By Ryan Laspina
Senior Specialist, Red Flags and External Reviews
Recently, the Department of Education (ED) instituted a new 150% Rule that will affect all new Federal Student Aid (FSA) Subsidized loan borrowers from July 1, 2013 on. According to the ED, “you may not receive Direct Subsidized Loans for more than 150% of the published length of your program.” For example, if you were in a four year bachelor’s program, you could not receive subsidized loans for more than six years (4 X 150% = 6). It is important to understand this rule because your eligibility for subsidized loans can change if your program changes.
Generally speaking, your loan usage is determined by how many semesters you receive a subsidized loan. In addition, your campus-level enrollment status will affect your eligibility. If you receive a subsidized loan for two semesters in a year at full-time enrollment status, then you have used one year of your maximum eligibility period.
If you were to receive a subsidized loan for two semesters in a year at half time enrollment, then you have used one half year of your maximum eligibility period. Remember, you can only receive subsidized loans for 150% of your published program length.
What if you decided to do a program change midway through your college career? Switching between majors should not affect your eligibility as long as you do not change the type of degree you are pursuing. However, if you change from a bachelor’s degree to an associate degree, your eligibility would change. It is even possible for you to lose your subsidized loan eligibility altogether if you were to make a program change after using most of your eligibility.
Example 1
Carl originally entered college pursuing a Bachelor of Science in Accounting. He completed his first two years at full time enrollment and received Subsidized loans both semesters each year. Therefore, he used two years of his maximum eligibility period (which is six years). However, after completing his second year of college, he decides he wants to change his program from a bachelor’s in accounting to an associate’s in accounting. The published program length of an associate’s program is two years, so the maximum eligibility period is three years. Since he already used two years’ worth of subsidized loans, he will only have one year left of eligibility, no matter how far away he is from obtaining a degree.
Example 2
Tracy originally entered college pursuing a Bachelor of Science in Accounting. She completed her first three years at full-time enrollment and received subsidized loans both semesters each year. Therefore, she used three years of her maximum eligibility period (which is six years). However, after completing her third year of college, she decides to change her program from a bachelor’s in accounting to a Certificate in Human Resources. The published program length of a certificate program is about one and a half years, so the maximum eligibility period is about 2.25 years. Since she already used three years’ worth of subsidized loans, she will have no eligibility left.
As you can see, if you are relying on subsidized loans to fund your education, it is important that you realize how your eligibility can change. In addition, it is important that you always know how much eligibility you have used, and how much eligibility you have left.
There are a number of great resources you can use to stay on top of this information. First and foremost, utilize a financial aid representative at your school. You can also speak with your loan servicer. If you would like more information on the 150% rule, please visit the FSA website for more information.
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