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(General) Subject: 150% Direct Subsidized Loan Limit Electronic Announcement #8 - Final Regulations Published

Posted Date:January 17, 2014

Author: Jeff Baker, Director, Policy Liaison and Implementation, Federal Student Aid

Subject: 150% Direct Subsidized Loan Limit Electronic Announcement #8 - Final Regulations Published

On May 16, 2013, we published interim final regulations implementing the limitation on the period for which a borrower may receive a Direct Subsidized Loan (150% Direct Subsidized Loan Limit). The Department solicited public comments on the interim final regulations and we received a number of comments. Based upon those comments we have made changes to the interim final rule in a final rule that we published in the Federal Register on January 17, 2014 (79 FR 3108). The final regulations change several provisions of the 150% limit, and some of those changes have operational impacts on schools. These changes are described below. The preamble to the final regulations discuss the comments we received and explain the reasons for the changes that we made.

The changes to the regulations apply to all Direct Subsidized Loan borrowers who are subject to the 150% limit, regardless of whether they received a Direct Subsidized Loan before or after the final regulations become effective.

1.Rounding Subsidized Usage Periods

Generally, a Subsidized Usage Period is the period of time, measured in academic years, for which a borrower has received a Direct Subsidized Loan, and is calculated by dividing the number of days in the loan's loan period by the number of days in the loan's academic year.

Under the interim final regulations, a Direct Subsidized Loan borrower's calculated Subsidized Usage Period was always rounded down to the nearest quarter of a year. Under the final regulations, at 34 CFR 685.200(f)(1)(iii), a Subsidized Usage Period will be rounded up or down, as appropriate, to the nearest tenth of a year. For example, under the interim final regulations, a borrower's calculated Subsidized Usage Period of 0.45 years would have been rounded down to 0.25 years; under the final regulations, the borrower's Subsidized Usage Period of 0.45 would be rounded up to 0.5 years.1

This change will not require schools to make any operational changes because the COD System performs the official calculation of Subsidized Usage Periods.

2.Interaction Between the Annual Loan Limit Exception and Proration of Subsidized Usage Periods Based on Part-Time Enrollment Status

Under the interim final regulations, there were two exceptions to the standard calculation of Subsidized Usage Periods. The first exception applied to borrowers who received a Direct Subsidized Loan in the amount of the annual loan limit for a period of less than an academic year (the annual loan limit exception). The second exception applied to borrowers who received a Direct Subsidized Loan while enrolled part-time (the part-time exception).

Under the annual loan limit exception a borrower has a Subsidized Usage Period of 1 year, even though the loan is received for a period of less than an academic year. For example, if a borrower is enrolled in a standard-term credit hour program and received a Direct Subsidized Loan in the amount of $3,500 for one term as a first-year student, the borrower's Subsidized Usage Period is 1.0 years, instead of 0.5 years, because the borrower received the Direct Subsidized Loan in the amount of the annual loan limit for a period of less than an academic year.

Under the part-time exception, a borrower's Subsidized Usage Period is prorated if the borrower is enrolled part-time (half time or three-quarter time). For example, if a borrower is enrolled in a standard-term credit hour program and received a Direct Subsidized Loan for a full academic year, but is enrolled half-time for that full academic year, the borrower's Subsidized Usage Period is 0.5 years, instead of 1.0 years, because the borrower's Subsidized Usage Period is prorated by 0.5 to account for the borrower's half-time enrollment status.

Under the interim final regulations, in circumstances in which the annual loan limit exception applied, the part-time exception did not apply. For example, if a borrower was enrolled half-time in a standard-term credit hour program and received a Direct Subsidized Loan in the amount of $3,500 for one term as a first-year student, the borrower's Subsidized Usage Period would be 1.0 years. Because the annual loan limit exception applied, there was no proration of the Subsidized Usage Period based on the borrower's half-time enrollment status.

Under the final regulations, at 34 CFR 685.200(f)(4)(i)-(ii), both exceptions will now apply to borrowers who are enrolled part-time and who receive the annual loan limit for a period of enrollment that is less than an academic year. In such cases, first the annual loan limit exception will be applied and then the part-time exception will be applied. Using the example from the preceding paragraph, the borrower's Subsidized Usage Period would initially be set to 1.0 years due to the annual loan limit exception, but would then be prorated by 0.5 based on the borrower's half-time enrollment status. This results in a Subsidized Usage Period for the borrower of 0.5 years.

This change will not require schools to make any operational changes because the COD System performs the official calculation of Subsidized Usage Periods.

3.Maximum Eligibility Period for Bachelor's Degree Completion Programs

Under the interim final regulations, all programs had a Maximum Eligibility Period based solely on the program's published length. Under the final regulations, at 34 CFR 685.200(f)(8)(i), an exception in that treatment has been added for bachelor's degree completion programs.

For purposes of the 150% limit, a bachelor's degree completion program is a bachelor's degree program that requires an associate degree or the successful completion of at least two years of postsecondary coursework as a prerequisite for admission to the program. Because these programs only offer the final two years of coursework necessary to confer a bachelor's degree, the programs have a published length of 2 years. Under the interim final regulations, using the published length of such programs to calculate the Maximum Eligibility Period resulted in Maximum Eligibility Period of 3 years. Under the final regulations, however, such programs will now have a Maximum Eligibility Period of 6 years.

This change will be implemented through school reporting for bachelor's degree completion programs to the COD System and NSLDS in accordance with the following standards:

  • Schools will report a program length of 4 years, even though the program is only 2 years in length, which will result in a Maximum Eligibility Period of 6 years.

  • Schools will report a "Special Program Indicator" of "B". The "Special Program Indicator" that was included in the previously posted COD schema and NSLDS enrollment reporting file layout already included a valid value of "B".

4.Maximum Eligibility Period for Special Admission Associate Degree Programs

Under the interim final regulations, all programs had a Maximum Eligibility Period that was based solely on the program's published length. Under the final regulations, at 34 CFR 685.200(f)(8)(ii), an exception has been added for special admission associate degree programs.

For purposes of the 150% limit, a special admission associate degree program is an associate degree program that:

  • Requires an associate degree, or the successful completion of at least two years of postsecondary coursework , as a prerequisite for admission;

  • Admits only a selected number of applicants based on additional competitive criteria which may include entrance exam scores, class rank, grade point average, written essays, or recommendation letters; and

  • Provides the academic qualifications necessary for a profession that requires licensure or certification by the State in which the coursework is offered.

Such programs only include the two years of coursework necessary to confer the special associate degree, the published length of 2 years. Under the interim final regulations, using the published length of such programs to calculate the Maximum Eligibility Period resulted in Maximum Eligibility Period of 3 years. Under the final regulations, however, such programs will now have a Maximum Eligibility Period of 6 years, because the combination of required prerequisite coursework and selective associate degree coursework are analogous to a baccalaureate degree program.

This change will be implemented through school reporting for special admission associate degree programs to the COD System and NSLSDS in accordance with the following standards:

  • Schools will report a program length of 4 years even though the program is only 2 years in length, which will result in a Maximum Eligibility Period of 6 years.

  • Schools will report a "Special Program Indicator" of "A". The "Special Program Indicator" that was included in the previously posted COD schema and NSLDS enrollment reporting file layout already included a valid value of "A".

As we noted in the preamble to the final regulations, during the Department's program compliance reviews we will evaluate whether an institution with selective admission associate degree programs which have certified that they meet the requirements under this regulation do satisfy those requirements.

We believe these changes to the regulations will provide greater equity for similarly situated borrowers and recognize the unique role and structure of certain academic programs.

We thank you for your cooperation as we continue to implement the provisions of the 150% limit. Please refer any questions about the 150% limit to 150Percent-Questions@ed.gov.


1For more information regarding the calculation of Subsidized Usage Periods, see the Frequently Asked Questions about the 150% limit, available at http://www.ifap.ed.gov/150PercentDirectSubsidizedLoanLimitInfo.

Last Modified: 01/16/2014