Trends and Issues

The in-school consolidation "aftermath": Determining Stafford loan aggregate limits for borrowers with Consolidation loans

Consolidation. In recent months, we have heard this word repeated over and over again as throngs of borrowers, including many thousands of borrowers still in school, rushed to consolidate prior to the increase in student loan interest rates. But now that the dust has settled, what will the aftermath of the in-school consolidation rush be? Shoptalk Online starts a new series examining the issues that the FFELP industry will need to be cognizant of now that this new generation of "in-school" Consolidation loan borrowers has emerged.

The first article in the series concerns how to determine Stafford aggregate loan limits for student borrowers who now have Consolidation loans. Although this issue isn't exactly new (borrowers with Consolidation loans have gone back to school and obtained additional Stafford loans for years), the prevalence of this situation is going to increase dramatically since the in-school consolidation rush of 2005. And many schools that are used to seeing student borrowers with Consolidation loans in their financial aid history only once in a blue moon will see — and need to deal with — these situations on a more regular basis.

So, for a borrower who consolidated while still in school (by entering repayment early), how will you know what portion of his or her new Consolidation loan counts against the borrower's Stafford aggregate loan limit in order to award the borrower future Stafford loans?

Using the NSLDS to determine a borrower's Stafford loan totals
The National Student Loan Data System (NSLDS) contains valuable information that can help you determine if a student has reached or exceeded his or her Stafford aggregate loan limit. However, when reviewing loan information on the NSLDS for Financial Aid Professionals Web site (at www.nsldsfap.ed.gov), some of the loan totals provided in a student borrower's loan history can be a bit confusing. With this in mind, here is a helpful process you can use to help you calculate a student's remaining Stafford loan eligibility.

1. On the NSLDS Web site, access the student borrower's loan history. Note: it is important to look beyond the "Aggregate Loan Information" table provided at the top of the page because the Consolidation loan total will often include underlying subsidized and unsubsidized Stafford loan amounts. In addition, when reviewing the Consolidation loan total, keep in mind that the amount may include capitalized interest; collection fees; spousal loans included in a spousal consolidation; and other federal loans, such as Perkins, PLUS, and HEAL loans (all of which do not count against a student's Stafford aggregate loan limit).
2. Go to the Loan Summary section in order to review the individual loans that the borrower has borrowed. Your goal is to manually calculate the borrower's subsidized and unsubsidized Stafford loans to determine how close the borrower is to his or her aggregate limits. To differentiate between the loans that are included in the borrower's Consolidation loan and the loans that are outside of the Consolidation loan, you'll need to review the loans' statuses.
3. To do this, sort the Loan Summary by Loan Type (subsidized Stafford and unsubsidized Stafford). For each loan type, review the list of loan statuses to see if any loans are not listed as PN (a code which means "Non-defaulted, Paid in Full through Consolidation Loan"), DN (a code which means "Defaulted, Paid in Full through Consolidation Loan"), or PC (an older code which means paid in full through Consolidation loan). You want to do this because there may be loans that are coded incorrectly that are part of the Consolidation loan.
   1. If a non-PN/DN/PC loan shows in an open status, it counts toward the student's Stafford aggregate loan limit.
   2. If a non-PN/DN/PC loan shows in a closed status, check to see if the closed date is within 210 days of the consolidation. If this is the case, the non-PN/DN/PC loan may be coded incorrectly as a PF ("Paid in Full") or DP ("Defaulted, Paid in Full") and may be a part of the Consolidation loan (and may count against the borrower's Stafford aggregate loan limit). To determine this, you may want to contact the student's consolidating lender to verify what loans were included in the consolidation. If a loan is coded incorrectly, the underlying loan holder can update the code on Real Time Access within TG's AdvanTG Web™.
   3. If there are other non-PN/DN/PC loans in a closed status that have a closed date that is not within 210 days of the consolidation, it is possible that the borrower paid the loan in full and this loan should not be counted against the borrower's Stafford aggregate loan limit.
4. Again by loan type (subsidized Stafford and unsubsidized Stafford), manually calculate the aggregate outstanding principal balance (Agg OPB) amounts listed for loans that you have identified as counting against the borrower's Stafford aggregate loan limit.
5. If the combined subsidized and unsubsidized Stafford loan totals you calculate match the Consolidation loan total provided in the "Aggregate Loan Information" table, no further research is required. You have the correct totals and can proceed to award the student his or her eligibility in Stafford loans, taking into account the totals that you have calculated.
6. If the totals you calculate do not match — or only nearly match — the Consolidation loan total provided in the "Aggregate Loan Information" table, then the difference may be "unallocated" — meaning that it may include capitalized interest; collection fees; spousal loans included in a spousal consolidation; and other federal loans, such as Perkins, PLUS, and HEAL loans (all of which do not count against a student's Stafford aggregate loan limit). Further research of this "unallocated" amount may be required to make sure that all of the borrower's loans are accounted for properly.

If the Stafford aggregate loan totals that you calculate differ from the amount on the "Aggregate Loan Information" table on the NSLDS, remember to document your calculation in the student's file.

More information
For more information on how to calculate Stafford aggregate limits for students with Consolidation loans, see:

• Dear Colleague Letter GEN-03-12 (available from the Information for Financial Aid Professionals web site at www.ifap.ed.gov/dpcletters/attachments/GEN0312Attach.doc),
• Editions #6, #7, #8, and #9 of the NSLDS Newsletter, available at www.ifap.ed.gov/IFAPWebApp/currentNSLDSListPag.jsp?p1=NSLDS+Newsletters&p2=c,
• The NASFAA Conference presentation "NSLDS Update," available at www.ifap.ed.gov/presentations/05NASFAANSLDS.html, and
• The 2004-2005 Federal Student Aid Handbook, page 3-72.

If you need assistance with this process, call TG customer assistance at (800) 845-6267 or send an e-mail message to cust.assist@tgslc.org or TG loan guarantee operations at (800) 446-5616 or send an e-mail message to lgo.helps@tgslc.org.

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