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New Subsidized loan limits


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Changes effective July 1, 2013.


New Legislation for Subsidized Loan Eligibility

On July 6, 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21) was enacted by Congress. The MAP-21 legislation added a new provision that will limit a student’s eligibility for Subsidized Direct Loans. This legislation limits a first-time borrower’s eligibility for Subsidized Direct Loans to a period not to exceed 150 percent of the length of the borrower’s current education program (degree plan). There are no changes to eligibility for unsubsidized or PLUS loans.

Click here for explanation and examples provided by the U.S. Department of Education.

Who is affected by this Legislation?

This legislation affects all new student loan borrowers as of July 1, 2013. Students who have never had a guaranteed student loan will fall under these requirements. In addition, former borrowers are affected by this legislation if on or after July 1, 2013, the borrower does not have an outstanding balance of principal or interest on a guaranteed student loan at the time he receives a new loan. For example, a student has a balance on a guaranteed student loan on July 1, 2013. The student pays off the loan on August 1, 2013 and does not borrow on a new Direct Subsidized Loan until January 15, 2014. When the new loan is calculated, this student is considered a “new borrower” and will fall under the Subsidized Direct Loan limitations.

How is my eligibility determined?

To determine a borrower’s maximum eligibility period, the Department of Education will use the published length of the student’s program of study. For example, the General Studies degree plan at AC is considered a 2 year program. Two years times 150 percent is 3 years (2 x 1.5=3). Therefore, the maximum eligibility period would be 3 years. Some certificate programs at AC are only considered one year programs and will have a maximum eligibility period of one and one half years (1 x 1.5=1.5).  Students who continue on to a University will have their maximum eligibility period extended, since their Bachelor’s degree would be considered either a 4 or 5 year program.  A student’s maximum eligibility period will be recalculated each time the student changes degree plans. The Department of Education will be calculating the student’s maximum eligibility period and will be notifying each college when the student has exceeded his eligibility period.

This limitation on receiving subsidized loans is not based on the dollar amount of subsidized loans the student has received. Instead it is based on the “usage period” or the amount of time covered by the subsidized loan. For example, if a student receives a subsidized loan for both the fall semester and the spring semester during an academic year, this student has used one year against his maximum eligibility period. Students who are enrolled in less than full time status will have their usage adjusted based on their enrollment status. Changing degree plans may change the maximum eligibility period; however, it does not reset the usage amount. If a student has received subsidized loans for 2 years while enrolled in an associate’s degree program (either at AC or another institution), and then changes to a one year certificate, the student would have no remaining subsidized eligibility, since the maximum eligibility period for a certificate program is one and one half years.

Once a student has met his maximum eligibility period, he will no longer be eligible to borrow subsidized loan funds; however, as long as the student is maintaining satisfactory academic progress, he would be eligible to borrow unsubsidized loans to pay for education expenses. If the student has not completed his program of study, he will also lose the interest subsidy on his subsidized loans. This would mean the student would start accruing interest on the subsidized loans even though he is still enrolled in school.

How do I receive information about these changes?

After July 1, 2013, it will be mandatory for all first time student loan borrowers to complete Direct Loan Entrance Counseling. Additional information on the 150 percent Direct Subsidized Loan Limits will be available at StudentLoans.gov and at StudentAid.gov . Students are encouraged to contact their loan servicer or their Financial Aid Office if they have questions concerning this new legislation.