USA Funds Policy Experts Offer Guidance for Helping Students Who Have Exceeded Aggregate Loan Limits

A student who inadvertently exceeds the aggregate loan limits for Stafford loans loses eligibility for additional financial aid under Title IV of the Higher Education Act of 1965. The loss of eligibility applies to student aid, such as loans made under the Federal Family Education Loan Program and the Direct Loan Program, Perkins loans, Pell Grants and Federal Work-Study.

Students who have exceeded the limit must resolve the over-borrowing in order to regain financial-aid eligibility. Schools may assist these students by providing counseling or, in some cases, working with students and the holders of the loan to reallocate the loan funds between subsidized and unsubsidized Stafford funding.

USA Funds^®’ policy staff offers the following potential solutions that financial-aid administrators could explore in helping students who have inadvertently over-borrowed the Stafford-loan limit, but want to regain Title-IV eligibility.

• If the student has over-borrowed subsidized Stafford funds but has remaining unsubsidized-Stafford-loan eligibility, the student can authorize the school to reallocate the loan funds. The school reduces subsidized-Stafford funds by the amount overborrowed and increases unsubsidized-Stafford funds by that same amount. More information about this option is available in section 6.20 of the Common Manual.
• The student may repay in full the excess loan amount. If the student takes this step, the student regains eligibility for other financial-aid funds — but regains Stafford eligibility only if the amount paid reduces the aggregate balance of unpaid principal to an amount that’s below the aggregate limit. If the student repays only the amount that the student over-borrowed, then that borrower is not eligible for additional Stafford funds. The student might, however, be eligible for graduate PLUS-loan funds if the student has moved to graduate-level studies, and for other types of Title-IV assistance.
• The student may make repayment arrangements satisfactory to the holder of the loan in order to repay the excess loan amount. These arrangements may include having the student sign an agreement acknowledging the debt and affirming the student’s intention to repay the excess amount as part of the normal repayment process. The student also may consolidate the loans that create the excess. The aggregate amount that the student may borrow remains the same, however. 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, as with the other option that involves repayment, the borrower regains Stafford eligibility only to the extent that the unpaid principal balance of the Stafford loans is less than the applicable aggregate limit.

For more information about helping students who have exceeded their aggregate limits to regain Title-IV eligibility, contact USA Funds’ policy experts.