NASFAA has received a significant number of questions from members seeking clarification on calculating the “expected time to credential” (ETTC) exception to the statutory loan limits imposed by the One Big Beautiful Bill Act (OBBBA). This Q&A — conducted with Denise Morelli of Sligo Law Group — is intended to address questions that have been raised as a result of the U.S. Department of Education’s (ED’s) initial published guidance and subsequent information communicated via webinars and office hours. In this uncertain environment, NASFAA advises that financial aid administrators consult with legal counsel to assess risk and determine the best course of action.

NASFAA Background on Expected Time to Credential Guidance

Effective July 1, 2026, OBBBA, among other things, eliminated the Graduate PLUS Loan program, set new annual and aggregate caps on the Parent PLUS Loan program, eliminated the additional Unsubsidized loan for certain health professions students, established distinct Unsubsidized annual and aggregate limits for graduate and professional students, and instituted a new federal student loan lifetime borrowing limit. An exception to the new loan limits exists for students who began their programs of study and borrowed a Direct Loan for those programs on or before June 30, 2026. The exception is limited to the student’s “expected time to credential,” which is defined in the regulatory language as the lesser of the maximum of three academic years or the period determined by calculating the difference between the student’s program length and the period of the program completed by the determination date, where program length is the minimum amount of time in weeks, months, or years, as set forth in an institution’s published material, that it would take a full-time student to complete the requirements for the program.

Prior to August 12, 2026, ED consistently advised institutions — including in the Final Rule published on May 1, 2026, a May 20, 2026 FAQ document, and in webinars and office hours held over the spring and summer of 2026 — to base the ETTC calculation for non-transfer students on the amount of time the student had been enrolled and not on the number of credits the student had completed as of the date of determination.

On August 12, 2026, the Department conducted a webinar during which it described calculating the ETTC for non-transfer students using credits completed rather than the previous time-based calculation. In describing the limited exception, the Department presenter specifically stated that to calculate the ETTC, the institution would use the credit hours earned to determine how much of the program a student has completed. Nowhere in the presentation does the Department acknowledge that it has changed the mechanism for calculating the ETTC from time enrolled to credit hours completed.

The impact and timing of this change of interpretation, coming when summer sessions had ended and many students were already arriving on campus, generated a number of questions on how schools should proceed, given that they had already determined eligibility and, in some cases, disbursed loans under the initial guidance.

NASFAA shared some of the most pressing questions with attorney Denise Morelli of Sligo Law Group to help institutions navigate this uncertain situation. Denise has over 30 years of experience as a career attorney with the Office of the General Counsel in the U.S. Department of Education, where she worked directly with Federal Student Aid program teams to resolve issues related to institutional and student Title IV eligibility and administrative capability. During that time, Denise represented Federal Student Aid and the Department in hundreds of cases before the Department’s Office of Hearings and Appeals and district courts.

In responding to the questions, Denise is providing her perspective based on that experience. Historically, the Department has taken action to remedy instances where conflicting guidance on an issue has been provided, and ED has indicated that it plans to update its FAQ document. We hope the information below will help institutions choose a path forward in calculating and disbursing aid until further guidance is published. Again, NASFAA advises that financial aid administrators consult with legal counsel to assess risk and determine the best course of action.

1. What is sub-regulatory guidance, and what is the legal effect of such guidance?

In general, information provided by a governmental agency to regulated entities that establishes an agency’s interpretation or intended enforcement implementation of a regulatory provision is considered sub-regulatory guidance. Sub-regulatory guidance does not have the force of law, but it can be given persuasive weight in enforcement or compliance proceedings when a regulation is broad in nature or implementation guidance is necessary to give the regulation meaning. Sub-regulatory guidance can be relied on to supplement regulatory standards, but it cannot be used to replace the requirements that have gone through formal notice-and-comment rulemaking.  With respect to the issue here, the webinars conducted by the Department in April and August, and the Q&A issued in May, would all be considered sub-regulatory guidance. The weight to be given to an agency’s guidance varies depending on whether a reviewing court or administrative tribunal finds that a regulation is broad and needs more details for implementation, or the wording is vague or ambiguous. Given the fact that the language of the regulation is precise and clear, and mirrors the statutory language, there is a high likelihood that the Department’s guidance will be given little or no weight in a proceeding reviewing a compliance or enforcement action.

2. Would the statements made in the August 12, 2026, webinar be classified as official Department guidance?

The Department does not specifically define the term “official guidance.” Due to the complexities of the HEA, Title IV programs, the Department uses a number of formats to provide implementation guidance on statutory and regulatory provisions. These include Dear Colleague Letters (DCLs), Electronic Announcements, Q&As, and the Federal Student Aid Handbook. Although not specifically defined, these written documents are what have traditionally been considered official Department guidance. Although each format varies in the type of review the guidance receives, each type of document receives some form of review and clearance. DCLs, which are subject to a government-wide clearance process, are usually given the greatest weight by reviewing bodies. Traditionally, webinars have been designed as training sessions to provide additional assistance on topics for which information has already been disseminated to the institutions through the issuance of regulations or more formal written documentation. There is no mandatory requirement for institutions to attend webinars, and the notices of upcoming webinars posted on Federal Student Aid’s Knowledge Center generally provide a broad topic area to be covered. Unless the information discussed in the August 12 webinar regarding the use of credits for the ETTC calculation is issued in a written document, it will be hard for the Department to argue that it is official guidance that institutions must follow, especially in light of the fact that the Department is changing its position on the ETTC calculation.

3. Can verbal responses provided to questions be considered official Department guidance?

 If a statement is made by a representative of the Department speaking in his/her official capacity, that statement can be considered guidance provided by the Department. As noted, the term “official guidance” has traditionally been reserved for formal written documents that have been disseminated to the broader financial aid community. An institution can rely on verbal guidance provided by an official representative of the Department; however, the issue becomes the weight to be given to that guidance in a compliance or enforcement proceeding. Reliance on verbal responses is risky because the representative can later maintain that they were misunderstood or that the information was not used in the proper context. In other situations, the information presented verbally may be inconsistent with written guidance that has been disseminated. The Department’s administrative tribunal has required institutions to pay liabilities for violations of regulatory standards even where there was a claim that the institution followed verbal directives from a Department employee. The most prudent course to take in this situation is to have the Department official provide the information in writing.

4. Are email responses to an institutional inquiry official guidance if they conflict with existing written guidance?

As noted before, the Department does not specifically define official guidance, although traditionally the term has been used to refer to written guidance, such as DCLs or Electronic Announcements, that are provided to the financial aid community at large. Although the email is a written communication from a Department official, this particular individual guidance would likely be given less weight by a reviewing body because it is in conflict with the more widely disseminated official guidance. Since there is a conflict here, the least risky approach would be to follow the written guidance that was disseminated to the broader financial aid community.

5. Is the guidance provided in the August 12 webinar consistent with the regulations?

No. The guidance in the August 12 webinar directs institutions to use the credits earned by a student when calculating the expected time to credential for purposes of determining the duration of an individual student’s exception to the new loan limits. This is in direct conflict with the regulatory language, which defines program length, the main component of the time to credential calculation, as the minimum amount of time in weeks, months, or years that it takes a full-time student to complete a program. The maximum length of the exception is also defined in time: three academic years. There is nothing in the regulatory language that provides for the calculation to be completed based on credits. The Department was provided an opportunity to revise the final regulation and change the ETTC calculation to use credits rather than time in response to a public comment on the proposed rules, but it chose to leave the language that essentially parrots the statutory language intact. (May 1, 2026, Federal Register). Although the Department does not specifically state that it was using time as the mechanism for calculating ETTC due to the constraints of statutory language itself, that is likely the reason. The statutory language is clear and specific, which doesn’t leave much room for a different regulatory interpretation and implementation. To the extent that the Department believes that adding the definition of an academic year to the regulatory language supports the use of credits rather than time in the ETTC calculation, that argument is not strong. The regulatory definition of an academic year sets forth the minimum instructional time in weeks that an institution’s academic year must include for purposes of participation in the Title IV programs. Although the definition does reference credits, it does so in the context of the instructional time necessary to complete those credits. Overall, the use of credits in the ETTC calculation is not aligned with the regulatory or statutory language.

6. Are institutions required to comply with the guidance provided in the August 12 webinar, and what are the risks of not complying with this new guidance?

In general, institutions are expected to comply with guidance provided by the Department on how it intends to implement the provisions of a regulation. In this case, however, the information provided in the August 12 webinar is inconsistent with prior written guidance disseminated by the Department through the May 20 Q&A. The webinars are not mandatory, and there was no alert provided that the Department was changing its interpretation of how to calculate a student’s expected time to credential for purposes of the loan limit exception, which would have prompted institutions to obtain the slides from the webinar. Until the Department issues written guidance stating that it is superseding the May 20 Q&A, it would be the most prudent for institutions to follow the guidance in the written Q&A.

Even if the Department ultimately issues written guidance confirming the information provided in the August 12 webinar regarding the use of credits in the ETTC calculation, the Department still has a few hurdles to overcome if it attempts to enforce the new guidance. First, it will need to provide a reasoned justification for changing its policy guidance with respect to the ETTC calculation. Although the policy guidance had been recently issued, the Department must still provide a justification for changing its previously published guidance. In addition, the Department must provide a reasoned basis for determining that the new guidance is a valid interpretation of the regulatory standard. The Department is unlikely to meet this standard due to the fact, as outlined above, that the revised guidance is inconsistent with clear regulatory and statutory language. Last, since the Department provided the new guidance after institutions needed to package students for the summer and fall terms, and in many cases the entire academic year, the Department has created a reliance issue. In order to meet their obligations to students, the institutions needed to design their systems and package students relying on the information available at the time, which was the regulatory language itself, any guidance provided in the NPRM and the Preamble to the final regulations, the April 17 webinar, and the May 20 Q&A.

These factors taken together will make it difficult for the Department to sustain any type of compliance or enforcement action against an institution for disbursing loan funds using an ETTC calculation based on time, as that method is consistent with the language of the statute and regulation, was reinforced by the April 17 webinar and the May 20 written Q&A, and it was the only information available to them at the time the institution needed to begin meeting its obligations to students. With respect to future disbursements, the Department would likely still have a difficult time since any guidance directing the use of credits for the ETTC calculation would require institutions to ignore the language of the regulations the Department just recently promulgated. If the Department believed that the use of credits was the proper implementation of the statutory provision, the appropriate time to have made that case was when it promulgated the regulation. Courts in the past have found that the Department cannot enforce standards through guidance when the language of the regulation does not support such guidance.

This analysis is based on the current factual situation. Should the Department provide written guidance outlining a reasoned basis for a determination that the regulations and statute permit the use of credits in the expected time to credential calculation, despite language to the contrary, the analysis regarding the risk for future disbursements could change. If the Department does issue further guidance requiring institutions to use credits in the calculation, institutions should not simply ignore that directive. Institutions, in consultation with their legal counsel, should take into account their individual circumstances and the reasoning provided in the directive, if any, when determining whether to challenge the directive, and how and when to make such a challenge.

7. Is it reasonable for an institution to conclude that both the time and credit methods are valid options for calculating students’ expected time to credential?

At the current time, the Department has created a situation where it has publicly sanctioned both methods as valid for calculating the expected time to credential. Without a statement by the Department acknowledging that there is a conflict with the guidance that it has provided and an outline on how it intends to resolve that conflict, an institution can reasonably argue that it believed both methods were valid options to follow. As noted above, there was no statement made in the August 12 webinar stating that the Department was changing its position on the issue or suggesting that the information provided in the webinar on the use of credits superseded the prior guidance on the use of time. In order to meet its obligations under the Title IV programs and its Program Participation Agreement, an institution must comply with all Title IV regulations. If the Department chooses not to issue any clarifying statement, institutions can make an argument that they made a good faith effort to comply with the regulation using either option. As previously stated, the least risky course of action to take would be to follow the written May 20 Q&A, which is more aligned with the language of the regulation. That said, since the Department created the confusion, it is unlikely to prevail in an enforcement or compliance action against an institution using either method. At a minimum, an institution’s reliance on the guidance available at the time the institution was required to package students for the semester or year would likely be considered a mitigating factor in a decision by a reviewing body on a compliance or enforcement action taken by the Department.

8. If an institution chooses to use the credit methodology set out in the August 12 webinar, when would that policy be effective?

Although there is no clear answer to this question, the Department provided no indication in the information disseminated during the webinar that it was creating a new policy with an effective date that is different from the July 1 effective date of the regulation. If an institution chooses to use the credit methodology, the most prudent course of action would be to apply it to all disbursements made after July 1, so that similarly situated students are not treated differently within the same term. If the application of the credit methodology results in a loan overpayment for some students, the institution would be expected to correct the student’s account and return the overpayment to the Department. That said, a reasonable argument can be made that the overpayment resulted from the institution’s compliance with the directive initially provided by the Department, which was the only directive issued prior to the institution needing to package students for the summer, fall, or year, and under these circumstances, it would be inequitable for the Department to require an institution to take action that would harm the students. As with any defense, there is no guarantee that it will prevail, but it is a reasonable argument to make under these circumstances.

9. Can an institution use different methodologies for different students depending on the circumstances?

There is nothing in the language of the statute or regulation that suggests a different methodology can be used for different students. In addition, the Department’s historic position is that regulatory standards should be applied uniformly to all students, thereby minimizing arbitrary actions by institutions. There are no factors here that would support a departure from that position. Further, it is the most equitable position for an institution to take. Recent e-mail communication from theOmbudsman’s office in FSA, which handles complaints from students, directed an institution to recalculate a complaining student’s ETTC using credits rather than time as it had initially been calculated. In directing the institution to take that action, staff noted that institutions do not have to recalculate all students, but should reevaluate students whose circumstances are brought to their attention. Essentially, the Department is telling institutions, “If a student complains, fix it; if they don’t, you may leave it.” Not only is this inconsistent with the Department’s historic position that similarly situated students should be treated the same, but it also puts institutions in a risky legal position with students who were not reevaluated. Institutions have a contractual legal obligation to their students, and treating similarly situated students inequitably poses a problem in a dispute between a student and an institution. The Ombudsman’s directives to this institution, and likely others, require the institution to make a choice between two equally bad options: Either ignore the Ombudsman’s directives and risk some type of action by the Department or be placed in a risky legal position with students by treating similarly situated students differently. In evaluating how to handle this difficult situation, institutions, in consultation with their legal counsel, should consider all factors before making a decision on what approach to take.

10. What is the best practice for documenting an institution’s expected time to credential policy?

As with any compliance issue, the institution should have a written document outlining the specific policy and procedure it is using to determine student eligibility for the loan limit exception and the duration of that exception. That policy should clearly state why it is using the particular calculation method — time or credit — it has chosen to implement. If the institution is choosing to use the time method outlined in the initial guidance, the documentation should include any system costs it has incurred implementing that method. Although the costs incurred in implementing the initial guidance would not be a direct legal consideration for a reviewing body, the Department’s administrative judges have been known to consider facts such as this when reaching a decision on a compliance or enforcement action.

Publication Date: 9/17/2026

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