Subsidized Usage Limit Applies

There is a new provision that limits a first-time borrower’s eligibility for Direct Subsidized Loans to a period not to exceed 150 percent of the length of the borrower’s educational program (“the 150% limit”).

• A Subsidized Direct loan is a loan for students with financial need as determined by federal regulations. No interest is charged while you are in school at least half-time, during your grace period, and during deferment periods.

  • Under certain conditions, the provision also causes first-time borrowers who have exceeded the 150 percent limit to lose the interest subsidy on their Direct Subsidized Loans.

• The 150% Direct Subsidized Loan Limit provision applies only to “first-time borrowers” on or after July 1, 2013:

• The Department of Education will determine whether borrowers are “first-time borrowers” for purposes of the 150% limit.

First-Time Borrower, Example 1:

1. Student has never borrowed before
2. Student enrolls
3. Student receives a Direct Loan
4. Student is a first-time borrower

First-Time Borrower, Example 2:

1. Student received FFEL/Direct Loans prior to July 1, 2013
2. Student pays off all FFEL/DL in June 2015
3. Student enrolls in 2017
4. Student receives a new Direct Loan in 2017
5. Student is a first-time borrower

Maximum Eligibility Period

The 150 Percent Direct LSubsidized Loan Limit provision uses a calculation that includes the borrower's "Maximum Eligibility Period."

* A borrower's Maximum Eligibility Period is a period of time that is equal to 150% of the published length of the student's academic program.