Your Questions Answered: The 150 Percent Rule

As part of the law that extended the 3.4 percent interest rate for Direct Subsidized Loans until July 1, 2013, a new borrower on or after July 1, 2013 becomes ineligible to receive additional Direct Subsidized Loans if the period during which the borrower has received such loans exceeds 150 percent of the published length of the borrower’s educational program. The borrower also becomes responsible for accruing interest during all periods as of the date the borrower exceeds the 150 percent limit.

For example, a student enrolled in a two-year program will have three years’ worth of subsidized loan eligibility and a student enrolled in a four-year program will have six years’ worth of subsidized loan eligibility. 

Download a copy of NASFAA's 150% Direct Subsidized Loan Limit Training Track PowerPoint presentation.

NASFAA has compiled the following list of common questions about this rule. Click on any of the links below to jump down to the corresponding category:  

Effective Date, Affected Borrowers & Reporting/Tracking Responsibility  

Q: When does the law limiting the subsidy on Direct Loans go into effect? 

A: July 1, 2013

Q: Which borrowers are impacted by the new limit on subsidized Direct Loans? 

A: The limit on subsidized Direct loans affects new borrowers, or “first-time” borrowers. A new borrower is defined as a student who has no outstanding principal balance on a Direct Loan (DL) Program or FFEL Program loan on July 1, 2013, or on the date the borrower obtains a Direct Loan after July 1, 2013. A student who had paid off all outstanding balances on DL or FFEL loans as of July 1, 2013, is a new borrower for this purpose. 

Q: If this rule only affects new borrowers, am I correct in assuming that all continuing students can keep on borrowing subsidized loans for years and years until they reach the aggregate loan limit, regardless of whether they switch programs or schools?  

A: Borrowers who do not meet the definition of “first-time borrower” in the interim final rule can continue to borrow as long as they meet satisfactory academic progress requirements and all other student eligibility criteria, until they hit applicable aggregate loan limits. For these borrowers, the number of years they remain enrolled at any institution does not affect their eligibility for interest subsidies. 

Note that this does not necessarily encompass all continuing students. No matter what year a student is in, if he has never borrowed, or has repaid all previous loans prior to a certain time, then he is a new borrower subject to the limitation. 

For more detailed examples related to new borrowers, see NASFAA’s analysis.

Q: What data will my institution be responsible for reporting? 

A: Your institution will be responsible for reporting the following to the Common Origination and Disbursement (COD) system and National Student Loan Data System (NSLDS) beginning in 2014-15:  

  • The Classification of Instructional Program (CIP) Code for the program in which the borrower is enrolled;
  • The credential level for the borrower’s program;
  • The length of the borrower’s program;
  • The borrower’s enrollment status at the time of loan disbursement; and
  • If applicable, an indication that the loan is for preparatory coursework for an undergraduate or graduate program or for teacher certification coursework.

Q: Do the expanded reporting requirements only apply to subsidized loans, since the 150% rules only affect subsidized loan eligibility? 

A: No, the new reporting requirements will apply to all Direct Loans, and all borrowers.

Q: How will schools report this new loan data? 

A: ED is working on the operational details of this and will releasing guidance at a later date.

Q: Since the reporting structure is not yet in place, what happens if a student in a short program of study during the 2013-14 year exceeds his or her maximum eligibility period unbeknownst to the school? 

A: ED is aware of this possibility and will be addressing it in future guidance. 

Q: What will ED be responsible for? 

A: ED will be responsible for the following: 

  • Determining whether a loan applicant is a new borrower for subsidy limit purposes;
  • Tracking borrowers’ subsidized loan borrowing in greater detail;
  • Informing schools of the number of periods a borrower has received subsidized loans;
  • Informing borrowers when they exceed the eligibility limit and become responsible for accruing interest.
Q: Does the guidance in GEN-13-13 for updating and reporting academic year and loan period dates apply to all Direct Loan borrowers, undergraduates and graduates? 
A: Yes. The guidance in GEN-13-13 applies to all Direct Loan borrowers and to all Direct Loans (subsidized, unsubsidized, parent PLUS, and graduate PLUS).

Q: What would a student’s maximum eligibility period if the student completed one AA program and is now enrolled in a second AA program? 

A: A two-year program has a maximum eligibility period of 3 years (i.e., 2 years x 1.5 = 3 years). Any prior borrowing while enrolled in the first AA program would count against the 3-year maximum eligibility period of the second AA program.

Q: When a student no remaining subsidized loan eligibility, do we only process unsubsidized loans from that point on? 

A: Yes, if the student has not reached the aggregate loan limits and is otherwise eligible.

Part-time and Part-year Attendance  

Q: How is part-time or part-year attendance calculated? 

A: ED has determined that the following calculation will be used to determine both remaining and used eligibility: Number of days in the borrower’s loan period for a Direct Subsidized Loan / Number of days in the academic year for which the borrower receives the Direct Subsidized Loan.

The fraction represents the “subsidized usage period” and will be rounded down to the nearest quarter of an academic year. For a student who attends for the entire academic year, the fraction is one—one year’s worth of subsidy has been used.  

If the student attends less than full-time, the fraction is adjusted accordingly.  For a student attending three-quarter-time, the usage fraction is multiplied by .75, and for a student attending half-time, it is multiplied by .5.

If a student borrows the full annual loan limit for a period that is less than the full academic year (for example, just one term), the subsidized usage period for that loan is one year, and no adjustment is made for less than full-time enrollment status.  The usage period for a student whose eligibility for a subsidized loan is less than the full annual limit would not be subject to this rule.

Q: How is the subsidized usage period prorated if the student has multiple enrollment statuses within the same loan period? For example, a student borrows a loan for a full academic year and is enrolled full time in the fall and half-time in the spring? 

A: The interim final rules do not address this scenario. NASFAA included this question in comments to the interim final rules, so ED will be addressing these situations in the final rules.

For more detailed examples related to part-time students see NASFAA’s analysis

Transfer Students 

Q: Does a transfer student “reset” his or her eligibility when they transfer? 

A: In general, a student who transfers between programs does not reset his or her eligibly. Loans borrowed for the previous program will count against the student’s current limit. For example, a student receives three years of subsidized loans for a two-year program, then transfers into a four-year program. For the four-year program, the student’s maximum eligibility period is six years, but she has already used up three years of eligibility, so she has three years of subsidized eligibility remaining while in the four-year program.

Q: What happens to transfer students who enter into a program of study that is shorter than his or her previous program? 

A: Under the interim final rule, this student might not have remaining subsidized eligibility in some cases. For example, a student who completed a four-year program having borrowed each year and then returns to school for a two-year program would have no remaining subsidized eligibility since he received subsidies for four full years already.

Q: Is it possible for a student who has exhausted his or her subsidized loan eligibility to regain eligibility upon transfer to a different program? 

A: Under the interim final rules, this could occur if the program the student is transferring TO is longer than the program the student is transferring FROM. For example, a student who receives three full years of subsidized loan while enrolled in a two-year AA program would have no remaining subsidized eligibility in the AA program. If the student transfers to a four-year BA program, the student would regain eligibility because the student’s new maximum eligibility period is six years and he or she has a subsidized usage period of three years (six years minus three years  equals three years of remaining eligibility.)

Q: What if a student is enrolled for three years in a two-year program and takes out no loans. The student then transfers to a four-year program. Does she have only three years left, or a full six years since she never took out a Subsidized Stafford Loan in the previous program?  

A: She has six years of subsidized loan eligibility remaining. Only periods for which a subsidized loan was taken count toward the aggregate 150% limit.

Q: Please respond to this scenario as it applies to a good number of applicants to our programs: A student enrolls at XYZ University in a 4-year program and subsequently drops after receiving two years of subsidized loans. The student then enrolls at ABC Career College in an 1800 clock hour program (two years). Does this student have any subsidized loan eligibility left to use in the 1800 clock hour program?  

A: The student’s subsidized loan eligibility is based on length of the program in which the student is currently enrolled. A student enrolled in a two-year program has three years of eligibility. Loans taken in the program from which the student transferred count against that limit. Thus, a student who received subsidized loans for two years in a previous program (regardless of that program’s length) has one year of subsidized loan eligibility remaining upon entering the two-year program. 

Note that only periods of enrollment for which the student received a subsidized loan count. If this student does not take a loan for the first year of his new program (or qualifies only for an unsubsidized loan), he still has subsidized loan eligibility for his second year in the program. However, once he does exhaust his subsidized eligibility, any further enrollment triggers the end of subsidies on his existing loans, including loans taken for a program which he did not complete. 

So, for example, the student withdraws from a four-year program having attended only two years, then begins a new two-year program. None of the coursework he took in the first program transfers to the second. He has one year of subsidized eligibility remaining. If he took his remaining subsidized loan for the first year of his new program, he will have exhausted his eligibility for the subsidy at the end of that first year. Once he begins attending his second year, he may borrow only unsubsidized loans, and his subsidies end (i.e., interest begins to accrue but may be capitalized) on all his outstanding loans. If, however, he took no loan for his first year, he could take a subsidized loan for his second year. If he completes the program at the end of that second year, his subsidies are preserved and run their normal course.

For more detailed examples related to transfer students see NASFAA’s analysis

Treatment of Undergraduate Preparatory Coursework 

Q: Does preparatory coursework for undergraduate programs increase a borrower’s subsidized loan eligibility? 

A: No. While a student can receive subsidized loans for preparatory coursework, the preparatory coursework is subsumed into the program to which the student is applying for admission for purposes of the subsidy limit. Further, the 150 percent limit does not increase the maximum period of 12 consecutive months that currently applies to loan eligibility for coursework.

For example, if a student is enrolled in preparatory coursework for a four-year undergraduate degree program and utilizes subsidized loan one year and then enrolls in a four-year program, he or she will only have five years remaining eligibility. 

For more detailed examples on treatment of undergraduate preparatory coursework please see NASFAA’s analysis.

Treatment of Graduate Preparatory Coursework 

Q: Is there a limit for subsidized loan eligibility for graduate preparatory coursework? 

A: Yes, for graduate preparatory coursework the limit on subsidized eligibility is equal to the maximum eligibility period for the undergraduate program for which the borrower most recently received a subsidized loan. Therefore, for example, a student who used all remaining eligibility for his or her undergraduate program would not have any remaining eligibility for their preparatory coursework.

For more detailed analysis on treatment of graduate preparatory coursework please see NASFAA’s analysis.

Treatment of Teacher Certification Coursework for Which the Institution Awards no Academic Credential 

Q: Will students enrolled in a teacher certification program for which the institution awards no academic credential have subsidized loan eligibility? 

A: Yes, the interim rule stipulates that a first-time (new) borrower enrolled in such a teacher certification program will have maximum subsidized loan eligibility equal to 150 percent of the length of the certification program. The borrower’s prior enrollment and subsidized loan borrowing do not affect subsidized loan eligibility for these programs; only subsidized loans received for the teacher certification coursework itself are considered in determining the borrower’s continued eligibility for subsidies.

For example, a student completes a four-year degree using only four years of subsidized loans, even though he was eligible for six. He then enrolls in a one-year teacher certification program. His subsidized eligibility for the teacher certification program is unaffected by his prior subsidized loan borrowing and is instead calculated based on 150 percent of his teacher certification program, leaving him with 1.5 years of subsidized eligibility since the program is a year in length.

For more detailed analysis on treatment of teacher certification coursework for which the institution awards no academic credential please see NASFAA’s analysis.

Loan Counseling 

Q: What changes do I need to make to my entrance counseling? 

A: Beginning on July 1, 2013, schools are required to include new information about the 150 percent subsidized loan limit in entrance counseling for first-time borrowers. See 685.304 in the interim final rules.

Schools are encouraged, but not required, to include new information about the 150 percent subsidized loan limit in entrance counseling for first-time borrowers performed prior to July 1.

Beginning June 28, 2013, entrance counseling materials on will include information regarding the 150 percent subsidized loan limit.

For more information, see ED’s May 16 Electronic Announcement.


Q: When will ED issue final rules? 

A: It’s NASFAA’s understanding that ED will be issuing final rules by the end of 2013. Note, however, that the interim final rules were effective upon publication on May 16, 2013.


Q: What resources and guidance has been released on the topic? 

A: ED has released a Dear Colleague Letter, an announcement with links to recordings of ED webinars offered in June, the Interim Final Rule, and the following Electronic Announcements: 

  • May 16, 2013: general announcement of interim final rules
  • June 20, 2013: phase one of COD system changes scheduled for June 28-30, 2013
  • August 30, 2013: prorating subsidized usage periods based on enrollment status for the 2013-2014 year
  • October 25, 2013: tracking teacher certification programs for the 2013-2014 Direct Loan processing year 

NASFAA also wrote a series of articles exploring the interim final rules:

ED will be offering a third webinar with an implementation update on November 12 and 14, 2013.

The Department of Education (ED) announced it will hold four open forums across the country to collect feedback on President Obama's college affordability plan. The plan, A Better Bargain for the Middle Class, was officially released in August and included a three-part agenda: (1) Paying for performance; (2) Promoting innovation and competition; (3) Ensuring that student debt remains affordable. A central piece of the plan is the establishment of a "college ratings system" that would include metrics related to access, affordability and outcomes. Will you be attending the forum in your area?

This Q & A was updated on Nov. 1, 2013. The original version was first published in Today's News on June 20, 2013.


Publication Date: 6/20/2013

Jessica H | 11/5/2013 2:48:08 PM

What if a student anticipates being enrolled in a Fall & Spring program, withdraws part way through the fall semester and then enrolls and attends the spring semester. Should all of the loan periods be August to May or August to December and then January to May?

Katherine C | 6/27/2013 2:9:52 PM

Need advice on remaining eligibility specific to non-term programs: A student enrolls in a non-term program with a length of 1.7 academic years, receives loans for the entire period and graduates, and then re-enrolls for another non-term program at the same institution for which all prior work is accepted as transfer credit. The new program is the equivalent of 2.4 academic years in length. Would this student have additional eligibility for the 0.7 AY remaining (1.7 X 150% = 2.55 orig max elig time, new prog length 2.4 less 1.7 used in prior program)?

Billy C | 6/25/2013 11:15:31 AM

Thanks for adding my question to the Q&A - and answering it so thoroughly

Daniel S | 6/25/2013 10:46:18 AM

We (NASFAA) need to lobby for A REGULATION that requires new regulations may only take effect ,at the earliest, twelve months after the last fiscal year has ended to allow ample time to comment on impact, modify if necessary, train aid administrators and implement any and all changes. These knee jerk notices, interim rules and untimely and unreasonable proposals shows a total lack of understanding of how the aid delivery system operates and the immense challenges placed upon our professionals, technical staff and families.

Jo Anne L | 6/25/2013 10:23:40 AM

On the scenario where student was transferring from 4-year program to clock hour (or 2-year) program. It is indicated in answer that student would have only one year left of remaining eligibility ... I thought this 150% was only for FIRST TIME BORROWERS after July 1, 2013. If student had already borrowed at 4-year program and is transferring to clock hour (or 2-year) program, would they then be restricted because they are not a FIRST TIME Borrower; maybe at the new institution but not in loans overall. Please clarify. From what I'm reading and you're saying is that no matter if they have had prior loans, transferring from 4-year backwards would restrict them to only one year of eligibility regardless if first time borrower or not.

Anne C | 6/20/2013 2:6:52 PM

Anne C
If this rule only affects new borrowers, am I correct in assuming that all continuing students can keep on borrowing subsidized loans for years and years until they reach the aggregate loan limit, ragardless of whether they switch programs or schools?

Patrick G | 6/20/2013 12:2:38 PM

Our institutions has four year undergraduate degree programs in which the first one, two, or three years must be taken at another institution. For example, our traditional Bachelor of Science in Nursing (BSN) program features 34 prerequisite hours, and students are admitted to the program as sophomore level students. Will our BSN program be categorized as a four year program (because it requires the equivalent of four years of full time undergraduate college credit) or a three year program (because our institution does not offer the first year, prerequisite course work)?

Billy C | 6/20/2013 10:29:57 AM

Please respond to this scenario as it applies to a good number of applicants to our programs: A studnet enrolls at XYZ Univerisity in a 4-year program and subsequently drops after receiving two years of subsidized loans. The student then enrolls at ABC Career College in an 1800 clock hour program (two years). Does this student have any subsidized loan eligibility left to use in the 1800 clock hour program?

Lake T | 6/20/2013 10:2:59 AM

As I understand it, he would still have the full six years because he would be a first-time borrower under the new four year program.

Jill B | 6/20/2013 9:59:59 AM

How is overall eligibility affected when a portion of the subsidized loan is returned as a result of R2T4?

Richard B | 6/20/2013 9:36:29 AM

What if a student is enrolled three years in a two year program and takes out no loans. Transfers to a four year program. Do they have only three years left if the transfer to a four year or would they have a full six years since they never took out a Subsidized stafford Loan?

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