There are several regulatory changes recently that could impact your school.  Please read through each of these to determine what internal procedural changes you may need to make at your school in order to be in compliance. 

Repeal of 150% Subsidized Usage Limit

Since 2013, Direct Loan statutory requirements limited a first-time borrower’s eligibility for Direct Subsidized Loans to not exceed 150% of the published program length. In addition, under certain conditions, the requirements caused first-time borrowers who exceeded the 150% limit to lose the interest subsidy on their Direct Subsidized Loans. The FAFSA Simplification Act, part of the Consolidated Appropriations Act, 2021, provides for a repeal of the 150% Subsidized Usage Limit Applies (SULA) requirements.  This applies to loans first disbursed July 1, 2021 and after.

School or student impact that need to be reviewed.

  • If school processes and systems have flexibility, disburse new Direct Subsidized Loans on or after July 1, 2021, to ensure borrowers receive the maximum benefit of the regulatory changes.
  • Beginning around July 1, 2021, schools will see a noted increase in postscreening activity, particularly for codes 25, 26, and 27 for several weeks and months and then expect the volume to decrease over time.
  • If schools produce their own entrance or exit counseling materials, they should remove all information about SULA and/or loss of subsidy. Other school-produced materials, such as letters, web content or internal procedures, should also be evaluated and updated as soon as possible.
  • If a school submits a Direct Loan with an earliest disbursement date before July 1, 2021, the COD System will continue to calculate subsidized usage. Subsidized usage calculations will also occur if a school changes the earliest disbursement date of a Direct Loan from on or after July 1, 2021, to be before July 1, 2021.

For FAME’s Freedom Finaid clients, the software will be updated in a future release.  For now, the school can alter the current SULA feature in the software by indicating “NO” when awarding the student.  For those students that have already been awarded and not received the 1st disbursement of their loan prior to July 1, 2021, the school will need to re-award these students using this same method as described.

 

Removal of Selective Service and Drug Conviction Requirements for Title IV Eligibility

The FAFSA Simplification Act also made changes to remove the requirement that male students register with the Selective Service before the age of 26 to be eligible for federal student aid and the suspension of eligibility for Title IV aid for drug-related convictions that occurred while receiving Title IV aid.

Schools may implement the changes as early as June 17, 2021. You must implement the changes no later than 60 days after the date of the Federal Register notice which is August 16, 2021.  To make Title IV aid accessible to as many students as soon as possible, the Department of Education (ED) will implement these changes in three phases across three award years: the 2021-2022, 2022-2023, and 2023-2024 award years.

Since the FAFSA cycle has already begun for the 2021-2022 award year, the Selective Service and drug conviction questions (as well as the option to register with the Selective Service via the FAFSA) will remain on the FAFSA. However, failing to register with the Selective Service or having a drug conviction while receiving federal Title IV aid will no longer impact a student’s Title IV aid eligibility.

Schools will still see Comment Codes 30, 33, or 57 for Selective Service issues and Comment Codes 53, 54, 56, or 58 for drug convictions. Each Comment Code will still include messaging that a resolution is required to regain eligibility for federal student aid. Schools must ignore the Comment Codes and the messaging requiring resolution and proceed to award and disburse aid to students if they are otherwise eligible. However, while recommended, schools are not required to go back and reprocess, package, or award aid for ISIRs they received for the 2021-2022 award year prior to the implementation date unless requested by the student.

ED will be proactively sending emails to students who are associated with 2021-2022 ISIRs received prior to the implementation date and who were determined to be ineligible based on their answers to Selective Service and drug conviction questions informing them about the change in the law and their potential eligibility for Title IV aid. Emails will direct students to contact their institution’s financial aid office.

For the 2022-2023 award year, it is similar to the 2021-2022 award year:

  • The Selective Service and drug conviction questions (as well as the option to register with the Selective Service via the FAFSA) will remain on the FAFSA;
  • Failing to register with the Selective Service or having a drug conviction while receiving federal Title IV aid will no longer affect a student’s Title IV aid eligibility; and
  • Institutions will still see Comment Codes 30, 33, or 57 for Selective Service issues and Comment Codes 53, 54, 56, or 58 for drug convictions, which institutions must ignore and may not use as a reason to deny Title IV aid to a student.

However, for the 2022-2023 award year, ED will include language in the Comment Codes stating that no further action is necessary on the part of the student or the institution.

For the 2023-2024 award year, ED plans to completely remove both the Selective Service and drug conviction questions from the FAFSA, as well as the option to register with the Selective Service via the FAFSA. They will also remove any associated Comment Codes and messaging that indicate a resolution is required for federal Title IV eligibility.

For FAME’s Financial Aid software products, the student eligibility features will all be updated in a future release.  For now, schools can override these requirements by indicating they have appropriate documentation to allow these students to be eligible for Title IV funds for these 2 requirements only.

 

Graduating a program without completing all required hours

The Distance Education and Innovation regulations, which were published on September 2, 2020 and effective July 1, 2021 (unless early implemented by institutions), defined a withdrawal exemption for all programs.  A student who completes all the requirements for graduation from the program before completing the days or hours in the period that they were scheduled to complete is not considered to have withdrawn.

For example, a student enrolled in a 900-clock hour program with two 450-hour payment periods completes all of the academic requirements to graduate (competencies, coursework, etc.) and graduates the program with only completing a total of 750 hours in the program.  Even though the student has not completed all of the hours in the 2nd payment period, since the student has graduated/completed the program, the student is NOT considered withdrawn for R2T4 purposes.

For clock-hour programs only, if a student graduates without successfully completing all of the established hours in the program, a school must re-prorate the amount of TIV aid and only pay the student for the hours successfully completed.  In the example, since the student left after 300 hours in the 2nd payment period, the school would have to prorate all TIV funds and only pay the student for a total of 750 hours, instead of paying for 900 hours.  This proration adjustment does not apply to credit-hour programs.

Clock-hour programs with a written excused absence hour policy would not be affected by this change as long as the excused absences and actual hours combined meet the program’s required hours and the excused absences are not at the end of the program.

Note: Graduating early from a program without completing all the days or hours should not be a common occurrence.  If a significant number of students are graduating early, it may call into question the true length of the program for Title IV purposes.

 

References

 

  • Electronic Announcements

150% Direct Subsidized Loan Limit: Electronic Announcement #25 – Guidance and Operational Information for the Repeal of 150% Subsidized Usage Limit (EA ID: DL-21-04)

Beginning Phased Implementation of the FAFSA Simplification Act (EA ID: GENERAL-21-39)

 

  • Dear Colleague Letters

Early Implementation of the FAFSA Simplification Act’s Removal of Selective Service and Drug Conviction Requirements for Title IV Eligibility