Understanding the 150% Loan Limit
On July 6, 2012 the Moving Ahead for Progress in the 21st Century Act (MAP-21) was enacted. The new provision limits a first-time borrower’s eligibility for Direct Subsidized Loans to a period not to exceed 150% of the length of the borrower’s educational program.
For a first-time borrower on or after July 1, 2013, there is a limit on the maximum period of time (measured in academic years and not amount borrowed) that they can receive Direct Subsidized Loans. Federal Direct Subsidized Loans were permanently limited to 150% of the length of a student’s academic program. This is called the “maximum eligibility period.” The maximum eligibility period is based on the published length of the student borrower’s current program. New student borrowers will be limited to receiving subsidized loans for 3 years in a 2-year program or 6 years in a 4-year program beginning July 1, 2013. Students reaching this limitation could receive unsubsidized loans if otherwise eligible including meeting satisfactory academic progress requirements. (This time limit does not apply to Direct Unsubsidized Loans or Direct PLUS Loans.)
Additionally, the borrower who reaches the 150% limitation will have their interest subsidy end for all outstanding subsidized loans. Repayment does not begin, but like unsubsidized loans, the student (rather than the government) would become responsible for interest accumulation at this point.
To avoid loss of subsidy, students who are new loan borrowers after July 1, 2013 have an increased incentive to remain within the timeframe limitations of satisfactory academic progress. (An approval of an academic progress appeal will not change any eligibility determined on subsidized loans based on this 150% rule. Federal law provides on provision to appeal this rule based on extenuating circumstances.)
For example, a student enrolled in a four-year bachelor’s degree program, the maximum period for which they can receive Direct Subsidized Loans is six years (150% of 4 years = 6 years). If they are enrolled in a two-year associate degree program, the maximum period for which they can receive Direct Subsidized Loans is three years (150 Percent of 2 years = 3 years).
Below are several examples:
Student receives 5 full years of Direct Subsidized Loans while enrolled in a 4-year BA program.
Student receives 3 years of Direct Subsidized Loans while enrolled in a two-year program. Student then transfers to a 4-year program.
Student received 6 years of Subsidized Loans while enrolled in a 4-year program. Student does not complete and enrolls for a 7th year.
Student is enrolled in a 2-year program and received 3 years of Subsidized Loans. Student enrolls for one more semester in the same program, and then transfers to a 4-year program.
Student received 5 full years of Direct Subsidized Loans while enrolled in a 4-year program. Student does not complete and then enrolls in a 2-year program.
Because the maximum eligibility period is based on the length of a student’s current program of study, the maximum eligibility period can change if they change to a program that has a different length.