School XYZ's academic year is defined as 36 credit hours and 30 weeks of instructional time. Its academic year is composed of three quarters. Olivia, a student at School XYZ, will complete her program after the winter quarter. She is enrolled in 12 credits during the fall quarter and 8 credits during the winter quarter. She has a remaining eligibility period (REP) of 0.5 for Direct Subsidized Loans. In this case, the proration is based upon 20 credits divided by 36 credits. Would proration allow Olivia to receive over half of her REP?
Olivia is not eligible for a loan for both terms, because that would create a subsidized usage period of 0.7 years, which exceeds her REP of 0.5 years. Proration will proceed only for the subsidized loan. Because the student is eligible for an unsubsidized loan for both terms, a second proration has to occur for Direct Unsubsidized Loan eligibility based on the credits Olivia will take during her last two quarters.
Here are the steps:
$5,500 * (12/36) = $1,833.33.
$7,500 * (20/36) = $4,166.67.
To work out how much Olivia can actually receive in Direct Unsubsidized Loans, factor out the amount she will receive in subsidized funds. Take $4,166.67 and subtract $1,833.33 (the result of the first step above). The result is the amount Olivia can receive ($2,333.34) in unsubsidized funds.
Publication Date: 7/21/2015