New 150% Rule for Subsidized Loans

Beginning July 1, 2013, the Department of Education is beginning a new rule for students with Subsidized Stafford Loans. This rule (called the 150% rule) deals exclusively with what are called “new borrowers”. A new borrower is defined in this rule as anyone who does not have student loan debt on or after July 1, 2013. By that definition, you could become a new borrower three years down the line if you pay off your student loans then.

This rule only applies to Subsidized Loans, not Unsubsidized Loans. The Dept of Ed will keep track of the amount of Subsidized Loans so schools won’t have to. It is unlikely that many will be affected by this rule until the 2014-15 award year next July.

What will happen is if a student goes beyond the 150% of a program’s published length of time, then the student will lose the interest subsidies on the Subsidized Loan, which means interest will accrue on the loan as though it is an Unsubsidized Loan. If you are getting close or if you have gone over the 150%, then it should show up in NSLDS as well as on the student’s SAR and ISIR.

There three things that student’s need to keep in mind with this new rule:

  1. If a student switches programs, that will affect their 150%. If you are in an 18 month program, and at the end of the 18 months you are not finished, you will only have another 9 months to finish that program before losing the interest subsidies. But if you switch to a 12 month program then, you’ve already been enrolled for 18 months, so you’ll lose your interest subsidies on the new 12 month program.
  2. This rule is not school specific. If you enroll at School A in a 12 month program, and switch to School B after 6 months, you’ve already used 6 months of eligibility. So if School B’s program is 12 months, you have 12 months of eligibility, so hopefully you finish it on time.
  3. This rule does not take into account the number of credits you are taking or Leaves of Absence. It goes by the length of time that the program is published for, so if you take a term off, that’s one less term of eligibility you will have. If you are taking 6 credits a term (instead of full time’s 12 credits minimum) for a 12 month program, most likely it will take you 24 months to complete the program. At 18 months, you will lose the interest subsidies.
Most Satisfactory Academic Progress policies require students to complete the program in 150% of the length of program. Where this differs from the 150% rule is that Leaves of Absence and number of credits matter in the SAP calculation.