Direct Student Loan Changes
Direct Subsidized Loans are not eligible for an interest subsidy during the six-month grace period.
- Subsidized loans are loans for which the borrower is not responsible for the interest while the student is enrolled in college on at least a half-time basis, when the loan is in the six-month grace period after the student is no longer enrolled at least half-time, or if the loan is in a deferment status. This provision eliminates the interest subsidy provided during the six-month grace period for subsidized loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014. If you receive a subsidized loan during this time frame, you are responsible for the interest that accrues while your loan is in the grace period. You do not have to make payments during the grace period (unless you choose to), but the interest will be capitalized (added to the principal amount of your loan) when the grace period ends. This provision does not eliminate the interest subsidy while the borrower is in school or during eligible periods of deferment.
Federal Subsidized Student Loan Borrowing Limitations
As of July 1, 2013, a first-time Federal Subsidized Student Loan borrower is no longer eligible for the Subsidized Student Loan program if he or she exceeds 150% of the published length necessary to graduate.
In addition, a borrower reaching the 150% limit becomes ineligible for the interest subsidy benefits on all Federal Subsidized Loans disbursed to the borrower on or after July 1, 2013.
Congress wants to encourage students to obtain undergraduate degrees within in a reasonable time frame. Students who change majors multiple times or, drop classes excessively or retake classes excessively are most likely to be affected by Public Law 121-141.
Congress no longer wants to provide interest rate deferments for students taking an exceptional amount of time to obtain an undergraduate degree. The interest rate expense is now passed to the student in such cases.
Based upon available information from the U.S. Department of Education, the interpretation of the 150% rule is actual credit hours completed versus credit hours attempted. If different information becomes available, this web site will be updated.
Student Loan FAQs
Questions and Answers
Q: I previously borrowed a subsidized loan prior to July 1, 2013. Does this rule apply to me?
A: No. This rule is in effect for new (first time) Subsidized student loan borrowers who borrow on or after July 1, 2013. Students who previously borrowed a subsidized student loan prior to July 1, 2013 are not impacted by this policy unless all loans are paid off in full as of July 1, 2013 and new loans are taken out.
Q: Will I receive less federal student loan money if I am affected by this?
A: It depends. What you would have previously received in the Subsidized student loan program, you may borrow in the Unsubsidized loan program. This is assuming you have not reached your lifetime Federal student loan borrowing limits.
Q:What does 150% of the published length necessary to graduate for a degree program mean in terms of actual credit hours completed?
A: Undergraduate degree programs generally require 60 credit hours for completion, refer to course information on your chosen program. 60 credit hours x 150% = 90 maximum credit hours can be taken before the 150% rule can be invoked.
Q: Can I appeal the 150% rule if I have extenuating circumstances?
A: No. Federal law provides no provisions to appeal this rule.
- Government Printing Office: Congressional Public Law 112-141 mandates this change.
- National Association of Student Financial Aid Administrators: Limiting Subsidized Loan Eligibility to 150% of Program Length