What is interest capitalization?
Interest capitalization is when accrued interest is added to the loan principal, resulting in the borrower paying an increased loan amount plus any new interest that accrues on that amount
When can an FAA exercise PJ to deny or reduce a federal direct loan?
The student has a debt burden high enough to raise concern about the borrower’s ability to repay the loan, and/or the student has demonstrated unwillingness to repay the loan
How is a student’s eligibility for non-need-based loans calculated?
= COA - OFA (the SAI is not considered). Subject to annual loan limits.
What is the purpose of an origination fee?
To help offset the cost of making a loan
How is the interest rate on Direct Loans for undergraduate students calculated?
The high yield of the 10-year Treasury note (at auction on June 1) plus 2.05%
Can dependent students whose parents refuse to file the FAFSA still receive federal loans?
Yes, they must complete the FAFSA (student contribution). The FAA must obtain written documentation (from parent or appropriate 3rd party) that parental support has ceased and will not resume, the date support ended, or a statement of parental refusal to file the FAFSA. If approved, the student may be offered unsubsidized loan funds only (using dependent annual loan limits)
What two situations may warrant a student completing more than one MPN?
The student transfers to another school that chooses not to use the MPN multi-year feature, or the student “closes” their MPN so that it cannot be used for additional future loans
What is the definition of a “week of instructional time?”
A consecutive seven-day period in which at least one day of instruction or examinations occurs. Instructional time does not include vacation days, homework, counseling, or orientation.
For a semester or trimester academic year, what are the minimum credit hours and weeks of instruction?
24 credit hours and 30 weeks of instruction
For a quarters academic year, what are the minimum credit hours and weeks of instruction?
36 credit hours and 30 weeks of instruction
For a clock hour program academic year, what are the minimum credit hours and weeks of instruction?
900 clock hours and 26 weeks of instruction
What is the minimum loan period?
The shortest period of enrollment for which a school can originate a Direct Loan (for standard-term schools, this is the length of an academic term)
What measurement determines if nonstandard terms are “substantially equal in length?”
Terms are substantially equal in length if no term in the program is more than two weeks of instructional time longer than any other term.
What is the formula to determine PLUS loan eligibility?
= COA - OFA (other loans borrowed, Pell, and grants/scholarships included in OFA)
What exceptional circumstances would allow a school to offer additional unsubsidized loan funds to a dependent student without actually requiring the parent to apply for a PLUS loan (6)?
Parent is 1) incarcerated, 2) their whereabouts are unknown, 3) not a US citizen, 4) only receiving disability benefits, 5) bankrupt and barred from assuming additional debt, or 6) the school has documented that the parent would not be able to repay the PLUS
What are the lifetime dependent undergraduate loan limits for subsidized and unsubsidized loans?
Dependent undergraduate borrowers can borrow up to $31,000 in total, of which only $23,000 can be subsidized.
What are the lifetime independent undergraduate loan limits for subsidized and unsubsidized loans?
Independent undergraduate borrowers can borrow up to $57,500 in total, of which only $23,000 can be subsidized.
What is the formula for calculating a student’s maximum unsubsidized loan eligibility?
Max base annual loan limit + Additional unsubsidized annual loan limit - subsidized loan eligibility = max unsubsidized loan eligibility
A school can choose to use a BBAY for a credit-hour program in which situations (3)?
1) uniformly for all students, 2) only for students in certain academic programs, or 3) on a student-by-student basis
When can schools use an SAY?
A Scheduled Academic Year can only be used for credit-hour programs offered in 1) standard terms, or 2) nonstandard terms where the terms are substantially equal
What two categories of students are subject to loan proration?
1) Students enrolled in undergrad programs of study shorter than an academic year, and 2) students enrolled in the final period of an undergrad program of study
Who defines a program’s academic year?
The school, in accordance with statutory requirements
What is a “remaining period?”
The enrollment period during which a student completes the requirements necessary for graduation
What are the four ways a school can provide borrowers with entrance counseling?
in-person, written, online, or “another interactive electronic format”
