determining that the student will meet the graduation requirements after completing only 750 clock hours, the school must prorate the student's Direct Loan annual loan limit, because the student is now treated as having been enrolled in a program shorter than an academic year in length (i.e. as though the student had originally enrolled in a 750 clockhour program). However, in this circumstance only the number of clock hours that the student completed are used to determine the prorated loan limit. There is no comparison of hours and weeks fractions, as is normally required when prorating the Direct Loan annual loan limit for students who are enrolled in programs shorter than an academic year.
The school determines the prorated annual loan limit by multiplying the applicable annual loan limit by the number of clock hours the student actually completed, then dividing the result by the number of clock hours in the program's academic year definition:
($3,500 x 750) ÷ 900 = $2,917 prorated combined subsidized/unsubsidized annual loan limit
($2,000 x 750) ÷ 900 = $1,667 prorated additional unsubsidized annual loan limit
(As noted earlier in this chapter, the prorated loan limit may also be determined by converting the fraction consisting of the number of clock hours the student completed in the program over the number of clock hours in the program's academic year to a decimal, and then multiplying the decimal by the applicable annual loan limit. Whatever approach a school chooses should be applied consistently, as the fraction method shown above and the decimal method may produce slightly different results.)
The school reduces each disbursement of the student’s Direct Subsidized Loan and Direct Unsubsidized Loan as shown below and returns the excess loan funds to the Department. Note that the school – not the student – is responsible for returning the excess Direct Loan funds in this situation.
Prorated Combined Subsidized/Unsubsidized Annual Loan Limit $2,917 ($583 reduction from original amount disbursed) 
Direct Subsidized Loan Adjusted First Disbursement $1,458 (original disbursement reduced by $292) 
Direct Subsidized Loan Adjusted Second Disbursement $1,459 (original disbursement reduced by $291) 
Direct Subsidized Loan Funds Returned to Department $583 
Prorated Additional Unsubsidized Annual Loan Limit $1,667 ($333 reduction from original amount disbursed) 
Direct Unsubsidized Loan Adjusted First Disbursement $833 (original disbursement reduced by $167) 
Direct Unsubsidized Loan Adjusted First Disbursement $834 (original disbursement reduced by $166) 
Direct Unsubsidized Loan Funds Returned to Department $333 
EXAMPLE 14: REPRORATION OF A PREVIOUSLY PRORATED LOAN LIMIT FOR A STUDENT WHO GRADUATES EARLY FROM A CLOCKHOUR PROGRAM
A dependent student is enrolled in the remaining 500 clock hours of a 1500 clockhour program that has a defined academic year of 900 clock hours and 26 weeks of instructional time. Because the student is enrolled in a final period of study shorter than an academic year, the school prorates the annual loan limit based on the 500 hours that it expects the student to complete:
($4,500 x 500) ÷ 900 = $2,500 prorated combined subsidized/unsubsidized annual loan limit
($2,000 x 500) ÷ 900 = $1,111 prorated additional unsubsidized annual loan limit
Based on EFC and COA, the student qualifies to receive the maximum annual combined prorated Direct Subsidized Loan/Direct Unsubsidized Loan limit of $2,500 in the form of a Direct Subsidized Loan and the maximum additional prorated Direct Unsubsidized Loan limit of $1,111. Each loan is paid in two equal disbursements, as shown below.
Prorated Combined Subsidized/Unsubsidized Annual Loan Limit $2,500 
Direct Subsidized Loan First Disbursement $1,250 
Direct Subsidized Loan Second Disbursement $1,250 
Prorated Additional Unsubsidized Annual Loan Limit $1,111 
Direct Unsubsidized Loan First Disbursement $556 
Direct Unsubsidized Loan Second Disbursement $555 
The student successfully meets the requirements for graduation from the program after completing only 400 clock hours. This means that the school must reprorate the annual loan limit based on the 400 hours that the student actually completed:
($4,500 x 400) ÷ 900 = $2,000 reprorated combined subsidized/unsubsidized annual loan limit
($2,000 x 400) ÷ 900 = $889 reprorated additional unsubsidized annual loan limit
Since the student originally received Direct Loan amounts in excess of the reprorated loan limit, the school must adjust the original disbursements and return the difference to the Department, as shown below. The school – not the student – is responsible for returning the excess funds.
ReProrated Combined Subsidized/Unsubsidized Annual Loan Limit $2,000 ($500 reduction from original amount disbursed) 
Direct Subsidized Loan Adjusted First Disbursement $1,000 (original disbursement reduced by $250) 
Direct Subsidized Loan Adjusted Second Disbursement $1,000 (original disbursement reduced by $250) 
Direct Subsidized Loan Funds Returned to Department $500 
Reprorated Additional Unsubsidized Annual Loan Limit $889 ($222 reduction from original amount disbursed) 
Direct Unsubsidized Loan Adjusted First Disbursement $445 (original disbursement reduced by $111) 
Direct Unsubsidized Loan Adjusted First Disbursement $444 (original disbursement reduced by $111) 
Direct Unsubsidized Loan Funds Returned to Department $222 