Borrower Eligibility

General eligibility | Borrower eligibility and disability discharges

General eligibility

We have a senior, undergraduate, independent student who already has borrowed the former aggregate Stafford loan limit of $46,000. He plans to graduate in May 2009 with an undergraduate degree. For his senior year, is he eligible to borrow $12,500, the new annual loan limit for his grade level for Stafford loans?
The student is eligible for up to $11,500 in additional Stafford loan funds for that year.

Under recently enacted federal student loan limits, the new aggregate loan limit for the student is $57,500. No more than $23,000 of that aggregate amount may be in subsidized Stafford loans.

Because the borrower already has a total of $46,000 in Stafford loans, $11,500 is the amount of eligibility that remains to reach the new aggregate limit of $57,500.

Note that if the student already has obtained $23,000 in subsidized Stafford loan funds, the entire additional $11,500 in Stafford loan funding for which the borrower now is eligible must be in the form of unsubsidized loans.

You will need Adobe Reader to access the chart of new loan limits from the USA Funds^® Web site.
I have a student who exceeded her annual loan limit last year, but who has not exceeded her aggregate loan limits. Is she eligible for loan funds this year?
Borrowers who have exceeded either the annual or aggregate Stafford loan limit are not eligible for additional Title IV funds until the excess is resolved. Borrowers who have exceeded the annual loan limit, but have remaining eligibility within the aggregate loan limit, have several options for regaining Title IV eligibility. Stafford loan borrowers can resolve the excess by any of the following methods:
- Repaying the excess loan amount in full.
- Making satisfactory repayment arrangements with the loan holder.
- Working with the school and lender to reallocate loan funds from subsidized to unsubsidized Stafford funding, or vice versa, as long as eligibility remains in the program under which the excess did not occur.
The school can certify additional Title IV financial assistance for the student only when the excess annual amount is resolved.
I have a student who is only 16 years old but has graduated from high school. Can she endorse a Master Promissory Note and borrow Stafford loan funds?
The Higher Education Act of 1965, as amended, does not place age limitations on borrower eligibility, and, in fact, has explicit provisions to ensure that any note signed by an otherwise underage student-borrower is enforceable despite the borrower’s age.

Some states, however, may have provisions that limit the ability of certain minors to endorse a legal agreement. USA Funds^® encourages the financial aid office to consult its own legal counsel when deciding if the student’s age is an issue with respect to endorsing any note and obtaining loan funds.
One of our students has received subsidized Stafford loans at two different schools for the same loan period. What is the obligation of the student and the school in this scenario?
A student may receive a Federal Family Education Loan Program loan for more than one school for the same period of enrollment — if the student is enrolled at least half time at each school, and the total amount of those loans does not exceed the student’s annual loan limit.

If both schools are aware of the student’s dual enrollment when certifying the loans, then the schools must coordinate with each other to ensure that the student’s eligibility for a Stafford or Grad PLUS loan, if applicable, and the parent’s eligibility for a parent PLUS loan are determined properly. If the first school already has certified a loan for the student, the second school is required to take the following actions:
- Eliminate the student’s cost-of-living expenses from the cost-of-attendance amount, because the cost-of-living expenses were included in the COA at the first school.
- Ensure that the student does not receive loan funds in excess of the annual Stafford-loan limits at the second school and that the total amount of the loans received by the student for enrollment at both schools does not exceed the student’s highest applicable annual Stafford-loan limit, per Common Manual 5.15.
If neither school is aware of the student’s simultaneous enrollment until after both schools have certified Stafford loans, and the student receives loan funds in excess of the highest applicable annual Stafford-loan limit, then the schools must coordinate with each other to adjust the student’s aid package at one or both schools to eliminate the excess loan amount. According to Common Manual 5.15, if neither school is able to eliminate the excess loan amount, they must report the excess loan amount to the lender.

If the student inadvertently has exceeded the annual loan limit, the school may not certify or deliver any additional Title-IV aid to the student until one of the following occurs:
- The school — with the student’s authorization — reallocates the excess subsidized Stafford-loan amount to unsubsidized Stafford funds.
- The school eliminates the excess amount by adjusting future disbursements, if future disbursements are pending.
- The student repays the excess amount in full.
- The student makes satisfactory repayment arrangements for the excess amount with the lender, such as signing an agreement to repay the funds.

I know the annual loan limits are increasing effective
July 1, 2007. But I’ve not seen very much about how these new limits affect the aggregate amount of Stafford-loan funds that a student may borrow. How much did the aggregate loan limits increase?
Although the Higher Education Reconciliation Act of 2005 increased annual loan limits, it did not change the long-standing applicable aggregate limits. Aggregate loan limits remain as follows:

Student Classification	Loans Included	Aggregate Loan Limit
Dependent undergraduate.	• Combined subsidized and unsubsidized Stafford-loan funds. • The outstanding balance of SLS and Direct Stafford loans. • Any portion of a Consolidation loan attributable to one of the above types of loans.	$23,000.
Independent undergraduate, or dependent undergraduate whose parents are unable to borrow a PLUS loan.		$46,000. No more than $23,000 of this amount may be subsidized Stafford-loan funds.
Graduate or professional.		$138,500. No more than $65,500 of this amount may subsidized Stafford-loan funds.

A borrower attended one university for the fall semester, and then transferred to a second university for the spring semester. She did not receive a Stafford loan at the first university. Is this borrower eligible for the full annual loan amount of $3,500 at her current grade level for attendance at the second school for the spring semester only?
Yes, because the student did not use any of the loan funds for which she was eligible for the first semester, she may obtain the full annual loan limit for the second semester, as long as the cost of attendance supports the need for that amount.
If a student drops to half-time attendance from full time after the student’s education loan was certified but before the loan funds are delivered, does the school have to recalculate the aid awarded and return any amount for which the student no longer is eligible?
The Common Manual, subsection 6.15.A, requires schools to ensure that a student does not obtain total aid that exceeds the cost of attendance. Additionally, Common Manual, subsection 8.7, states that, prior to delivery of loan funds, a school must determine that the student has maintained continuous eligibility for the loan period. If, prior to the delivery of funds, the school determines that the student no longer qualifies for the amount that was certified, the school must determine the amount for which the student now is eligible and ensure that the delivery of funds does not exceed that amount in the first or subsequent disbursements.

You will need Adobe Acrobat Reader to view the Common Manual on the USA Funds Web site.
Where can I find information regarding a student’s eligibility for additional unsubsidized Federal Stafford-loan funds if the borrower’s parent is incarcerated?
There are no federal policies that explicitly dictate whether a student whose parent is incarcerated is eligible for additional unsubsidized funding. USA Funds^® believes that this student must qualify for future unsubsizided Stafford loans under the normal criteria. For example, the student’s parent must be unable to obtain a Federal PLUS loan. The parent’s incarceration itself does not create an ineligible-parent-borrower situation, though many lenders may deny credit to a borrower whose ability to repay seems impaired by the borrower’s incarcerated status.
Can a student borrow federal student loans from two separate institutions simultaneously? For example, if a student wants to attend two schools at the same time, can the student use financial aid from both schools?
Students who are eligible to receive funds through the Federal Family Education Loan Program at two different schools may borrow simultaneously from each. The schools involved, however, must ensure that the student does not borrow more than the annual limits for the student’s federal loans. The schools must ensure that there is no duplication of noneducational expenses when they determine the student’s costs of attendance.

For more information refer to the Federal Student Aid Handbook, Volume 3, Chapter 4.
When a non-U.S. citizen has applied for a green card but has not yet received it, what documentation can the school accept to determine the student’s eligibility for Title-IV funds?
The Department of Homeland Security assigns an Alien Registration Number, or A-Number, to all legal immigrants. To verify the immigration status of U.S. permanent residents and other eligible noncitizens, the U.S. Department of Education collects the A-Number on the Free Application for Federal Student Aid. The eligible-noncitizen data automatically is forwarded from the FAFSA to the DHS for primary verification of citizenship status.

If the information provided on the FAFSA matches the DHS information, a match flag appears in the Student Aid Report and the Institutional Student Information Record confirming that the student is eligible for aid. The match flag appears under the heading “DHS” in the ISIR and under the “DHS Match Flag” section of the SAR. A comment about the results also will appear on the SAR and ISIR.

If primary verification does not produce a match, the SAR and ISIR will include a comment explaining that the student either needs to provide documentation proving citizenship or provide a corrected SAR/ISIR that includes an A-Number for eligible noncitizen status. Once the Department of Education’s Central Processing System receives the correction, it will attempt a match with the DHS to confirm the applicant’s status.

If the initial verification does not produce a database match with immigration records, the DHS automatically will perform a secondary check to verify existence of documentation that determines the student’s citizenship. The school should wait at least five, but no more than 15, business days after viewing the SAR/ISIR results before inquiring about the result of the secondary confirmation. If no result is available after 15 days, the school must begin the paper secondary-confirmation process.

To perform a paper secondary confirmation, the school must get documentation from the student verifying eligible noncitizen status and submit the documentation to the DHS. Acceptable documentation is the student’s green card, or a copy of the student’s Arrival/Departure Record (Form I-94) if the student does not yet have a green card.

If the school cannot get that documentation in the form of a green card or Form I-94, the student is not eligible for Title-IV funds.

USA Funds^® encourages financial-aid administrators to review Common Manual subsection 5.2 and Federal Student Aid Handbook Volume 1, Chapter 2 for more details about eligible-noncitizen status.
A student has enrolled for the second semester at our graduate school. He completed an undergraduate degree in the first semester at another school. The undergraduate school approved and disbursed a subsidized Stafford loan of $5,500 for the one semester.

As a financial-aid administrator for a graduate school, I am aware I do not have to prorate loan amounts. Because the student already has received $5,500 in subsidized Stafford-loan funds during this academic year at an undergraduate school, what is the maximum subsidized-Stafford-loan amount the borrower can receive for one semester at the graduate level? The “unmet need” for the semester is $5,349. Can our school certify this amount as a subsidized loan?
When a student transfers from one school to another, the “new” school must determine if the academic year at the prior school overlaps with the intended loan period at the “new” school. In this example, it appears that the two academic years overlap. To determine the student’s eligibility for additional subsidized- and unsubsidized-Stafford funds at your school, subtract the gross loan amount received during attendance at the prior school from what the student otherwise would be eligible to receive at your school.

The lack of proration for graduate students complicates the determination of loan eligibility. In all cases, however, the maximum annual loan amount for a graduate student is $8,500 for subsidized Stafford and $10,000 for unsubsidized Stafford.

Because the borrower already received $5,500 in subsidized-Stafford-loan funds during the academic year, the school must subtract this amount from the maximum subsidized-loan amount of $8,500. In addition, the graduate student may be eligible for the full $10,000 unsubsidized-Stafford-loan amount. Of course, a financial-aid administrator also must review the cost of attendance and the borrower’s current aggregate loan amounts in order to accurately determine the correct loan amount for the borrower during this academic year.
A student was enrolled last semester as a second-year student and received the first disbursement of a subsidized Stafford loan ($1,750) and an unsubsidized disbursement of $1,800. This semester the student has advanced to a third-year level and needs more money than the financial-aid administrator originally certified. What are the maximum amounts that the student is eligible to receive for the upcoming semester?
Because the upcoming semester is a part of the same academic year, the amounts already received during that academic year must be deducted from the annual loan limits based on the student's new grade level. At the third-year academic level, the student is eligible for a subsidized Stafford loan of $5,500 and an unsubsidized Stafford loan of $5,000, for a total of $10,500. If the student's Cost of Attendance justifies the full annual amount for both subsidized and unsubsidized Stafford loans, the borrower is eligible to receive the additional $3,750 in subsidized Stafford and $3,200 in unsubsidized Stafford funding ($5,500 less $1,750 is $3,750; $5,000 less $1,800 is $3,200).

If the student's COA does not justify the full annual loan limit for a third-year student, but the student is eligible for additional funds, the school should determine the total amount eligible for both subsidized and unsubsidized Stafford loans and subtract the amounts already disbursed.
A student has a loan period of August 2004 through May 2005. We received the second disbursement Feb. 24, 2005. The student is enrolled at our school in a half-time status with six credit hours. One of the classes is a one-credit late-start class that begins March 12. The student withdrew from the class and received a full refund on March 19. The instructor indicated that student never attended the class.

Is the school at fault for disbursing money before the class began?
The student was enrolled half time and was eligible for the funds at the time of delivery. Therefore, the change in the student’s enrollment status after the delivery of loan funds does not create a liability for the school.
We have a graduate student who came to our school after borrowing in excess of the undergraduate subsidized loan limit at a prior school. Since that time, the borrower has consolidated all undergraduate loans — including subsidized and unsubsidized Stafford loans. Does the borrower need to reduce the undergraduate subsidized Stafford loan level under or at $23,000 before we can award her additional loans?
By consolidating the outstanding loans, the student has made satisfactory arrangements with the loan holder to repay the "over-borrowed" amount and regains eligibility for Title-IV assistance.

The aggregate amount that the student may borrow remains the same. And the total of the student's outstanding subsidized Stafford loans — even those that have been included in a consolidation loan — continue to apply toward that aggregate loan balance. So, the borrower regains subsidized-Stafford eligibility only to the extent that the unpaid balance of the subsidized Stafford loans is below the applicable aggregate limit.
A borrower attended one university for the fall semester and did not receive a Stafford loan. The borrower transferred to a second university for the spring semester. Is that borrower eligible for the full annual loan amount at the grade level for attendance at the second university?
Yes. Because the borrower did not use any eligible loan funding for the first semester, the borrower may obtain the full annual loan limit for the second semester, as long as the cost of attendance supports the need for the full loan amount.
I have a group of academically advanced students who will enroll next fall. The students will complete their senior year of high school at the same time as their freshman year. Are these students eligible for Stafford loans?
Typically, students must have a high-school diploma or its equivalent to be eligible for Federal Family Education Loan Program funds. In a few cases, however, students without high-school diplomas or their recognized equivalents may be eligible to receive Stafford loans. Schools are permitted to enroll a limited number of students such as the ones you describe in your query, as long as the students excel academically and otherwise meet the school's admissions standards. If the students complete a program of at least two years that is acceptable for credit toward a bachelor's degree, the academic transcripts for that program would be considered the equivalent of a high-school diploma. See Common Manual subsection 5.9 for more information.
Can a dependent-undergraduate student whose parent is neither a U.S. citizen nor an eligible non-citizen receive additional unsubsidized funds without the parent completing a PLUS application?
Yes. If a dependent-undergraduate student's parent is unable to obtain a PLUS loan, either because the parent has adverse credit, or because some other exceptional circumstance exists, the student is eligible to receive additional unsubsidized funds subject to the applicable annual and aggregate maximum loan amounts. In the example presented here, an individual who is neither a U.S. citizen nor an eligible non-citizen would be ineligible to receive a PLUS loan, and so it would serve no purpose to require that individual to complete the PLUS application.
Are borrowers still eligible for FFELP loans if they have filed bankruptcy? Does the period of bankruptcy count toward the 270 days of nonpayment that results in default?
Borrowers do not lose eligibility for FFELP loans based solely on an active bankruptcy action. This issue was addressed by the U.S. Department of Education in GEN-95-40/95-G-282, published in September of 1995. This publication summarizes the statutory change to Section 313 of the Bankruptcy Reform Act of 1994 (Pub. L. 103-394) that added paragraph (c) to 11 U.S.C. 525. As applied to FFELP loans, this statutory change prohibits schools, lenders, guarantors or the Department of Education from considering a person ineligible for Title IV loans, grants or work-study awards solely because the person has filed bankruptcy, owes a debt that is dischargeable in that bankruptcy proceeding, or has had a debt discharged in bankruptcy.

When a borrower files bankruptcy, all due diligence ceases as a result of the collection stay order of the court. Lenders place the borrower on an administrative forbearance during the active bankruptcy period so that the borrower's delinquency does not continue during the active bankruptcy period. At the end of the bankruptcy period, lenders are permitted to administratively forbear any outstanding delinquency prior to the start of the bankruptcy stay, and many borrowers re-enter repayment in a "current" status.

The Common Manual provides schools and lenders with guidance regarding numerous topics relating to bankruptcy, including the following:

Effect on borrower eligibility: 5.6. Effect on loan disbursements: 8.7.F. Administrative forbearance provisions: Forbearance Eligibility Chart Other bankruptcy-related topics are covered in Chapter 13 of the Common Manual.

In addition, as noted in Appendix C of the Common Manual, USA Funds' policy requires a lender to cancel remaining disbursements scheduled after the filing of the bankruptcy. Although the borrower's eligibility is not affected by the bankruptcy, USA Funds believes it is important to the integrity of the FFELP to ensure that loans can be clearly defined as "pre-petition" and "post-petition" debt. The goal of this policy is to eliminate any ambiguity regarding eligibility for discharge of the loan. Please note, however, that this provision applies only to disbursements scheduled after the bankruptcy. Borrowers must be notified and advised that they may obtain the additional funds (if still eligible) by re-applying.
A student's mother applied for a PLUS loan and was denied. The student applied for additional unsubsidized Stafford-loan funds, and was approved for the additional funding. Then the student’s father applied for a PLUS loan and is eligible. Can the father receive PLUS-loan funds and the student receive additional unsubsidized Stafford- loan funds for the same loan period?
If either of the student's parents is determined to be eligible for PLUS-loan funding, the parent’s eligibility precludes the student’s eligibility for unsubsidized Stafford funds.

Note that if only one parent had applied and been denied, then the other parent would not have been required to apply for a PLUS loan in order for the student to be eligible for unsubsidized Stafford-loan funds. Since the other parent applied for a PLUS loan and is eligible, however, that parent's eligibility negates the student's eligibility for unsubsidized Stafford-loan funds.

The parent's loan amount may, of course, be increased to ensure that the student receives sufficient funds to cover costs. If any of the unsubsidized Stafford-loan funds are delivered to the student prior to the determination of the parent's eligibility, those funds need not be refunded. No additional unsubsidized Stafford loan funds should be delivered to the student from those amounts determined to be "additional funding," however, and the school must request the cancellation of future unsubsidized Stafford-loan funding.

See Common Manual subsection 6.15.D. for additional details.
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Borrower eligibility and disability discharges
Are borrowers eligible for new Stafford or PLUS loans if they have loans in a conditional-discharge period due to total-and-permanent disability?
Borrowers with loans in a conditional-discharge period due to total-and-permanent disability may obtain new Federal Family Education Loan Program loans only if they take the following steps:
- Obtain signed certification from a physician stating that the borrower now is able to work and earn money.
- Sign a statement acknowledging that new FFELP loans cannot be discharged in the future based on any impairment present when the loan is made, unless the impairment deteriorates to the point that the borrower is unable to work and earn money.
- Sign a statement acknowledging that:
  - Any loan previously granted a conditional total-and-permanent-disability discharge — but not yet given a final discharge — generally may not be discharged in the future based on an impairment that was present when the borrower originally applied for discharge or when the new loan is made. A discharge may be granted in the future if that impairment deteriorates to the point that the borrower once again is unable to work and earn money.
  - All loans currently in a conditional-discharge status will be placed back into repayment.
Is a student who is totally and permanently disabled eligible to receive a Federal Stafford loan? I'd heard that you can deny processing a Stafford loan if you believe the student does not intend to repay the loan.
A school may not refuse to certify a Federal Stafford loan solely because of a borrower's disability. FFELP borrowers who obtain loans after they become totally and permanently disabled, however, are not permitted to have those loans discharged in the future based on a disabling condition that existed at the time the loan was made. The student must meet all applicable eligibility criteria, including passing any ability-to-benefit testing, but, if otherwise eligible, the student may obtain a loan despite the disability.

A school is permitted to refuse to certify a FFELP-loan application in some instances, such as cases in which the school determines that the student’s expenses can be met in a more-appropriate manner, or if the borrower clearly indicates an unwillingness to repay the loan. The school cannot exercise this option as the result of policies that are discriminatory.

Refer to Common Manual subsection 6.1.5 and the regulatory information on which that guidance is based, 34 CFR 682.603(e). Common Manual subsection 6.1.5 also cautions schools that loan-certification practices may not discriminate against borrowers who are disabled, provided the borrower exhibits an appropriate ability to benefit. Additionally, schools should consult their own legal counsel to ensure compliance with provisions related to nondiscriminatory practices.
The Common Manual states that borrowers are not responsible for loans if the loans are discharged or forgiven. Should schools assume that discharged and forgiven loan amounts do not count toward the aggregate loan limit?
Discharged and forgiven loan amounts are not counted toward a borrower's aggregate loan limit. Schools are reminded, however, that with the new total-and-permanent disability conditional-discharge period, schools must be certain that a discharge due to the borrower's disability is "final" — meaning the U.S. Department of Education has approved a final discharge. Once the final discharge occurs, that loan balance no longer is collectible from the borrower and does not count against any applicable aggregate loan limit. Loans in a conditional discharge period do count toward the borrower's aggregate and annual loan limits, however.
If the student has had a loan discharged due to a total disability, can that student ever borrow Federal Family Education Loan Program loan funds again? If so, what documentation must the school obtain?
A student who has had FFELP loans previously discharged due to total and permanent disability may obtain new FFELP loans. Eligibility requirements for the new loans are determined by when the previous loans were discharged.

Discharged prior to July 1, 2001 [682.201(a)(6)]
The borrower must obtain a physician's statement certifying that the borrower may now engage in "substantial gainful activity" (e.g., be able to work and earn money).

The borrower also must sign a statement acknowledging that any new loan received may not be discharged due to the same disability or any disability existing at the time the new loan is made, unless the disabling condition substantially deteriorates to the point the borrower is once again unable to work and earn money.

Discharged on or after July 1, 2001 but prior to July 1, 2002 [682.201(a)(6)(iii)]
In addition to the two requirements listed above under Discharged prior to July 1, 2001, the borrower must also reaffirm any loans discharged due to total and permanent disability (TPD) if the date of the borrower's TPD is within three years of the date the borrower applied for a new loan.

Discharged on or after July 1, 2002 and still in the conditional discharge period [682.201(a)(5) and (7)]
The borrower's receipt of a new Stafford or PLUS loan terminates the borrower's conditional discharge and the Department of Education will restore the loan to servicing.

The borrower must sign a statement acknowledging that any loan(s) currently in a conditional discharge status due to total and permanent disability will be placed back into repayment.

The borrower must obtain a physician's statement certifying that the borrower may now engage in "substantial gainful activity" (e.g., be able to work and earn money).

The borrower also must sign a statement acknowledging that any loan that has been conditionally discharged may not be discharged in the future due to the same disability or any disability existing at the time the borrower applied for the total and permanent disability discharge or when the new loan is made, unless the disabling condition substantially deteriorates to the point the borrower is once again unable to work and earn money.

Discharged on or after July 1, 2002 and the loan(s) have been granted a final discharge [682.201(a)(5)]
The borrower must obtain a physician's statement certifying that the borrower may now engage in "substantial gainful activity" (e.g., be able to work and earn money).

The borrower also must sign a statement acknowledging that any loan that has been conditionally discharged may not be discharged in the future due to the same disability or any disability existing at the time the borrower applied for the total and permanent disability discharge or when the new loan is made, unless the disabling condition substantially deteriorates to the point the borrower is once again unable to work and earn money.
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