/Institutions/United-States-University/json/current/Policy-and-Procedure-Manual-local.json

/Institutions/United-States-University/json/current/Policy-and-Procedure-Manual.json

502-2-2-Packaging

Title:	Packaging for Federal Direct Loans
Owner:	Office of Financial Aid
Last Updated/Revised:	07/01/2024

Policy: United States University determines a student’s eligibility for Federal Direct Loans in accordance with the applicable requirements established by the Department of Education.

Definitions:

• Academic Year – a period of time in which a typical full-time student is expected to advance one grade level. For undergraduates, the law requires certain minimums. An academic year must contain a minimum of 30 weeks for a credit hour program and at least 24 semester-credit hours. The academic year definition for USU is 32 weeks and 24 semester credits.
• Aggregate Loan Limit – the total amount disbursed to a borrower under a given loan type throughout the borrower’s academic career. This amount must not exceed applicable total loan limits, which are based on the student’s graduate/undergraduate status.
• Annual Loan Limit – the maximum amount that a student may borrow at a particular grade level in one academic year.
• Federal PLUS Loan – a Federal Direct Loan which parents can borrow on behalf of their dependent children. PLUS loans are also available to graduate and professional students.
• Direct Subsidized Loan – only students who have financial need may receive Direct Subsidized Loans (DLSUB). The federal government does not charge interest on DLSUB while the borrower is enrolled on at least a half-time basis, and during the grace and deferment periods.
• Direct Unsubsidized Loan – a Federal Direct Loan for a student that is not eligible for, or who has exhausted his/her eligibility for Direct Subsidized Loan. Interest begins to accrue from the first disbursement date forward. Students may elect to pay the interest while in schools, in a grace period, or in deferment or have it capitalized and added to the principal.
• Grade Level – a student’s academic class level
• Loan Period – the period of enrollment for which a loan application is originated.
• Master Promissory Note (MPN) – the legal document that requires a student loan borrower to repay the funds borrowed under the Federal Direct Loan program.
• Loan Entrance Counseling (LEC) – provides information to the student about the terms and conditions of their loans as well as their rights and responsibilities.
• Remaining Period of Enrollment – a period of enrollment that is less than one academic year in length and the final period of enrollment required for a student to complete his or her program of study.

The purpose of this policy is to detail how packing for federal direct loans occur.Purpose:

Procedures: 

1. Applying for Federal Direct Loans
   1. A student who wishes to receive a Federal Direct loan must complete a Free Application for Federal Student Aid (FAFSA), a Master Promissory Note (MPN) and Loan Entrance Counseling (LEC) prior to receiving the loan.
      1. A dependent student whose parent wishes to receive a Federal PLUS loan, must complete, and sign the FAFSA.
      2. To qualify for a Federal Parent PLUS loan the school must direct the parent to studentaid.gov to apply for the Federal Parent PLUS loan. Upon credit approval the school must direct the parent to complete an MPN.
2. Originating Direct Loans
   1. For all Federal Direct Loans, the school must document the student’s cost of attendance (COA), student aid index (SAI), and other financial assistance.
   2. The school must determine a student’s Pell grant eligibility before originating a Federal Subsidized or Unsubsidized Loan.
      1. Before originating a Federal Unsubsidized loan, the school must first exhaust the student’s Federal Subsidized loan eligibility for the applicable period of enrollment.
   3. To request Federal Direct loan funds for a student, the school must certify that the borrower is eligible for the loan and must provide specific amounts and dates for each disbursement of the loan.
   4. For each Direct Loan that a school disburses to a student or parent, the school must submit a loan award record to the Common Origination and Disbursement (COD) system that includes the student’s grade level, the loan period and academic year dates, the loan amount, the anticipated and actual dates and amounts of the loan disbursements.
   5. The school must originate a Direct Loan while the student is enrolled and eligible for the period of enrollment for which the loan is intended.
      1. The school may not originate a loan for a period in which the student is no longer enrolled.
   6. The school may refuse to originate a loan for an individual borrower on a case-by-case basis or originate a loan for an amount less than the borrower’s maximum eligibility.
      1. The refusal cannot limit borrowing by students or parents entirely or on a categorial basis.
      2. Documentation of such unique circumstances is required and must be provided to the student in writing.
3. Eligibility
   1. For all Federal Direct Loans, the school must confirm that the applicant is an eligible borrower.
      1. The student needs to be enrolled at least half-time and making satisfactory academic progress.
      2. Review the National Student Loan Data System (NSLDS) to ensure:
      • The student is not in default,
      • The student does not owe an overpayment on a Title IV grant or loan, and
      • The student has not exceeded their annual or aggregate loan limits.
      1. Ensure loan amounts, in combination with other aid, will not exceed the student’s financial need or COA.
      2. Prorate the annual loan limit for an undergraduate enrolled in their remaining period of enrollment that is shorter than an academic year.
   2. The school must determine the student’s need for a Federal Subsidized loan prior to originating a Federal Unsubsidized loan or Federal PLUS loan.
   3. To qualify for a Federal PLUS loan, a person must not have an adverse credit history unless the applicant uses an endorser who does not have an adverse credit history.
      1. Any Federal PLUS applicant who has an adverse credit history but who qualifies by obtaining an endorser must also complete PLUS credit counseling at studentaid.gov.
   4. Dependent students whose parent(s) are not eligible for PLUS loans, can borrow additional Federal Unsubsidized loan amounts up to the same amount that is available to independent undergraduate students. For example:
      1. Parents with adverse credit history
      2. Parents who are incarcerated or whose whereabouts are unknown.
      3. Other exceptional circumstances as mentioned in FSA Handbook, Volume 8, Chapter 4.
4. Master Promissory Note (MPN) Requirements
   1. The school must direct the applicant to the studentaid.gov website and ensure completion of the MPN.
      1. A separate PLUS loan MPN is required for each dependent student.
      2. The MPN can be used to disburse multiple loans over several years. A multi-year MPN enables the borrower to obtain additional loans without signing a new document. However, if the maximum period for use of the MPN has expired, the school must have the borrower sign a new one.
5. Confirmation Process
   1. For Federal Subsidized and Unsubsidized loan awards, the school uses affirmative confirmation. The student provides a statement confirming the types and amounts of Title IV loans he or she wants for the period of enrollment.
      1. The confirmation process must be completed prior to the disbursement of any Federal Direct loan funds provided under an existing MPN.
   2. Each student aid recipient must be provided an award letter, which specifically identifies all Federal Direct loans in the applicable enrollment period, as part of the confirmation process.
6. Loan Periods
   1. The loan period (or period of enrollment) for which a Federal Direct loan is intended must coincide with an academic period for which institutional charges are generally assessed.
      1. For credit-hour programs, the minimum loan period is a single academic term, and the maximum loan period is the academic year as defined by the school.
7. Overlapping Academic Year
   1. Overlapping academic year occurs when a student, who received a Federal Direct loan, transfers from an institution to United States University (USU) and the academic year at USU (or the academic year for the new program at USU) begins before the calendar end date of the academic year at the prior institution.
      1. In this case the Federal Direct loan award cannot exceed the student’s annual loan limit less the amount disbursed at the prior institution.
      2. However, the student may borrow again for a subsequent term within the same academic year once the term begins after the end of the academic year at the prior institution.
8. Aggregate Loan Limits
   1. A borrower who has reached his or her aggregate borrowing limit for Direct Subsidized and Direct Unsubsidized loans may not receive additional loans.
   2. Students who transfer from a prior institution to USU must be added to the Transfer Monitoring List at NSLDS.

Scope: This policy applies to all students receiving federal direct loans. 

Documents and Forms: None