NASFAA has received several questions on the increased loan limits in H.R. 5715, which was signed by the President yesterday. NASFAA will continue to explore issues related to this new legislation in the coming days and weeks. This article outlines the annual loan limit increases as defined by the law.

The amendments made by this section shall be effective for loans first disbursed on or after July 1, 2008. For students enrolled as regular students in eligible programs:

• The bill introduces an additional unsubsidized Stafford annual limit of $2,000 for undergraduate dependent students.

• The bill increases the additional unsubsidized Stafford annual limits by $2,000 for dependent students whose parents are unable to borrow a PLUS loan. (Previously 1st and 2nd year students would qualify for an additional $4,000, but now will qualify for $6,000. For students who have successfully completed their first two years, the limits will increase from $5,000 to $7,000.)

• The bill increases the additional unsubsidized Stafford annual limits by $2,000 for independent undergraduate students. (Previously 1st and 2nd year students would qualify for an additional $4,000, but now will qualify for $6,000. For students who have successfully completed their first two years, the limits will increase from $5,000 to $7,000.)

• The amendatory language has designated a separate category for graduate and professional students; these students will not see any annual limit increases. Their additional unsubsidized Stafford annual limit remains $12,000. (Previously the Senate sought to increase annual limits for graduate students, but that provision did not make it into the final bill).

There has been some confusion about dependent students and dependent student whose parents are unable to borrow a PLUS loan. The bill divides those students into separate categories and gives each of them a $2,000 additional unsubsidized Stafford annual loan limit increase. It does not appear to offer a dependent student a $2,000 increase, and then another $2,000 increase if their parents are denied a PLUS loan.

Preparatory Coursework and Teacher Certification

Previously, the law distinguished between preparation for entry into an undergraduate program versus preparation for entry into a graduate program only in terms of the level of the program into which acceptance was sought. Previously the law also required that a student taking preparatory coursework for acceptance into a graduate program must already have a baccalaureate in order to qualify for a loan for the preparatory coursework, up to $7,000. A student who was not actually accepted into a graduate program would not have been considered to be on a graduate level - rather such a student was considered to be in preparation for entry into a graduate program and subject to the preparatory loan limits.

But, the amendatory language appears to define separate loan limit categories according to the student's status as an undergraduate versus a graduate student, rather than in terms of the level of the program into which acceptance is sought. For graduate or professional students enrolled in preparatory coursework or teacher certification, the additional unsubsidized Stafford annual limit is $7,000. It remains unclear, however, which students would meet the definition of graduate or professional student enrolled in preparatory coursework or teacher certification.

H.R. 5715 does not mention or address annual loan increases for dependent students enrolled in preparatory coursework or teacher certification. It is unclear how the Department will define the maximum annual loan limits for dependent students in that situation.

Undergraduate independent students (or dependent students whose parents are unable to borrow a PLUS loan) enrolled in preparatory coursework will receive an additional unsubsidized Stafford annual limit increase from $4,000 to $6,000. But under the amendatory language, it appears undergraduate independent students enrolled in teacher certification courses will actually see an additional unsubsidized Stafford annual limit decrease from $7,000 to $6,000.

It also remains unclear whether the Department will consider undergraduate independent students who are seeking entry into a graduate program as graduate or professional students, allowing them access to the additional $7,000.

NASFAA is engaged in ongoing discussions with the Department of Education to clarify these and other questions raised by the H.R. 5715. We will continue to post new information in Today's News as we receive clarifications.

By Justin Draeger
NASFAA Associate Director of Communications

Joan Berkes, NASFAA Director of Legal and Regulatory Analysis, also contributed to this article.

Posted 05/08/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.