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Trends and Issues

Shoptalk Online 394, February 27, 2007

Trends and Issues

Sticky situations: awarding additional unsubsidized Stafford

In this edition of Shoptalk Online, we continue our series on difficult policy issues that come up occasionally in the Title IV programs (see previous articles in editions 390 and 384). This installment will discuss exceptional circumstances under which a school is permitted to award additional unsubsidized Stafford loan funds — beyond the base annual loan limits — to a dependent undergraduate student.

Credit denial: the most common reason to certify an additional unsubsidized Stafford loan
When a parent applies for and is denied a parent PLUS loan due to adverse credit, the school is allowed to certify an additional unsubsidized Stafford loan for a dependent undergraduate student at the same level allowed for an independent undergraduate student, i.e., $4,000 for first- and second-year students and $5,000 for third-, fourth-, and fifth-year students, within the cost of attendance minus other estimated financial assistance. A student who borrows additional unsubsidized Stafford funds in this situation is also allowed to borrow up to the aggregate Stafford loan limits for independent students — $46,000 total, no more than $23,000 of which may be subsidized Stafford.

Other reasons the school may certify an additional unsubsidized Stafford loan
Remember, a parent's refusal to borrow never constitutes an exceptional circumstance, nor does the school's decision not to participate in the PLUS Loan Program, nor does the aid administrator's belief that a parent should not borrow a parent PLUS loan.

However, ED recognizes that, besides adverse credit, other circumstances may exist that would prevent a parent from borrowing a parent PLUS loan. In lieu of a PLUS credit denial, a school is also permitted to certify additional unsubsidized Stafford loan funds in these situations:

The student's parent is incarcerated.
The student's parent's whereabouts are unknown.
The student's parent is precluded by a bankruptcy court from future borrowing.
The parent of a dependent student is not a U.S. citizen or permanent resident, or is not able to provide evidence from the U.S. Bureau of Citizenship and Immigration Services that he or she is in the U.S. for other than a temporary purpose with the intention of becoming a citizen or permanent resident.
The student's family income is limited to public assistance or disability benefits and the school has documented that the parent would not be able to repay the PLUS loan.
The school has evidence that a lender has a lending policy that would result in a parent PLUS loan denial due to the parent's existing debt burden, income-to-debt ratio, likely inability to repay, or other credit standards or factors.

The school must document the student's file when it certifies an additional unsubsidized Stafford loan under one of these circumstances. Just as with a parent PLUS loan credit denial, these circumstances may not occur every academic year, so the school must re-examine and document that the circumstances continue to apply before certifying an additional unsubsidized Stafford loan in a subsequent year.

Aggregate issues
When a dependent undergraduate student receives additional unsubsidized Stafford loan funds in multiple years, the student may appear to have borrowed close to, or in excess of, the dependent Stafford aggregate limit of $23,000. In this case, the school should count only the loan amounts that the student would have received under his or her current eligibility as a dependent student against the dependent undergraduate aggregate loan limit.

Here's an example: a student's parent is prohibited from applying for a Parent PLUS loan by a bankruptcy court, so during the first three years of enrollment, the student borrows a total of $24,625 in Stafford loans: $11,625 in base Stafford loan amounts ($2,625, $3,500, and $5,500) plus $13,000 in additional unsubsidized Stafford loans ($4,000 each in years one and two, then $5,000 in year three). Although the student appears to have exceeded his or her dependent aggregate limit of $23,000, the school excludes the $13,000 in additional unsubsidized Stafford from the total borrowing of $24,625; thus, the student still has $11,375 in base Stafford loan eligibility.

More information
To read more about the circumstances under which a school may certify an additional unsubsidized Stafford loan for a dependent undergraduate student, please see page 3-73 of the 2006-07 Federal Student Aid Handbook and Dear Colleague Letter GEN 05-16, topics 3 and 4.

For questions about handling parent PLUS loan denials and student eligibility for additional unsubsidized Stafford loan funds, call TG customer assistance at (800) 845-6267, or send an message to cust.assist@tgslc.org.

Loan data reporting: Ensure accurate anticipated graduation/completion date is provided

When a school certifies a Stafford or PLUS loan, or completes an In-School Deferment Request, one of the pieces of information the school provides is the student's anticipated graduation/completion date. It is important that the school provide an accurate anticipated graduation/completion date, because this enables the lender and guarantor to report the loan's status correctly to the National Student Loan Data System (NSLDS). If the school does not provide an accurate date, there are repercussions to the student, as this article illustrates.

The issue
A majority of the time, when a school's financial aid office certifies a Stafford or PLUS loan, or a school's financial aid office, registrar, or some other office completes an In-School Deferment Request, it provides an anticipated graduation/completion date that meets the definition provided on both the Stafford and PLUS Master Promissory Notes: "[T]he date the student is expected to complete the program at your institution." However, sometimes a school provides an anticipated graduation/completion date that represents the last day of the loan period.

The repercussions
When the school provides the last day of the loan period as the anticipated graduation/completion date for a Stafford loan, the lender must then report the loan to the NSLDS as being in a grace status on the day following the end of the loan period, as the lender must assume that the student is out of school as of that date.

In reality, the student may actually be expected to return to school for the following period of enrollment or may be expected to return in the fall — after a summer bridge extension — if the last day of the loan period is the end of the spring semester. If the lender reports the loan to the NSLDS as being in a grace status at the end of the loan period, the student may receive information from the lender or guarantor that states that the student will soon enter repayment on the loan; this will certainly cause confusion for the student, who believes he or she is still enrolled and should not enter his or her grace period and subsequently start repayment until after the student's true anticipated graduation/completion date.

When the school provides the last day of the loan period as the anticipated graduation/completion date for a Grad PLUS loan, the lender must then report the loan to the NSLDS as being in a non-deferred repayment status on the day following the end of the loan period, as the lender must assume that the student is out of school as of that date.

As with the Stafford loan borrower mentioned above, the Grad PLUS borrower may actually be expected to return to school for the following period of enrollment or may be expected to return in the fall — after a summer bridge extension of the student's in-school deferment — if the last day of the loan period is the end of the spring semester.

If the lender reports the loan to NSLDS as being in a non-deferred repayment status at the end of the loan period, the student may receive information from the lender or guarantor that states that the student is required to make payments on the loan; this will cause confusion for the student, who believes he or she is still enrolled and not yet responsible for repayment of principal.

In both of the cases mentioned above, the student will likely call the registrar, financial aid office, lender, or guarantor for assistance. Since it is the school's responsibility to report enrollment on the NSLDS, if the lender or guarantor hears from the student, it will have to direct the student to the school to correct the situation. The lender cannot put the student's loan into the appropriate status on the NSLDS until the student's enrollment status is corrected.

The solution
Cases like the ones mentioned above can be prevented if the school is careful to provide — for each student — an anticipated graduation/completion date that reflects the date that the student is expected to complete his or her program of study instead of the loan period end date. The financial aid office is encouraged to pass this information on to the registrar or any other office on campus that has the responsibility to report enrollment or complete in-school deferment requests. If all of the applicable offices provide consistent anticipated graduation/completion dates, there will be less misinformation on the NSLDS and fewer circumstances of confused students.

More information
For more information on enrollment reporting, deferment, or other topics touched upon in this article, call TG customer assistance at (800) 845-6267, or send an message to cust.assist@tgslc.org.

Skill-builders: organize your financial aid office practice to get more done faster

Does this sound familiar? You've got a line of students snaking out the office door, the phones are ringing off the hook, and the stack of verification files waiting on your desk for review are piling up with each passing day. If this is anything like what you've experienced in your financial aid office (FAO), you're not alone.

Even outside peak season, FAOs can find themselves besieged by phone and , working hard to keep up with the latest changes in federal regulations or the newest department project. To manage the demands on your office, consider changes that build efficiency into processes and give you more control over your schedule. By introducing just a few modifications, you may be surprised at the extra time you have to devote to other priorities like campus enrollment or student outreach.

A streamlining formula
Even the best-run businesses can be improved. Good office managers consider every aspect of operations as an opportunity for making the business stronger. If you're looking for areas to strengthen in your office, think about some of the following suggestions.

Design your work space to be efficient for you and your customers: Plan a space that moves foot traffic logically and efficiently to any available window or front-counter staff. If you have the budget, consider an information kiosk staffed by someone who can answer questions or direct students. In front of the lobby counter, set up a self-help area that your students can access easily. This eliminates the need for them to stand in line to pick up forms and publications. Behind the lobby counter, create an area for your staff that gives them easy access to what they use most, e.g., applications and procedures. Set up an archive room or section for outdated files and books; this helps minimize clutter.
Automate your processes with technology as much as you can: Student applications, loan management, student job placement — these are all areas that can be automated to some degree with the help of software. Even setting up mail merges in your favorite word processor can cut down on the huge volume of correspondence schools handle. Consider buying off-the-shelf software if you have the budget, or look more closely at the capabilities of the software your office currently uses.
Manage interruptions: Sometimes the key to getting things done is to safeguard your time as much as you can. For phone calls, voice mail may be the best answer your customers can expect, at least for a couple of hours. For , check your messages at designated times and consider turning off any automatic notifications. " addiction," the compulsion to check on a constant basis, is running rampant in many offices, according to publications like the Chronicle of Higher Education. And if you have too many walk-ins to your office behind-the-counter, offer to meet at another time.
Learn to say "no" diplomatically: If you're overwhelmed with work, you may need to occasionally resort to politely refusing a request. You can offer to help at another time. Or you may be able to bargain for additional time also.
Review your processes: Have a committee from your office team evaluate procedures on an annual basis. You'll be able to tap into your staff's insight about the best ways to get things done. Ask for a report at the end of their evaluation that offers recommendations and provides a blueprint for making more improvements.

To learn more
Industrial engineers analyze the work of plant assembly lines and industrial complexes. Various organizational consultants have been doing something similar for business offices for years. If you're looking for books on improving office practice, read through some of the following suggested titles.

First Things First by Steven Covey
Getting Things Done by David Allen
Organizing from the Inside Out by Julie Morgenstern

TG also offers training that addresses issues of office efficiency, including Ducks In a Row and Crafting the Keys to Customer Service. Find out more about these opportunities, which are provided through the TG Speakers Bureau, by visiting TG Online at www.tgslc.org/speakers/index.cfm.

Question of the week

Q.: Is a student who is enrolled in an undergraduate program and is taking graduate level courses eligible for a Stafford loan at the graduate level annual loan limits?

A.: No. According to the 2006-07 Federal Student Aid Handbook (FSA Handbook), page 3-78, "There are several rules to consider if a student is simultaneously taking undergraduate and graduate courses. A student in an undergraduate program can't get the graduate loan limits based on taking graduate coursework as a part of the undergraduate program."

However, the FSA Handbook continues, "In contrast, a graduate student who is taking some undergraduate coursework is eligible for the graduate loan limits if the student is enrolled at least 1/2-time in courses (either graduate or undergraduate) that can be applied to the graduate program requirements. However, the student must already be admitted into the graduate program — a student with a bachelor's degree who is taking preparatory work for graduate school (or whose full admission to the graduate program is contingent upon completion of certain undergraduate courses) is not eligible for graduate loan limits."

Do you have a question?
If you have a question that needs an answer, feel free to Ask TG™. Ask TG is TG's online query tool for borrowers, schools, and lenders. It includes a database of frequently asked questions about financial aid, student loan processing, and TG's products and services. To submit a question to Ask TG, visit tgslc.custhelp.com.