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)

Author
Federal Student Aid
Subject
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)

Since 2013, Direct Loan statutory requirements have limited a first-time borrower’s eligibility for Direct Subsidized Loans to a period not to exceed 150% of the length of the borrower’s educational program. In addition, under certain conditions, the requirements have caused first-time borrowers who have met or 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.

To address the change in requirements, we will be making changes to the Central Processing System (CPS), the Common Origination and Disbursement (COD) System, and the National Student Loan Data System (NSLDS®), and we have begun the work needed to modify our systems, web and software products, technical documents, training materials, and publications.

In this Electronic Announcement we inform schools about some of the immediate operational impacts starting July 1, 2021. We also provide schools with information about those system, web, and software modifications as well as the anticipated implementation date for each update.

  • Operational Impacts to Schools

  • Impact on the CPS

  • Impact on the COD System

  • Impact on NSLDS

  • Impact to StudentAid.gov and the myStudentAid mobile app

  • Impact on Loan Servicing

Operational Impacts to Schools

While the majority of the changes will be to the Department of Education’s (the Department’s) systems, there are a number of operational impacts for schools to consider in the immediate future.

  • Program-level enrollment reporting for the COD System and NSLDS will not change. Schools must continue to report the required enrollment reporting data elements within the appropriate time frames.

  • If school processes and systems have flexibility, we strongly encourage schools to 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 (see more in the “Impact on the CPS” section below) for several weeks and months. We 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 at the earliest point possible.

Impact on the CPS

There will be minimal impact to the CPS. Messages related to the 150% limits will continue to display on Student Aid Reports (SARs) and in Institutional Student Information Records (ISIRs) for those borrowers who are subject to the 150% limit (those with loans first disbursed on or after July 1, 2013 and before July 1, 2021).

As noted above, there will be an increase in postscreening.

    • Postscreening Reason 25 – This reason code is sent when the SULA Indicator changes for a borrower. Because the borrowing limits will continue to apply to borrowers and Direct Loans with an earliest disbursement date prior to July 1, 2021, schools will still need to be notified if the SULA Indicator changes. There will be an increase in volume following the one-time system update that will occur during implementation weekend (see the Impact on the COD System section below).

    • Postscreening Reason 26 – This reason code is sent when the “Loss of Subsidy” status changes on a Direct Loan. Schools will continue to be notified as the subsidy status of loans changes. There will be a large volume of transactions after July 1, 2021, as we begin to remove the “Loss of Subsidy” status from Direct Subsidized Loans that have lost the interest subsidy benefit from the 2013–14 award year and forward.

    • Postscreening Reason 27 – This reason code is sent when the sum of the subsidized usage period (Sum SUP) for a borrower has decreased and subsequently provides the borrower with additional subsidized loan eligibility. Because borrowing limits and subsidized usage periods (SUP) will continue to apply to Direct Subsidized Loans with an earliest disbursement date prior to July 1, 2021, schools will still need to be notified if the total SUP for a borrower decreases. Note: The Department expects that most borrowers who currently have a total SUP for subsidized loans with an earliest disbursement date before July 1, 2021, will not have significant  changes to their total SUP after July 1, 2021, as the COD System will no longer calculate SUP for any Direct Subsidized Loan with an earliest disbursement date on or after July 1, 2021.

    Impact on the COD System

    During the period June 26–27, 2021, we will implement COD System changes related to the 150% Direct Subsidized Loan limit. The changes are explained below. Note: Other COD System changes that will also be part of the June 26–27, 2021 implementation will be covered in a forthcoming Electronic Announcement.

    COD Common Record Processing

    Currently, we evaluate subsidized usage at both the borrower level and the award level and perform subsidized usage calculations to monitor and limit subsidized loans for borrowers who have reached their maximum subsidized loan eligibility. After June 27, 2021, the COD System will no longer include Direct Subsidized Loans with an earliest disbursement date on or after July 1, 2021 in subsidized usage calculations. In addition, new borrowers (for COD System purposes, this means borrowers who do not have any Direct Loans on file with a positive balance) will not be flagged with the SULA Indicator if their first Direct Loan has an earliest disbursement date on or after July 1, 2021.

    Note: Program-level data and other related fields will still be required to process Direct Loans and disbursements even though we will no longer use them to calculate subsidized usage for loans with an earliest disbursement date on or after July 1, 2021.

    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. In addition, if there is a change in earliest disbursement date from on or after July 1, 2021, to before July 1, 2021 and it is a borrower’s first Direct Loan, we will update the SULA Indicator for that borrower from “N” to “Y.”

    One-time system update: During the implementation, we will do a one-time update to recalculate subsidized usage that may have included previously accepted Direct Loans with an earliest disbursement date on or after July 1, 2021; more specifically, we will remove those loans from the SULA calculations. We will also remove the SULA Indicator from new borrowers who have only Direct Loans with an earliest disbursement date on or after July 1, 2021; more specifically, we will change the SULA Indicator from “Y” to “N.”

    COD System Edits

    Beginning June 27, 2021, we will no longer return COD Reject Edit 206 (The Remaining Subsidized Eligibility Period is less than zero for this award.) and COD Reject Edit 207 (The Remaining Subsidized Eligibility Period is less than zero for this award after this disbursement was approved from the Action Queue.) for loans with an earliest disbursement date on or after July 1, 2021. This means a school will be able to submit a Direct Subsidized Loan for borrowers who are close to or at their maximum eligibility period (MEP) as long as the earliest disbursement date is on or after July 1, 2021.

    Note: Edits 206 and 207 will still apply to loans with an earliest disbursement date before July 1, 2021. A school may also receive these edits if the school makes changes to a Direct Loan and the disbursement date moves from a date on or after July 1, 2021, to a date before July 1, 2021.

    COD Warning Edit 200 (150% Subsidized Usage Limit Applies to borrower) will continue to be returned for any existing borrower who has the SULA Indicator set to “Y.” Though the warning edit may be returned at the borrower level, we will not calculate subsidized usage on Direct Loans with an earliest disbursement date on or after July 1, 2021.

    SULA Calculator

    Beginning June 27, 2021, the SULA calculator will not perform SULA calculations when loans with an earliest disbursement date on or after July 1, 2021 are added or updated within the calculator. The SULA calculator will continue to perform calculations for loans that have an earliest disbursement date before July 1, 2021.

    COD Website

    The COD website will continue to display the SULA Indicator and subsidized usage for borrowers, when applicable.

    Documentation and Software

    In the next month or so, we will post additional technical information and documents and other operational guidance on the Knowledge Center.

    COD Common Record XML Schema and 2021–22 COD Technical Reference – There are no changes to the COD Common Record XML Schema. We plan to post an updated version of the 2021–22 COD Technical Reference in late June 2021.

    EDExpress for Windows – There are no changes required for the EDExpress for Windows software.

    Impact on NSLDS

    There will be limited system changes to NSLDS. As noted above, program-level enrollment reporting is still required and does not change with the repeal. In addition, when applicable, SULA-related information will continue to be received and displayed within NSLDS. However, there will be some updates to implement the retroactive reversal of the loss of subsidy for impacted borrowers.

    Loss of Subsidy

    On July 1, 2021, we will update NSLDS to no longer determine the “Loss of Subsidy” status for any Direct Subsidized Loan, regardless of the loan’s earliest disbursement date. In addition, beginning on July 1, 2021 and following confirmation from the federal loan servicer, we will remove the “Loss of Subsidy” status (and reinstate subsidy benefits) on any Direct Subsidized Loan with a balance greater than $0.

    Impact to StudentAid.gov and the myStudentAid mobile app

    We plan to implement updates to Aid Summary, exit counseling, and the Annual Student Loan Acknowledgment by July 1, 2021.

    • Within Aid Summary (StudentAid.gov and myStudentAid mobile app), we will be updating the Subsidized Loan Usage page that displays for customers who have Direct Subsidized Loans. We will be adding language about the changes to the subsidized usage rules and replacing the graph showing the customer’s subsidized usage with a static timeline chart that helps illustrate the timing and impact of the SULA repeal. The FSA Partner Connect Student View also will be updated to reflect these changes to Aid Summary.

    • Within exit counseling (StudentAid.gov), we will remove the “Loss of Subsidy” icon from the loan-level display.

    • The Annual Student Loan Acknowledgment (StudentAid.gov and myStudentAid mobile app) provides customers who have Direct Subsidized Loans with a link to Aid Summary for additional SULA-related details. A minor edit is being made to the link language.

    General web content (outside of log-in) on impacted StudentAid.gov pages also will be updated by July 1, 2021.

    Impact to Loan Servicing

    Once the “Loss of Subsidy” status is removed, we will work with the federal loan servicers to retroactively apply subsidy benefits to any period of time, such as an in-school deferment, during which a borrower would have been entitled to subsidy benefits. This may include removing accrued interest and reapplying payments, where appropriate. Note: Under existing notification processes, the federal loan servicers will notify borrowers of the changes to their accounts; given the volume of the updates, it may take several weeks before all borrowers are notified.

    We are also working with our federal loan servicers to update applicable web content and correspondence.

    Contact Information

    Additional information will be posted in Electronic Announcements in the next couple of months. Schools can keep up with the latest information on the 150% Direct Subsidized Loan Limit Information Topics page on the Knowledge Center.

    If you have questions regarding the updates to the CPS or EDExpress, contact CPS/SAIG Technical Support at 1-800-330-5947 or by email at CPSSAIG@ed.gov.

    If you have questions regarding the updates to the COD System, contact the COD School Relations Center at 1-800-848-0978 or by email at CODSupport@ed.gov.

    If you have questions regarding the updates to NLSDS, contact the NSLDS Customer Support Center at 1-800-999-8219 or by email at nslds@ed.gov.