The Wisconsin Association of Student Financial Aid Administrators is a non-profit organization that provides support to financial aid administrators and other agencies involved in the administration of financial aid programs in Wisconsin’s postsecondary educational institutions.
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Written by: Keyimani Alford
In the financial aid community, the term 150 Percent Subsidized Loan Limit is ringing mighty strong. For some time now financial aid professionals have spent countless hours trying to clearly understand what the appropriate steps to be in compliance are. Going from the stability of the National Clearinghouse, an enrollment reporting company that updates the Department of Education about student enrollment on the schools behalf, to institution’s having the primary responsibility to report that same information has prompted a level of frustration.
The 150 Percent Subsidized Loan Limit, enacted on July 6, 2012 through the Moving Ahead for Progress in the 21st Century Act (MAP), amended the Higher Education Act to establish a new limit of Direct Subsidized Loan eligibility. Its intention is to parallel first-time borrowers to receive subsidized loans for a period that is equal to the published length of an educational program. This terminology sounds familiar, right? That’s because it is indeed familiar—yet different in definition for our discussion.
The Department of Education has tied the first-time borrower term to multiple programs like Pay As You Earn and the Extended Repayment Plan but what does a first-time borrower really mean for the 150 Percent Subsidized Limit? A first-time borrower, based on the 150 Percent Subsidized Loan Limit, is an individual who has no outstanding balance on a Direct Loan or FFEL Program loan on July 1, 2013, or on the date the borrower obtains a Direct Loan after July 1, 2013. Only individuals who meet the definition of a first-time borrower are subject to the new provision pertaining to the 150 Percent Subsidized Loan Limit.
Note: For the repayment plans mentioned, the first-time borrower date is October 7, 1998 for the Extended Repayment Plan, and October 1, 2007 for Pay As You Earn with receiving a disbursement of a Direct Loan on or after October 1, 2011.
Lost in the saga yet? As with all FSA programs, institutions and the Department of Education perform specific duties that assist with maintaining program integrity as outlined within the law. Specifically, the Department of Education will (1) calculate a first-time borrower’s maximum eligibility period, (2) calculate a first-time borrower’s subsidized usage period, (3) determine if a first-time borrower has remaining eligibility period, if so, how much, and (4) determine whether a first-time borrower loses interest subsidy on his or her Direct Subsidized Loans as a result of the 150 percent limit.
Although the Department of Education will use databases like CPS, NSLDS and COD to assist in the transmission of subsidy information, institutions have a responsibility as well through Enrollment Reporting and Entrance Counseling. Did you know that the Department of Education has provided materials for schools to use to assist in getting the word out to students? If not, now you do! The Electronic Announcement (the first of many) posted on May 16, 2013 provides a really neat synopsis of the impact of the loss of subsidy, how changing programs can impact students, what counts against the maximum eligibility period and more. You can access the direct document by going here.
But, is that really it? Of course not, we all know the Department of Education would not make it that easy for financial aid professionals! When considering the 150 Percent Subsidized Loan Limit there must be an understanding of how the Maximum Eligibility Period (MEP) is calculated. For this purpose the mathematical equation is quite simple, you just take the length of the program and multiply it by 1.5 to determine the maximum program length. For example, a program that is 4 years, the maximum timeframe they can receive subsidy is for 6 years. (You must keep in mind that the student must meet the first-time borrower definition for this to apply.) The Department of Education (the responsible party for calculating the MEP) will use the information that is provided by the institution and transmit that MEP to the Common Origination and Disbursement (COD) System and to the National Student Loan Data System (NSLDS). Without institutions submissions for Enrollment Reporting the MEP is difficult to determine.
There are some key things to keep in mind when thinking 150 Percent Subsidized Loan Limit: (1) Institutions are responsible for reporting enrollment in NSLDS, regardless if you use a clearinghouse or not, (2) ED will calculate the Maximum Eligibility Period based on the institutions compliance, (3) the school is provided a Comment Code 267 to signal when a student has reached their subsidy limit, and (4) servicers have a role to stop subsidy when it is met.
In conclusion, the frustration of newly created programs will forever be an epidemic in the financial aid world. However, with a proper understanding of the main concepts we will contribute to helping students achieve the goal of attaining a post-secondary education with less debt, less stress, and minimized years in college. Reality says, in order to stimulate the economy, we must stimulate the workforce which programs like this is aimed to do. And, just like the Academic and Competitiveness Grant (ACG) and the National Science and Mathematics Access to Retain Talent (SMART) programs they may wither away with Reauthorization. In either case, as financial aid professionals we can only wish for the best and keep our fingers crossed….
Because resources are an awesome gift, take a little time to further explore the wonderful world of the 150 Percent Subsidized Loan Limit by reviewing the Frequently Asked Questions from the Department of Education here.