Posted Date: May 11, 2016
|Author:||Sue O'Flaherty, Service Director, Program Management, Federal Student Aid|
Subject: 150% Direct Subsidized Loan Limit: Electronic Announcement #21 - Common Subsidized Loan Limit Usage Inquiries
In March 2015, we implemented a Direct Loan Subsidized Usage Inquiry Page on the Common Origination and Disbursement (COD) Web site. This page allows users to send cases of incorrect Subsidized Usage Period calculations or incorrect applications of loss of subsidy to the Department of Education (the Department). This functionality should only be used when the error cannot be resolved by the school. However, while researching many of these inquiries, we have identified that many of them are a result of misreported data that the school can correct itself or a school’s misunderstanding about the 150% limit. This Electronic Announcement presents the most common issues in a question and answer format.
Note: Please monitor the IFAP Web site for a forthcoming electronic announcement that will remind schools of the critical importance of complete and accurate reporting of program-level enrollment information to the National Student Loan Data System (NSLDS®).
Q1: Why does the borrower have a Subsidy Status of “Loss of Subsidy” in NSLDS when the COD System still shows that the borrower has remaining subsidized eligibility?
A1: The COD System calculates subsidized eligibility for the 150% Direct Subsidized Loan Limit based on information sent to the COD System in loan records. NSLDS determines the interest subsidy status for subsidized loans awarded based on information reported to NSLDS in the enrollment reporting process and from information that NSLDS receives from the COD System. We have identified two common errors that result in schools incorrectly reporting published program length to NSLDS, which in turn leads to an incorrect loss of interest subsidy:
Incorrect Format of the Published Program Length Field - The NSLDS enrollment reporting roster includes an implied decimal point between the third and fourth position of the published program length field, but schools are reporting the published program length without taking the implied decimal into account. For example, many schools are sending a four-year program as “000400” (0.4 year program) instead of “004000” (4.0 year) program. Reporting in this way could cause the student to immediately lose subsidy on his or her first subsidized loan and on any future subsidized loans.
Inconsistent Use of Published Program Length Measurement Between COD System and NSLDS - The published program length time measurement (Years, Months, Weeks) reported to the COD System is different than the published program length time measurement reported to NSLDS. For example, schools reported a 24-month published program length and a 30-week academic year to the COD System and reported a 2-year program length to NSLDS. A 24-month program with a 30-week academic year is 3.428 years long, not 2 years long. Reporting in this way could cause a school to make a subsidized loan to a student who is not eligible to receive it.
If a school determines that it had incorrectly reported any of a student’s program-level enrollment information which is used by NSLDS to identify a unique program (CIP Code, Credential Level, and Published Program Length), it must:
Report the student as never having attended (status X) the program that was associated with the inaccurate reporting, with an effective date equal to the Program Begin Date for that program; and
Re-establish the student’s program-level enrollment information by reporting the accurate program-level information.
Both of these reporting actions may be submitted in the same batch response file, using two separate program-level (type 002) records.
Q2: The student received a subsidized loan for the full academic year that was only half of the annual loan limit. Why is the loan's Subsidized Usage Period not 0.5 years?
A2: The Subsidized Usage Period is a time measurement, not a dollar amount limit. A loan's Subsidized Usage Period is the length of the loan period divided by the length of the academic year. Since the loan period equals a full academic year (for example, fall/spring), the Subsidized Usage Period in this case equals 1.0 years even though the award amount is less than the annual loan limit.
Q3: The student has a Remaining Eligibility Period of 0.7 years. When I prorated the loan amount for the fall/spring loan by 0.7 it was rejected by the COD System. Why?
A3: The Subsidized Usage Period is a time measurement, not a dollar amount limit. In most cases, a loan's Subsidized Usage Period is the length of the loan period divided by the length of the academic year. Therefore, a school should not simply prorate a student's loan amount by the remaining eligibility.
In this case, the loan submitted was still for a full year, with a Subsidized Usage Period of 1.0 year, and thus rejected. When the Remaining Eligibility Period is less than 1.0 years, the Loan Period/Academic Year ratio (Subsidized Usage Period) cannot exceed the remaining eligibility period. Therefore, in this case, the loan period would have to be shortened to cover at least one payment period (fall only) to be accepted in the COD System.
Note: There are two exceptions to the calculation of a Subsidized Usage Period time measurement.
The first exception is when the loan amount equals the full annual loan limit for the grade level. Any time the loan amount equals the full annual loan limit for the student’s grade level, the Subsidized Usage Period will generally equal 1.0 years even if the loan period length is shorter than the academic year length. Therefore, in the example above, the loan period must not only be shortened to cover one payment period, but the loan amount must also be less than the full annual loan limit for the Subsidized Usage Period to be less than 1.0 years. It is not appropriate to simply prorate the annual loan limit by the student’s Remaining Eligibility Period.
The second exception is when the student is enrolled less than full-time. When this is the case, and a less-than-full-time enrollment status is reported to the COD System, the Subsidized Usage Period will be prorated accordingly. In the example above, if the student were enrolled half-time for the full academic year, a full fall/spring loan could have been originated because the Subsidized Usage Period of 1 year would have been prorated downward to 0.5 years.
Additional guidance can be found in 150% Direct Subsidized Loan Limit Electronic Announcement #20.
Q4: I reported a summer-only loan with the same loan period as the academic year dates. Why is the Subsidized Usage Period a full 1.0 year?
A4: When reporting the Academic Year Begin and Academic Year End Dates to the COD System, a school must use the dates that coincide with the school’s full Scheduled or Borrower-Based Academic Year. If the academic year is the same as the loan period, the Subsidized Usage Period will generally equal 1.0 years.
The academic year reported must reflect the period used to track annual loan limits. It is your school's defined academic year, and in most cases, must not be less than 30 weeks of instructional time, or for a clock-hour program, not less than 26 weeks. A single-term academic year is never correct.
Additional guidance can be found in Dear Colleague Letter GEN-13-13 and the Federal Student Aid Handbook Volume III, Chapter 5.
Q5: The student was enrolled half-time in the fall semester and full-time in the spring semester so why is the loan’s Subsidized Usage Period reflecting as if the student was full-time for the entire year?
A5: When enrollment (full-time, three-quarters-time or half-time) varies between terms or payment periods the COD System calculates a weighted average of each payment period's Subsidized Usage Period based on the enrollment status reported in the disbursement record for that payment period. To determine the length of each term or payment period the COD System uses the reported Payment Period Start Date in combination with the loan period start and end dates.
Some schools have reported the same Payment Period Start Date for all the disbursements of a loan. Therefore, the COD System considers that loan to have a single term or payment period. The COD System uses the latest disbursement's enrollment status to set the enrollment for the entire term/payment period.
Schools must report the Payment Period Start Date for the term or payment period the disbursement covers. The payment period start date is the beginning of the term or payment period. For example, if the fall term begins 8/31, the disbursement scheduled for that term must be reported with a payment period start date of 8/31. If the spring term begins 1/30, the disbursement scheduled for that term must be reported with a payment period start date of 1/30.
Additional guidance can be found in 150% Direct Subsidized Loan Limit Electronic Announcement #17.
Q6: We made the first disbursement of the loan and later zeroed it out and made no other disbursements. Why is the COD System still showing the Subsidized Usage Period at 1.0 years?
A6: Once an actual disbursement is posted in the COD System, an actual Subsidized Usage Period is calculated and charged against the borrower's eligibility. At that point, only a loan that is fully inactivated has the Subsidized Usage Period removed. An inactivated loan is one where all disbursements (actual and anticipated) and the loan amount are $0, and the COD System has accepted those changes.
Additional guidance can be found in 150% Direct Subsidized Loan Limit Electronic Announcement #16.
Q7: We made the fall disbursement on a fall/spring award, but then reduced the fall disbursement to zero and reduced the loan amount. Why is the borrower still being charged a full 1.0 years Subsidized Usage Period?
A7: To exclude a loan’s payment period from being included in the subsidized usage, the disbursement amount must be reduced to $0, the loan amount must be reduced, and the loan period begin and/or end dates (Financial Award Begin and End dates) must be changed to reflect the payment periods for which the student received a disbursement (Spring only). Once all of the required updates have been accepted, the COD System will recalculate the Subsidized Usage Period.
Additional guidance can be found in 150% Direct Subsidized Loan Limit Electronic Announcement #15.
Q8: A loan was originated and accepted by the COD System. Why did it reject for Edit 206 (The Remaining Subsidized Eligibility Period is less than zero for this award) after sending actual disbursements?
A8: Something changed about the student’s status or eligibility between when the COD System initially accepted the loan and when the loan was disbursed. For example, if the enrollment status was reported as half-time for all disbursements when the loan was initially processed in the COD System, but when reporting the actual disbursement, the enrollment status was updated from half-time to full-time, the recalculated usage may exceed the remaining subsidized eligibility.
In this example, the borrower is no longer eligible for the loan period as reported. Analysis is needed to determine whether the student may be eligible for a portion of the loan period.
Additional guidance can be found in 150% Direct Subsidized Loan Limit Electronic Announcement #15.
Before submitting a Subsidized Usage inquiry on the COD Web site or sending questions to 150Percent-Questions@ed.gov, review the 150% Direct Subsidized Loan Limit Information page. This page contains Electronic Announcements, Dear Colleague Letters, and a series of Frequently Asked Questions that answer most schools’ questions about the 150% Direct Subsidized Loan Limit.
Publication Date: 5/11/2016