The 150% limit on Direct Subsidized Loans is in effect now, as of July 1, 2013. All first-time borrowers on or after July1, 2013 are subject to the new provisions.  The requirements associated with this new provision also stipulate additional requirements of schools, including enhanced entrance counseling.  See below for more of the details.

The U.S. Department of Education (ED) states that, generally, a first-time borrower is one that did not have an outstanding balance of principal or interest on a Direct Loan (or on an older FFEL Program Loan) as of July 1, 2013.  The provision, which is authorized by the Moving Ahead for Progress in the 21st Century Act (MAP-21), was enacted almost a year ago on July 6, 2012.  The law states that a first-time borrower’s eligibility for a Direct Subsidized Loan may not exceed 150% of the length of the borrower’s educational program. The borrower’s educational program is defined as the eligible program that the student is enrolled in, and for which he or she is applying for a Direct Subsidized Loan.  In addition, MAP-21 will, in certain circumstances, result in first-time borrowers who exceed the 150% limit losing eligibility on their Direct Subsidized Loans.

The Department of Education will calculate the first-time borrower’s maximum eligibility period, as well as their subsidized usage periods.  This information will be used to determine if the borrower has any remaining eligibility period for Direct Subsidized Loans, and if so, how much.  Additionally, ED will determine whether a borrower loses interest subsidy on his or her Direct Subsidized Loans as a result of the 150% limit.  This past week, from June 28-30, 2013, ED is reported to have updated COD to add a new “Subsidized Usage Limit Applies (SULA)” field.  This field will allow schools to identify borrowers impacted by this new provision.  A new COD Warning Edit 200 will be returned on the person level on any award once the SULA field is populated.  Further, a new Web-only report will automatically be posted weekly to your school’s COD Reporting Newsbox (not via SAIG) in comma-separated-values (.csv) file format.  The report will not be available for request on an ad-hoc basis.  It will list all borrowers that will be impacted by the 150% limit.  The borrower’s name will only appear on the list once, and will only remain on the report for 45 days.

Schools are responsible to immediately begin reporting the correct Direct Loan academic year and loan period dates to COD.  Guidance for what this entails is included in Dear Colleague Letter (DCL) GEN-13-13.  If schools inaccurately report the specified information, it could cause students to lose eligibility for Subsidized Direct Loans when they otherwise may still have remaining Subsidized DL eligibility.

Additionally, schools must immediately begin providing updated entrance counseling that is required under the interim final regulations that implement this law.  It is mandated that all first-time borrowers that complete entrance counseling for loans first disbursed on or after July 1, 2013 must be made aware of the 150% Direct Subsidized Loan eligibility limit.  This enhanced counseling must be made before making the first disbursement of a Direct Subsidized or Unsubsidized Loan to borrowers classified as a first-time borrower as stipulated in this law.

As of June 28, 2013 ED’s entrance counseling materials on StudentLoans.gov were modified, as a temporary step, to include a link to information about the 150% limit.  Later in the year (likely in October), the actual content of the StudentLoans.gov entrance counseling material will be updated to include the applicable information.

Schools that provide their own entrance counseling to students (e.g., do not use ED’s entrance counseling on StudentLoans.gov) must ensure that they provide all first-time borrowers (those without a balance on a DL or FFEL on July 1, 2013) with the additional information related to the 150% limit, as required by regulation.  Schools may refer to the attachments to the May 16, 2013 Electronic Announcement for information that may be used to augment their entrance counseling to meet the new requirements in the near term.

For more information, schools should become thoroughly familiar with the guidance in DCL GEN-13-13 and in the Electronic Announcements dated May 16, 2013 and June 20, 2013.

 (DCL GEN1313, EA051613, EA062013)

 

If you have any questions regarding this information, please contact your Customer Service Representatives via support.fameinc.com.