Get Answers to Your Frequently Asked Questions on Single-Term Loans
By Sheryl Ross-Mahoney, Senior Policy Specialist
Student requests, dealing with uneven costs across terms, a student’s scheduled completion of a program — all are reasons you might be required or choose to originate a Direct Loan for a single term only. Single-term loans come with some rule variations, however, and USA Funds Ask PolicySM has received a number of questions on the topic.
Here are answers to some of your most frequently asked questions:
If a student requests the full annual loan limit for a single payment period, is the school required to originate the loan for that abbreviated period?
Yes. If the student requests the full annual loan limit for a single term and is otherwise eligible, the school must process the single-term loan.
When calculating the student’s single-term loan amount, use the cost of attendance, estimated financial assistance and alternate expected family contribution for the single payment period only. Note that using these reduced amounts may mean that some students are not eligible for the full annual loan limit for the abbreviated period.
Are there any scenarios in which a school can originate the loan for less than the student’s eligibility or for a lesser amount than the student requests?
You cannot arbitrarily choose to originate only a portion of a student’s eligible amount for the single term. You also may not establish across-the-board policies to limit the amount of loan funds your school originates for students who request a loan for only a single term.
The only time a school may originate less than the student requests or is otherwise eligible to receive is through the use professional judgment on a case-by-case basis. In those cases, you must notify the student of the reason that you originated less than the student’s full loan eligibility. Federal law and federal policy explicitly prohibit any type of systematic limitation to the loan amount or to general loan eligibility.
Are there other rules related to originating a loan for a student who is completing a program in the single term?
Yes. Those rules apply when a student is an undergraduate who is completing a program in a single term (which likely is less than the school’s established academic year). In that case, you must prorate the loan amount based on established loan proration requirements.
Loan proration is required in two instances. And they are the only scenarios in which proration is permitted:
  • When a student is enrolled in a program that is shorter than an academic year.
  • When a student is enrolled in a program that is at least one academic year in length but is completing the program in a period that is less than an academic year.
USA Funds®loan proration fact sheet offers more information.
If a student’s per-term costs are unequal, can the school schedule uneven disbursements of the same loan?
No. Initially you must schedule all Direct Stafford and PLUS loans for substantially equal disbursements on a payment period basis.
There are instances when a school subsequently may need to update disbursement amounts to be uneven, such as when the student advances to a new grade level during the academic year. But if you know the per-term costs are uneven prior to originating the loan, you may choose to originate separate loans on a term-specific basis.
For example, if the student’s costs are higher during the fall term, you could originate one loan for the fall term using the fall-only COA, EFA and alternate EFC. Then you could originate a separate loan for the spring term only, using the lower costs attributable only to that payment period. You must disburse the separate fall and spring loans in multiple, substantially equal amounts during each of those payment periods unless your school is exempt from the requirement due to a low cohort default rate
You must ensure that the sum of any Stafford loans disbursed during the academic year does not exceed the student’s applicable annual loan limits.
For more information
If you have questions about single-term loans — or any other federal student loan policy — contact USA Funds Ask Policy using our online form.