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Volume 7
The Federal Pell Grant Program
Introduction
This volume of the Federal Student Aid Handbook provides information to assist schools in determining student eligibility
for and calculating the amount of Federal Pell Grants.
Significant Changes for 2025326
Throughout Volume 7, all dates, award years, and dollar values have been updated to reflect the 2025326 processing
year. Also, where appropriate, links and publications associated with FSA9s Partner Connect and Knowledge Center have
been updated.
Note: Statutory citations are to the
Higher Education Act (HEA) of 1965, as amended.
Chapter 1
We added a reminder that schools must work with any student who indicates on the FAFSA form that their parent or
guardian was killed in the line of duty to document and, if determined eligible, certify eligibility for a maximum Pell Grant
under the Special Rule.
Chapter 2
In the <Calculated Pell= section, we added set of steps for determining the calculated Scheduled Award to clarify when a
school should and should not round to the nearest $5. We updated the examples to demonstrate these steps.
Chapter 3
We added a section titled <Less Than Half Time Pell Grant Cost of Attendance= to demonstrate this concept and provide
an example of how a Pell Grant may be limited by a less-than-half-time COA.
Chapter 4
We added a fourth example titled <Less-than-half-time Enrollment and Pell Grant COA= to the <Pell Formula 1= section,
which incorporates the concept of a less-than-half-time Pell Grant COA with a less-than-half-time enrollment intensity
proration.
There were no substantive changes in Chapters 5-8 or the Appendix.
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Chapter 1
Student Eligibility for Pell Grants
General Eligibility Requirements for Federal Pell Grants
In general, a student must be enrolled in an undergraduate course of study at a non-foreign institution to receive a Pell
Grant. For the Pell Grant program, a student is an undergraduate only if the student has not earned or completed the
requirements for a bachelor9s or professional degree. A student who has earned a baccalaureate degree or a first
professional degree cannot receive a Pell Grant. However, students enrolled in an eligible post baccalaureate program as
described below are still considered undergraduates for purposes of Pell Grant eligibility.
A student who completes a master9s program has earned a degree beyond the baccalaureate level, making the student
ineligible for a Pell Grant even if they do not have a bachelor9s degree and enroll in an undergraduate program. Most
professional degrees are also considered beyond the baccalaureate level; the same restrictions apply to students who
have earned professional degrees considered beyond the baccalaureate level.
A student who has received an associate degree4or any certificate or diploma below the baccalaureate level4and who
enrolls in another undergraduate program continues to be considered an undergraduate student until the student has
completed the curriculum requirements for a first bachelor9s degree.
A student with a baccalaureate or professional degree is ineligible even if the degree is from an unaccredited school or is
not accepted for admission or transfer credit by your school. Similarly, a student with a baccalaureate or professional
degree from a foreign school usually isn9t eligible for a Pell Grant. But because a foreign degree often won9t translate
neatly into the American classification, the school must judge whether it equates to a U.S. bachelor9s degree. If the
student provides written documentation that the foreign degree is not equivalent to a bachelor9s degree awarded in the
United States, you may determine that the student does not have a bachelor9s degree. Documents supporting such a
conclusion may include information about the type of school the student attended and total years of education leading to
the degree.
A student enrolled in a program that lasts longer than five years, typically first professional degree programs such as a
six-year pharmacy program, can be considered an undergraduate for only the first three or four years. Students enrolled
in dual-degree programs that confer a bachelor9s degree and either a graduate or first professional degree are
undergraduates for at least the first three years of the program. The school determines at what point after three years the
student ceases to be an undergraduate student. The student must be considered a graduate student after the fourth year
of such programs (see
Volume 1, Chapter 1 for further discussion).
Occasionally, a student will complete all the requirements for a bachelor9s degree but will continue taking undergraduate
courses without accepting the degree. Your school must decide whether and at what point the student completed the
baccalaureate course of study. If your school determines that the student did complete a bachelor9s program (regardless
of whether the student accepted the degree), then the student is no longer eligible to receive a Pell Grant.
Wrong Grade Level on the FAFSA Form
When an undergraduate student incorrectly reports on the Free Application for Federal Student Aid (FAFSA®) form that
the student will be a graduate student or has a bachelor9s degree, the student must correct that information. Because the
application shows that the student isn9t an undergraduate, the Department9s records will show that the student is
ineligible for Pell. If the application isn9t corrected, the school won9t be able to pay the student a Pell Grant.
Definition of an Undergraduate Student
34 CFR 668.2
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Eligible Postbaccalaureate Program
A student who is enrolled at least half time in a postbaccalaureate teacher certification or licensure program is eligible to
receive a Pell Grant for the period necessary to complete the program if:
The program does not lead to a graduate degree;
The school offering the program does not also offer a bachelor9s degree in education;
The student is pursuing an initial teacher certification or licensing credential within a state; and
The program consists of the courses required by a state to receive a professional certification or licensing credential
necessary for employment as a teacher in an elementary or secondary school in that state.
Under this very limited provision, a postbaccalaureate program is defined as a program that generally requires a
student to have a bachelor9s degree before being admitted to the program. Accordingly, a program in which
undergraduate students are routinely allowed to enroll would not meet the definition of a postbaccalaureate program for
this purpose, nor would a program that is generally open to undergraduates but that also admits students with bachelor9s
degrees. For Title IV purposes, a school must treat a student who receives a Pell Grant under this provision as enrolled in
an undergraduate program. Such a student is eligible for Federal Work-Study and fifth-year undergraduate (not graduate
student) Direct Loan limits but would not be eligible for a Federal Supplemental Educational Opportunity Grant (FSEOG).
Eligible Postbaccalaureate Program and the FAFSA
Normally, students who indicate on the FAFSA that they have a bachelor9s degree won9t be listed in the Department9s
records as Pell-eligible students, and the school won9t be able to receive Pell funds for them. However, to allow students
who are eligible under the postbaccalaureate program provision to be paid, students who correctly report that they have a
bachelor9s degree but also indicate on the FAFSA form that they are in a teaching credential program will be listed as Pell-
eligible students. Of course, you must determine whether the student falls under the eligible postbaccalaureate provision.
Prohibition on Receiving Two Pell Grant Payments for Concurrent Enrollment
A student may not receive Pell Grant payments concurrently from more than one school. If a student is awarded Pell for
any period of concurrent enrollment, the student has the choice of which award to receive but is limited to a single award
from a single school.
For Pell purposes, the phrase <concurrently from more than one institution= means that the student must be attending
both schools at the same time for the concurrent Pell Grant prohibition to apply. A student who withdraws from one school
and enrolls at least one day later in another school is normally not considered to have been enrolled concurrently. If a
Pell-eligible student withdraws from one institution but meets one of the Return of
Title IV Funds (R2T4) withdrawal
exemptions and subsequently enrolls at a different institution during the same payment period, the new institution can
award Pell Grant funds for any remaining portion of the overlapping payment period. See Chapter 6 of this volume for
additional information on awarding remaining eligibility for a transfer student. The new institution should maintain
documentation in the student9s file supporting a Pell Grant disbursement at that institution following the student's
withdrawal from the prior school.
Eligible Postbaccalaureate Programs
34 CFR 690.6(c)
HEA Sec. 401(d)(4)(B)
Prohibition on Concurrent Enrollment
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Pell Eligibility for Incarcerated Students
Section 484(t) of the HEA established Pell Grant eligibility for confined or incarcerated students if they are enrolled in an
eligible Prison Education Program (PEP). A confined or incarcerated individual is eligible to receive a Pell Grant if that
individual enrolls in an eligible PEP. For additional information about PEPs, see
Volume 1, Chapter 1 and Volume 2,
Chapter 2 of the FSA Handbook.
Institutions that participated in the Second Chance Pell (SCP) experiment under the Experimental Sites Initiative (ESI)
were invited to apply to participate in a revised version of the experiment. The revised SCP program allows institutions
participating in the experiment as of July 1, 2023, to continue offering their current programs to confined or incarcerated
individuals for up to three award years while they work through the application and approval process for the PEP(s) they
wish to offer under the new provisions. See Electronic Announcement GENERAL-23-25 for additional information. The
revised SCP experiment will end on June 30, 2026; schools will not be permitted to disburse Pell Grant funds under the
experiment beyond the 2025-26 award year.
Cost of Attendance for Incarcerated Students
The cost of attendance for students who are incarcerated may include the following: tuition, fees, books, course materials,
supplies, equipment, and the cost of obtaining a license, certification, or a first professional credential. For more
information on the cost of attendance, see
Volume 3, Chapter 2 of the FSA Handbook.
Confined or incarcerated individuals may not receive Pell Grant funds for more than their cost of attendance and may not
receive a Title IV credit balance. To ensure that all allowable costs are included in the cost of the attendance, schools
must include books, course materials, equipment, and supplies as part of institutional charges and either provide those
materials directly to the individual or include the costs of books and supplies in the individual9s tuition and fees. If a credit
balance is created, the school must return the Pell Grant funds associated with the credit balance to the Department and
it will be credited to the student's remaining Pell eligibility.
Maximum Pell Grant Eligibility for Dependents of Certain Deceased Servicemembers and Public Safety Officers
Students who meet the eligibility requirements for Pell Grants under the Special Rule in HEA Section 401(c) will receive a
maximum Pell Grant award, regardless of their calculated SAI. To receive a Pell Grant based on eligibility under the
Special Rule, a student must be:
34 CFR 690.11
HEA Section 401(d)(3)
Pell Eligibility for Incarcerated Students
34 CFR 668, Subpart P 3 Requirements for prison education programs
34 CFR 690.62(b)(1) 3 Prohibition on issuance of credit balances for confined or incarcerated individuals
Dear Colleague Letter GEN-23-05 3 Eligibility of Confined or Incarcerated Individuals to Receive Pell Grants
Prison Education Programs 3 FSA Partners Knowledge Center Resources
Prison Education Programs 3 Questions and Answers
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The child of a parent or guardian who died in the line of duty while either (a) serving on active duty as a member of
the U.S. Armed Forces on or after September 11, 2001; or (b) actively serving as and performing the duties of a
public safety officer; and
Less than 33 years old as of the January 1 prior to the award year for which the applicant is applying (e.g., for the
2025326 award year, a student must be less than 33 years old as of January 1, 2025, to be eligible).
In this situation, eligible students will have a Scheduled Award equal to a maximum Pell Grant award, regardless of SAI.
Other aid for these students will be based on their calculated SAI.
Public Safety Officer Definition
A public safety officer generally includes the following:
Law enforcement officer
Firefighter
Member of a rescue squad or ambulance crew
Federal Emergency Management Agency (FEMA) employee
Emergency management or civil defense agency employee
Chaplain
Others defined in Section 1204 of the Omnibus Crime Control and Safe Streets Act of 1968 (34 U.S.C. 10284)
Identification of Eligibility and Acceptable Documentation
The U.S. Department of Defense does not provide confirmation that a service member killed in the line of duty meets the
special eligibility criteria. Further, no comprehensive federal database exists to effectively and efficiently identify public
safety officers killed in the line of duty. Therefore, students will self-identify potential eligibility on the FAFSA form, and the
school will be required to confirm eligibility by collecting supporting documentation from the student. Once you document
and certify Special Rule eligibility for a maximum Pell Grant award, neither your school nor any other school is required to
redetermine that student's eligibility for subsequent award years if the student continues to meet all other Pell Grant
eligibility requirements and the age requirement for the Special Rule.
Acceptable documentation may include, but is not limited to, the following:
A copy of the servicemember9s DD Form 1300 (Report of Casualty) which documents death in the line of duty.
A copy of the servicemember9s DD Form 214 and death certificate, documenting that the date and cause of death
occurred during and as a result of active duty.
A copy of a Department of Veterans Affairs Death Narrative Document.
A determination letter acknowledging eligibility for certain federal benefits under the Public Safety Officers Benefit
(PSOB) program administered by the Department of Justice.
A written letter of attestation or determination made by a state or local government official with supervisory or other
relevant oversight authority of an individual who died in the line of duty while serving as a public safety officer.
Pell Grants Under the Special Rule
HEA Section 401(c)
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Documentation of the student qualifying for a state tuition or other state benefit accorded to the surviving children or
other family members of a public safety officer.
Other documentation the school determines to be from a credible source that describes or reports the circumstances
of the death and the eligible occupation of the parent or guardian.
Legacy IASG and CFH Eligibility
Students who were eligible for and received Iraq and Afghanistan Service Grant (IASG) funds or received Pell Grant funds
based on IASG or Children of Fallen Heroes (CFH) eligibility criteria for the 2023-24 award year but are not eligible for Pell
Grant funds under the Special Rule beginning with the 2024325 award year are eligible to receive Pell Grant funds based
on prior IASG or CFH eligibility criteria. Students remain eligible if they received at least one disbursement of Pell Grant or
IASG funds based on their IASG or CFH eligibility during the 2023-24 award year and continue to meet the age
requirement for the Special Rule. Students who receive a maximum Pell Grant based on legacy IASG or CFH guidance
continue to be eligible if the student received at least one disbursement of funds based on the grandfathered eligibility in
each subsequent award year. If there is a break in disbursement of one award year, then the student must qualify under
the Special Rule in HEA Section 401(c).
Certification and Reporting
Schools report maximum Pell Grant eligibility based on either (1) Special Rule criteria eligibility or (2) legacy eligibility due
to prior IASG or CFH criteria to the Department via the FAFSA Partner Portal (FPP). Once reported, the FAFSA Processing
System (FPS) will generate a new ISIR transaction reflecting the student9s eligibility. This updated ISIR transaction will
allow you to originate and disburse a maximum Pell Grant for eligible students. Applicants who meet Special Rule
eligibility will be reported as simply eligible. There will be a separate value for students who meet the requirements for
legacy eligibility. See
Volume 4 of the 2025-26 FAFSA Specifications Guide for additional information.
Eligibility Determination FAFSA
Partner Portal
Field
Indicator Value
Eligible 3 Special Rule (died in the line of duty while serving on active duty as a
member of the U.S. Armed Forces on or after September 11, 2001)
IASG Indicator 1 3 Eligible for
IASG
Eligible 3 Legacy IASG IASG Indicator 2 3 Eligible,
grandfathered for
IASG
Eligible 3 Special Rule (died in the line of duty while actively serving as and
performing the duties of a public safety officer)
CFH Indicator 1 3 Eligible for CFH
Eligible 3 Legacy CFH CFH Indicator 2 3 Eligible,
grandfathered for
Note: You must work with any student who indicates on the FAFSA form that their parent or guardian was killed in
the line of duty to document and, if determined eligible, certify eligibility for a maximum Pell Grant under the
Special Rule. This includes students who may otherwise qualify for a Max Pell Grant based on SAI or other
eligibility criteria. Since eligibility under the Special Rule does not need to be redetermined annually, certifying a
student as eligible under the Special Rule allows the student to continue receiving a maximum Pell Grant award in
subsequent award years, regardless of financial information.
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CFH
Ineligible IASG or CFH
Indicator
3 3 Not eligible for
IASG/CFH
No Determination IASG or CFH
Indicator
Blank 3 No
Determination
While you do not need to redetermine a student9s eligibility in subsequent award years, you must recertify and report
eligibility annually in FPP.
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Chapter 2
Calculating Pell Grants
Pell Grant Scheduled Awards are based on information provided on the FAFSA form, the presence of a valid Student Aid
Index (SAI) on the student9s FAFSA Submission Summary or ISIR, the academic year structure (see Volume 3, Chapter 1),
and the Pell Grant cost of attendance (COA) for a full-time student for a full academic year (see Volume 3, Chapter 2). For
term-based programs, awards for part-time students are adjusted based on a student9s enrollment intensity.
Scheduled Award, Award Year, and Annual Award
The Scheduled Award is the maximum amount a student can receive during the award year if the student attends full
time for a full academic year. The award year begins on July 1 of one year and ends on June 30 of the next year. For
example, the 2025-26 award year begins July 1, 2025, and ends June 30, 2026. The student9s Scheduled Award is
established by the school using the student9s Pell Grant COA and the information received on the student9s ISIR, which will
include the student9s Pell Grant eligibility and SAI.
The annual award is the maximum amount a student would receive during a full academic year based on enrollment
intensity and COA. Note that for a full-time student, the annual award will be the same as the Scheduled Award. A part-
time student who is enrolled in a term-based program will have an annual award that is less than the Scheduled Award.
Published Maximum and Minimum Pell Grant Award Amounts
The maximum Pell Grant award amount is determined by the appropriation Act applicable to that award year. The
Department will announce the maximum Pell Grant award amount for the award year, as required, when the amount is
available. The minimum Pell Grant award amount will be 10% of the maximum Pell Grant award amount for the award
year. Both the maximum and minimum award amounts will be rounded to the nearest $5. You should refer to the
Knowledge Center for the most updated information.
Pell Grant Eligibility Criteria
A student may qualify for a Pell Grant under one of three sets of eligibility criteria:
Maximum Pell Grant eligibility (Max Pell)
Minimum Pell Grant eligibility (Min Pell)
Calculated Pell Grant eligibility, based on SAI
If FPS has determined that a student's ISIR transaction is eligible for a Pell Grant, the <Pell Grant Eligibility Flag= will be set
to <Y=. Schools will use additional information on the ISIR to determine whether students qualify for Max Pell, Min Pell, or a
Calculated Pell Grant. Actual Pell Grant award amounts are unique to individual students and are based upon and limited
by the student's enrollment intensity, SAI, COA, and Lifetime Eligibility Used (LEU). For more on LEU, see Chapter 8 of this
volume.
Maximum Pell Grant Eligibility Criteria
This section describes eligibility criteria to qualify for a Max Pell Grant and the <Max Pell Indicator= value that you will see
on the student9s ISIR.
Dependent Student
Note:/Examples use fictional maximum ($7,500) and minimum ($750) Pell Grant award amounts for
demonstration purposes only. Award amounts in examples in this volume should not be used in packaging Pell
Grants for the 2025-26 award year.
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Max Pell
Indicator
Eligibility Criteria
1 The student9s parent(s) is not required to file a federal income tax return.
2 The student9s parent is a single parent and has an AGI greater than zero and less than or equal to 225% of
the poverty guideline for the applicant9s family size and state of residence.
3 The student9s parent is not a single parent and ha s an AGI greater than zero and less than or equal to 175%
of the poverty guideline for the applicant9s family size and state of residence.
Blank Ineligible for Max Pell
Independent Student
Max Pell
Indicator
Eligibility Criteria
1 The student (and spouse, if applicable) is not req uired to file a federal income tax return.
2 The student is a single parent and has an AGI grea ter than zero and less than or equal to 225% of the
poverty guideline for the applicant9s family size and state of residence.
3 The student is not a single parent and has an AGI greater than zero and less than or equal to 175% of the
poverty guideline for the applicant9s family size and state of residence.
Blank Ineligible for Max Pell
Poverty Guidelines
The Department of Health and Human Services (HHS) annually produces poverty guidelines by state of residence. Use the
U.S. Federal Poverty Guidelines Used to Determine Financial Eligibility for Certain Programs for the prior-prior tax year
(e.g., for the 2025326 award year, use the 2023 poverty guideline) by state of legal residence to determine a student9s
eligibility for Max or Min Pell.
State of Legal Residence
Dependent student state of legal residence is the reported state of residence of their parent(s), if reported. Otherwise, use
the student9s reported state of residence. For independent students, use the reported state of residence for the applicant.
Maximum Pell Grant Eligibility
HEA Sec. 401(b)(1)(A)
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For independent student applicants or parents of dependent student applicants who do not have a reported state of legal
residence or whose place of legal residence is outside the U.S., use the poverty estimates for the contiguous 48 states.
Required to File a Federal Income Tax Return
Use IRS Publication 501 for the applicable tax year to determine if the independent applicant or dependent student9s
parent(s) was required to file a federal tax return. If tax filing status is known, use the combination of reported marital
status, tax filing status, and age to determine if they were required to file.
Minimum Pell Grant Eligibility Criteria
This section describes eligibility criteria to qualify for a Min Pell Grant and the <Minimum Pell Indicator= value that you will
see on the student9s ISIR.
Dependent Student
Min Pell
Indicator
Eligibility Criteria
1 The student9s parent is a single parent and has an AGI less than or equal to 325% of the poverty guideline
for the applicant9s family size and state of residence.
2 The student9s parent is not a single parent and ha s an AGI less than or equal to 275% of the poverty
guideline for the applicant9s family size and state of residence.
Blank Ineligible for Min Pell
Independent Student
Min Pell
Indicator
Eligibility Criteria
3 The student is a single parent, and the AGI is les s than or equal to 400% of the poverty line.
4 The student is a parent and is not a single parent , and the AGI is less than or equal to 350% of the of the
poverty guideline for the applicant9s family size and state of residence.
5 The student is not a parent, and the student9s (an d spouse9s if applicable) AGI is less than or equal to 275%
of the of the poverty guideline for the applicant9s family size and state of residence.
Blank Ineligible for Min Pell
Minimum Pell Grant Eligibility
HEA Sec. 401(b)(1)(C)
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Calculated Pell Grant (Eligibility Based on SAI and COA)
If the <Pell Grant Eligibility Flag= on the ISIR is set to <Y=, but the <Max Pell Indicator= and <Minimum Pell Indictor= are
blank, the student may be eligible for a calculated Pell Grant.
Calculated Pell Grant Order of Operations
Use the following steps to determine the amount of a calculated Pell Grant:
If the student9s calculated Pell Grant is greater than the Min Pell amount/and/the student9s COA, the Scheduled award will
be the same value as the student9s COA (not rounded).
Step 1: Subtract the student9s calculated SAI from the award year9s published Max Pell amount.
Step 2: Compare the amount from Step 1 to the award year9s published Min Pell amount. If Max
Pell minus SAI g Min Pell, proceed to Step 3. If not, the student is not eligible for a
Calculated Pell Grant.
Step 3: Round the result from Step 1 to the nearest $5.
Step 4: Compare the rounded amount from Step 3 to the student9s Pell Grant COA. If the
rounded amount is less than the student9s Pell Grant COA, the student is eligible for a
Scheduled Pell Grant Award of that resulting amount. If the rounded amount is greater
than the student9s Pell Grant COA, the student is eligible for a Scheduled Pell Grant
Award equal to the student9s Pell Grant COA.
Volume 7, Chapter 2, Example 1: Eligible for Calculated Pell Grant
A student9s calculated SAI is 1,004 and the Pell COA is $10,000. For demonstration purposes, assume the
published Max Pell for the award year is $7,500. The published Min Pell for the award year is 10% of the Max Pell,
or $750. The school performs the steps in the Calculated Pell Grant process to determine the student9s Scheduled
Award.
Step 1: Max Pell ($7,500) - SAI (1,004) = $6,496
Step 2: Calculated Pell Grant ($6,496) > Min Pell ($750)
Step 3: Round Calculated Pell Grant ($6,496) to the nearest $5 = $6,495
Step 4: Rounded Calculated Pell Grant ($6,495) < Pell Grant COA ($10,000)
Since the calculated Scheduled Award is less than the Pell COA, the school determines that the student is eligible
for a Scheduled Award of $6,495.
Volume 7, Chapter 2, Example 2: Eligible for Calculated Pell Grant, Capped at COA
A student9s calculated SAI is 1,004 and the Pell COA is $6,493. For demonstration purposes, assume the published
Max Pell for the award year is $7,500. The published Min Pell for the award year is 10% of the Max Pell, or $750.
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If the student9s calculated Pell Grant is less than the published Min Pell amount for the award year, the student is not
eligible for a calculated Pell Grant. However, the student may still meet eligibility requirements for Min Pell based on AGI,
family size, state of residence, and poverty guidelines, described previously.
Determining the Award Year for Crossover Pell Awards
You must source Pell Grant funds from the award year to which the payment period is assigned. When awarding Pell
Grants for a crossover payment period, you may assign the payment period to the award year that best meets the needs
of your students and maximizes a student9s eligibility over the two award years in which the crossover payment period
occurs. For general information about payment periods, see Chapter 1 of Volume 3, and for more detail on crossover
payment periods, see the section on crossover payment periods in Chapter 5 of this volume.
Basic Pell Grant Formulas
Except for subscription-based programs (see
Volume 3, Chapter 1 for information on subscription-based programs), if all
coursework is offered in credit hours and scheduled to be completed within a specific time frame, the program generally
can be considered term-based. Term-based programs can have either standard terms or nonstandard terms. Pell Grants
are usually calculated differently for the two types of terms. Standard-term programs may be treated similarly to
nonstandard-term programs if the program does not conform to a traditional academic calendar or meet certain other
The school performs the steps in the Calculated Pell Grant process to determine the student9s Scheduled Award.
Step 1: Max Pell ($7,500) - SAI (1,004) = $6,496
Step 2: Calculated Pell Grant ($6,496) > Min Pell ($750)
Step 3: Round Calculated Pell Grant ($6,496) to the nearest $5 = $6,495
Step 4: Rounded Calculated Pell Grant ($6,495) > Pell Grant COA ($6,493)
Since the calculated Scheduled Award is greater than the Pell COA, the school determines the student9s
Scheduled Award must be capped at the COA. The student is eligible for a Scheduled Award of $6,493.
Volume 7, Chapter 2, Example 3: Ineligible for Calculated Pell Grant
A student9s calculated SAI is 6,751 and the Pell COA is $9,000. For demonstration purposes, assume the published
Max Pell for the award year is $7,500. The published Min Pell for the award year is 10% of the Max Pell, or $750.
The school performs the steps in the Calculated Pell Grant process to determine the student9s Scheduled Award.
Step 1: Max Pell ($7,500) - SAI (6,751) = $749
Step 2: Calculated Pell Grant ($749) < Min Pell ($750)
Since this student9s Calculated Pell Grant is less than the published Min Pell for the award year, the student is not
eligible for a Calculated Pell Grant. However, the student may still meet eligibility requirements for a Min Pell.
Crossover payment periods
34 CFR 690.64 3 Determining the award year for a Pell Grant crossover payment period
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conditions. Regardless of whether coursework is generally offered using terms, schools always have the option of treating
a program as a non-term program for Title IV purposes. See Volume 3, Chapter 1 for detailed guidance on standard term,
nonstandard term, and non-term programs.
When calculating Pell Grants, you must generally use the same formula for all years in a student9s program. In most
cases, a program9s academic calendar determines the formula that must be used to calculate Pell Grant awards, and that
formula is then used for all years of the program. However, for programs offered in standard terms a school has the option
of choosing between different Pell formulas, as explained later in this chapter. For such programs, a school normally
chooses one of the allowable formulas and uses that same formula for the duration of the program, but in rare cases a
school may have reason to change from the originally selected formula to a different allowable formula. Any such change
in Pell formulas for standard-term programs can only be made at the beginning of a new award year.
Pell Grant Payments by Payment Period
Pell Grants must be spread out in disbursements over the course of a program of study to help meet the student9s costs in
each payment period. The payment period affects when Pell funds are disbursed and the exact amount to be disbursed.
See
Volume 3, Chapter 1 for further discussion and definitions of payment periods.
A student who doesn9t enroll in one of the payment periods of a program won9t receive the portion of their award for that
payment period. If the student9s enrollment intensity changes in the next payment period, the annual award will change
and the disbursement amount for the payment period will be different.
Your school must apply its federal student aid full-time enrollment standards consistently to all students enrolled in the
same program of study for all Title IV purposes. However, your school9s academic standard may differ from the enrollment
standard used by the financial aid office for Title IV purposes. For example, your school's academic policy may define full
time as six hours during the summer, but the financial aid office uses 12 hours as the full-time standard for all terms,
including the summer term. For more on enrollment status, see Volume 1, Chapter 1.
Basic Pell Grant formulas
34 CFR 690.63 3 Pell Grant formulas
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Chapter 3
Pell Grant Enrollment Intensity and Cost of Attendance
Pell Grants and Enrollment Intensity
Enrollment intensity is the percentage of full-time enrollment at which a student is enrolled, rounded to the nearest whole
percent. For example, if full-time enrollment is 12 credit hours and the student is enrolled in 7 hours, the enrollment
intensity would be 7 ÷ 12 × 100% = 58.3% (round to 58%).
Pell Grant Enrollment Intensity for Term-Based Programs
In a term-based program, academic progress is always measured in credit hours (or an equivalent measure in a direct
assessment program), and the student9s annual award depends on their enrollment intensity. Your school9s standards for
full-time enrollment must meet the minimum regulatory requirements, which are discussed in detail in
Volume 1, Chapter
1 of the FSA Handbook.
Programs Offered in Standard Terms
For Title IV purposes, full-time enrollment for programs offered in standard terms is defined by the institution and, for
undergraduate students, must comprise at least 12 credit hours. Below is a chart of enrollment intensity relative to full
time, assuming the school defines it as 12 credit hours for financial aid purposes. Enrollment intensity only applies to
Pell Grant eligibility. All other Title IV programs use enrollment status categories (full-time, three-quarter
time, half-time, and less-than-half-time).
Credit Hours Enrollment Intensity Formula Enrollment Inten sity Enrollment Status Equivalent
12 (or more) 12 ÷ 12 = 1.0 100% Full-Time
11 11 ÷ 12 = 0.917 92% Three-Quarter Time
10 10 ÷ 12 = 0.833 83% Three-Quarter Time
9 9 ÷ 12 = 0.75 75% Three-Quarter Time
8 8 ÷ 12 = 0.667 67% Half-Time
7 7 ÷ 12 = 0.583 58% Half-Time
6 6 ÷ 12 = 0.50 50% Half-Time
5 5 ÷ 12 = 0.417 42% Less-than-Half-Time
4 4 ÷ 12 = 0.333 33% Less-than-Half-Time
3 3 ÷ 12 = 0.25 25% Less-than-Half-Time
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2 2 ÷ 12 = .0167 17% Less-than-Half-Time
1 1 ÷ 12 = 0.083 8% Less-than-Half-Time
Note: Enrollment intensity cannot exceed 100% for purposes of Pell Grant proration.
If the student is enrolled less than half time, it will also affect the cost components that are used in the student9s budget
(see
Volume 3, Chapter 2). Note that schools do not have the discretion to refuse to pay an otherwise eligible part-time
student, including during a summer term or intersession.
Programs Offered in Nonstandard Terms
Full-time enrollment for programs offered in nonstandard terms is determined by multiplying the number of weeks in each
term by the number of credit hours in an academic year, then dividing the result by the number of weeks in an academic
year. The full-time enrollment number is then used as the denominator for determining enrollment intensity.
For example, College X has a program that consists of four 8-week terms. College X defines the academic year as 40
quarter hours and 32 weeks of instructional time. College X determines that full-time enrollment is 10 credit hours per
term [(8 weeks per term * 40 credit hours)/32 weeks of instruction)]. Below is a chart of enrollment intensity, relative to
10 credit hours per term as full-time.
Quarter Credit Hours Enrollment Intensity Formula Enrol lment Intensity Enrollment Status Equivalent
10 (or more) 10 ÷ 10 = 1.0 100% Full-Time
9 9 ÷ 10 = 0.90 90% Three-Quarter Time
8 8 ÷ 10 = 0.80 80% Three-Quarter Time
7 7 ÷ 10 = 0.70 70% Half-Time
6 6 ÷ 10 = 0.60 60% Half-Time
5 5 ÷ 10 = 0.50 50% Half-Time
4 4 ÷ 10 = 0.40 40% Less-than-Half-Time
3 3 ÷ 10 = 0.30 30% Less-than-Half-Time
2 2 ÷ 10 = 0.20 20% Less-than-Half-Time
1 1 ÷ 10 = 0.10 10% Less-than-Half-Time
Note: Full-time enrollment for programs offered in nonstandard terms may differ from program to program and even from
term to term, as it is based on the number of weeks in each term, the number of credit hours in an academic year, and
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the number of weeks in an academic year.
Pell Grant Enrollment Intensity for Clock-Hour or Non-Term-Based Programs
Students enrolled in clock-hour or non-term-based programs are considered to be enrolled full-time for Pell Grant
purposes. See Chapter 4 of this volume for additional discussion of enrollment intesity for clock-hour and non-term-based
programs.
Pell Grant Enrollment Intensity for a Consortium Program
The enrollment intensity of a student attending more than one school under a consortium agreement is based on all the
courses taken that apply to the degree or certificate at the home school. The disbursing school may have to make some
adjustments if the coursework at the other school is measured in different units.
Below are examples of calculating enrollment intensity for students enrolled in regular coursework at their home
institution and coursework offered at another institution through a consortium agreement. The examples describe how to
calculate enrollment intensity when the units of enrollment are different (i.e., semester hours at the home school and
quarter hours at the consortium institution).
Students Enrolled in Only Correspondence Courses
Students enrolled in programs of correspondence study are considered to be enrolled no more than half time (the
equivalent of 50% enrollment intensity), even if they are enrolled in enough coursework to be full time. However, if the
correspondence study is combined with regular coursework, the student9s enrollment intensity might be more than half
Volume 7, Chapter 3, Example 1: Quarter Hours Converted to Semester Hours
A student is taking six semester hours at their home school and nine quarter hours at a different school under a
consortium agreement. To determine their enrollment intensity, the home school needs to convert the hours at
the host school into semester hours.
Because a quarter hour is about two-thirds of a semester hour, the home school multiplies the number of quarter
hours by two-thirds:
9 quarter hours x 2/3 = 6 semester hours
Then the hours taken at both schools can be added together:
6 semester hours (home school) + 6 semester hours (host school) = 12 semester hours
Volume 7, Chapter 3, Example 2: Semester Hours Converted to Quarter Hours
A student is taking nine quarter hours at their home institution and six semester hours at a different institution. To
determine their enrollment intensity, the home school needs to convert the hours at the host school into quarter
hours.
Because a semester hour is about one and one-half of a quarter hour, the home school multiplies the number of
quarter hours by 1.5:
6 semester hours x 1.5 = 9 quarter hours
Then, the hours taken at both schools can be added together:
9 quarter hours (home school) + 9 quarter hours (host school) = 18 quarter hours
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time (see section below for additional information).
A student enrolled only in a non-term correspondence program always has their award calculated based on 50%
enrollment intensity. For a student enrolled in a term-based correspondence program, your school must determine
whether the student is enrolled half time (six or more credit hours in a term) or less than half time (fewer than six credit
hours in a term). Special rules are used to determine the student9s enrollment intensity when the student is enrolled in a
combination of regular and correspondence coursework.
Students Enrolled in a Combination of Regular and Correspondence Courses
If a student is enrolled in a non-correspondence study program, but correspondence coursework is combined with regular
coursework, the correspondence courses must meet the following criteria to be considered in determining the student9s
enrollment intensity:
The courses must apply toward the student9s degree or certificate or must be remedial work to help the student in
their course of study.
The courses must be completed during the period required for the student9s regular coursework (e.g., a term).
The amount of correspondence work counted can9t be more than the number of credit hours of regular coursework in
which the student is enrolled (although a student taking at least a half-time load of correspondence courses must be
paid as at least a half-time student, regardless of the credit hours of regular coursework).
This chart assumes that the school defines full-time enrollment as 12 credit hours per term, and half-time enrollment as
six credit hours per term.
Regular Work Correspondence Work Adjusted Total Cours ework Enrollment Intensity
3 3 6 50%
3 6 6 50%
3 9 6 50%
6 3 9 75%
6 4 10 83%
6 6 12 100%
6 2 8 67%
2 6 6 50%
3 2 5 42%
As you can see in the second and third rows of the table, the number of correspondence hours counted in the total course
load was adjusted so that the correspondence hours never exceeded the regular hours taken. Note that, in the second to
last row of the table, the student is eligible for payment based on half-time (50% enrollment intensity) in correspondence
courses, because not all the correspondence work can be counted toward enrollment intensity.
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Determining Enrollment Intensity Using Credit Hour Equivalencies
For students enrolled in direct assessment programs and students with intellectual disabilities enrolled in comprehensive
transition and postsecondary (CTP) programs, enrollment intensity can be calculated using credit hour <equivalencies=
rather than credit hours.
For direct assessment programs, schools must develop a methodology, consistent with the requirements of the school9s
accrediting agency or state, to reasonably equate each class or competency in the direct assessment program to either
credit hour or clock hour equivalencies. For more information, see
Volume 2, Chapter 2 of the FSA Handbook.
Enrollment intensity for students with intellectual disabilities enrolled in CTP programs may also be determined using
credit hour equivalencies. These equivalent credits, earned from audited courses and other normally noncredit activities
undertaken as part of a program for students with disabilities, may be awarded for purposes of determining enrollment
intensity. For more detail, see Volume 1, Chapter 1 of the FSA Handbook.
Enrollment Intensity for Cooperative Education
In a cooperative education program, your school assesses the work to be performed by the student and determines the
equivalent academic course load. The student9s enrollment intensity is based on the equivalent academic course load.
Academic Calendar and Enrollment Intensity Changes
Because the academic calendar for a program determines which Pell formula you use, you need to review the conditions
for the use of each formula if the calendar for the program changes. This is particularly true if you are using Formulas 1
and 2, which have the most restrictive conditions.
If a student9s enrollment intensity changes during the year, your school may have to recalculate the student9s Pell Grant
payment based on the new enrollment intensity. We9ll discuss when a school is required to recalculate a student9s Pell
Grant payment due to a change in enrollment intensity in Chapter 7 of this volume.
Pell Grant Cost of Attendance
The types of costs included in the Pell Grant cost of attendance are the same as those for the other
Title IV programs;
however, the value of each component in the Pell Grant COA is always based on the costs for a full-time student for a
full academic year. See Volume 3, Chapter 2 of the FSA Handbook for a full discussion of cost of attendance and
allowable costs.
For Pell, costs for programs or enrollment periods longer or shorter than an academic year must be prorated so that they
are the costs for one full academic year. This is true for both parts of the academic year definition: if either the number of
weeks or the number of clock/credit hours differs from the academic year standard, the costs must be prorated to
determine the full-time, full-year Pell budget.
The need to prorate Pell costs is most likely to occur in these situations:
A term-based program that provides fewer weeks of instructional time than the minimum number of weeks of
instructional time in an academic year;
A non-term program that provides less than 24 semester hours, 36 quarter hours, or 900 clock hours and/or provides
fewer weeks of instructional time than the minimum number of weeks of instructional time in an academic year; or
A program that is longer than an academic year, where the costs for the entire program are charged at the beginning
Enrollment intensity changes
34 CFR 690.80(b)
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of the program.
There are two ways to prorate Pell costs, as shown in the following examples. Examples 3 and 4 are based on a program
that is shorter than an academic year. Example 5 shows how costs are prorated when they are charged for a program that
is longer than an academic year. Note that prorating the COA usually does not affect the amount of Pell Grant the student
receives. However, you9re required to report the full-time, full-year Pell budget when reporting disbursements to the
Common Origination and Disbursement System (COD).
Volume 7, Chapter 3, Example 3: Prorating Total Costs by Lesser of Two Fractions
You may take the student9s entire COA (tuition and fees, housing and food, etc.) and multiply it by the lesser of
the two fractions that represent the length of the academic year. One fraction is based on credit or clock hours
and the other is based on weeks of instructional time, as shown in this example.
Let9s use the example of a program that charges $10,500, awards 18 semester credits, and is completed by most
full-time students within 20 weeks of instructional time.
Credit/clock hours in academic year definition (24) ÷ Credit/clock hours awarded (18)
OR
Weeks in academic year definition (30) ÷ Weeks provided (20)
Since the fraction using credit hours is the lesser fraction, the program cost of $10,500 is multiplied by 24/18 to
find the full-year Pell cost.
$10,500 x (24/18) = $14,000
The full-time cost is $14,000.
Note: If one of the fractions is equal to one, for instance, if the program awards 24 credit hours, then the prorated
cost is the same as the original COA.
Volume 7, Chapter 3, Example 4: Prorating Academic Costs and Living Expenses Separately
As an alternative, you can separately prorate the costs associated with credit or clock hours (tuition and fees,
books and supplies, loan fees) and the costs associated with weeks of instructional time (housing and food,
miscellaneous expenses, disability expenses, transportation, dependent care, study abroad, reasonable costs
associated with employment as part of a cooperative education program). Using our earlier example of a program
lasting 20 weeks and awarding 18 credit hours, and specifying that the student9s tuition, books, supplies, etc.,
come to $4,500 and living expenses amount to $6,000, the calculation would look like this:
$4,500 x (24/18) = $6,000
$6,000 x (30/20) = $9,000
In this example, the student9s Pell COA is the sum of the two prorated costs, or $15,000.
Volume 7, Chapter 3, Example 5: Prorating Costs for a Non-term Program Longer Than an Academic
Year
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Less Than Half Time Pell Grant Cost of Attendance
As stated above, the value of each component in the Pell Grant COA is always based on the costs for a full-time student
for a full academic year. However, students enrolled less than half time may only have certain components included in
their COA. You may not include either (1) miscellaneous personal expenses or (2) housing and food if the student has
exhausted their less-than-half-time housing and food allowance (three semesters or equivalent in total, no more than two
of which may be consecutive at any one school). See
Volume 3, Chapter 2 of the FSA Handbook for a full discussion of
cost of attendance and allowable costs for less-time-half-time students.
The following examples use the cost of attendance described below and demonstrate how a student9s Scheduled Pell
Grant award may differ, based on a less-than-half-time enrollment intensity. For demonstration purposes, assume the
student has exhausted their less-than-half-time housing and food allowance at the institution.
COA Component Amount (FT) Amount (LTHT)
Tuition and Fees $2,500 $2,500
Books and Supplies $500 $500
Housing and Food $5,000 $0
Transportation $500 $500
Personal Expenses $500 $0
Pell Grant COA (Full-Year) $9,000 $3,500
You must also prorate costs if they are charged for a period longer than an academic year. You may use either of
the proration methods shown in Examples 3 and 4. We9ll use the example of a program awarding 1,000 clock
hours and providing 40 weeks of instructional time. Let9s assume that the school uses the regulatory minimums
and defines the academic year as 900 clock hours and 26 weeks. The total costs over the 40 weeks, including
tuition and living expenses, are $5,900. If we use the method in Example 3, this amount must be prorated by the
lesser of the following two fractions:
Credit/clock hours in academic year definition (900) ÷ Credit/clock hours awarded (1,000)
OR
Weeks in academic year definition (26) ÷ Weeks provided (40)
The lesser of the two fractions is the one based on weeks (26/40). Multiply the total program cost by this fraction
to determine the Pell costs for a full academic year:
$5,900 x (26/40) = $3,835
If the student is in a category where costs are limited, such as less-than-half-time enrollment, those costs that are
allowable must be based on costs for a full-time student for a full academic year. For instance, the tuition
component of the Pell COA for a less-than-half-time student must be based on the tuition costs that would be
incurred by a full-time student attending a full academic year.
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The student is eligible for Max Pell, which is $7,500 for demonstration purposes. As a full-time student, the Pell Grant COA
($9,000) is greater than the Pell Grant amount ($7,500), so the student9s Scheduled Award is $7,500. However, since the
less-than-half-time Pell Grant COA ($3,500) is less than the Pell Grant amount ($7,500), the student9s Scheduled Award as
a less-than-half-time student is capped at $3,500. See <Volume 7, Chapter 4, Example 4= for a demonstration of how to
determine the student9s annual award, based on less-than-half-time enrollment intensity.
Pell Grant Cost of Attendance for Cooperative Education
If a student has a co-op job for the first term, the tuition and fees for that period can be prorated over the full academic
year for the program (which must include at least 24 semester/trimester hours, 36 quarter credit hours, or 900 clock
hours, as well as 30 weeks of instructional time, or, for clock-hour programs, 26 weeks). This prorated amount is then
added to the other COA components to arrive at the total cost for a full-time student for a full academic year.
For the rest of the year, your school can either use the COA with the projected amount or can recalculate the student9s
tuition and fees at the end of the first term to determine a new COA for the remaining payment periods. This decision
must be consistent with your school9s overall policy on recalculating for changes in a student9s costs. Note that the COA
can also include employment-related expenses.
Pell Grant Cost of Attendance for a Consortium Program
A student receiving a Pell Grant for attendance at two schools through a consortium agreement may have costs from both
schools at the same time. The student9s COA is calculated in the same way as for a student taking classes at only one
school. The student9s charges for tuition and fees and books and supplies at the consortium schools must be combined
into a single charge for a full academic year for purposes of the Pell calculation.
The school paying the student may choose to use actual charges for the student, which would simply be the sum of the
actual charges at each school. Of course, if the student isn9t attending full-time, your school will have to prorate these
tuition and fees and books and supplies charges so that they are the correct amounts for a full-time, full-year student.
If the disbursing school uses average charges, then the average full-time charges at each of the schools must be prorated
and combined. If the student is taking a full-time load at each school, the full-time tuition and fees charges for an
academic year at each school can be averaged to determine the tuition and fee cost. However, if the student is taking an
unequal course load, the disbursing school must prorate the charges based on the number of hours the student is taking
at each school.
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Chapter 4
Calculating Annual Awards Using Pell Grant Formulas
Fractions and Rounding
Use the following rules on fractions and rounding along with Pell Formulas 1-5 (discussed later) to properly calculate and
award Pell Grants.
Fractions
When using fractions, be careful to multiply first, and then divide to avoid an incorrect result. For example, the correct
way to prorate a $2,150 Scheduled Award for a payment period that is a nonstandard term of 10 weeks of instructional
time, for a program that has 30 weeks of instructional time is to multiply the Scheduled Award by the number of weeks of
instructional time in the term, then divide by the number of weeks of instructional time in the academic year or ($2,150 x
10) ÷ 30 = $716.67.
In this case, if you were to first divide the fraction consisting of the weeks in the payment period over the weeks in the
academic year to get a decimal (10 ÷ 30 = 0.333333...) and then round the decimal either down (0.33) or up (0.34),
multiplying that decimal by the Scheduled Award amount would result in a number that9s too low (0.33 x $2,150 =
$709.50) or too high (0.34 x $2,150 = $731.00).
Rounding
The Common Origination and Disbursement System (COD) accepts cents and whole dollar amounts in payment amounts
for Pell. If your school disburses in whole dollar amounts, you may round up if the decimal is 0.50 or higher, or round down
if it's less than 0.50. When rounding for a student expected to be enrolled for more than one payment period in the award
year, alternate rounding up and down, unless a different Pell award amount is calculated for the following term (for
example, when a student9s enrollment intensity changes). In this case, the alternate rounding restarts and you may round
up for two consecutive terms. Your policy on rounding must be applied equally to all students.
As an example, consider a student who is enrolled full time in a program offered in a traditional academic calendar
consisting of fall and spring semesters. The student's full-time Scheduled Award is $7,005. Under Pell Formula 1 (as
described later in this chapter), the student's full-time payment for each of the two terms (fall and spring) is $3,502.50.
Using the rounding rule stated above, you would round the student's fall payment up to $3,503, and round the spring
payment down to $3,502.
Finally, when calculating eligibility using Pell Formula 2 or 3, you may round the annual award to the nearest whole dollar
before determining the disbursement amounts for each term. See <
Volume 7, Chapter 4, Example 9= for a demonstration
of this rounding rule.
Pell Formula 1: Credit-Hour Programs Using Standard Terms With At Least 30 Weeks of Instructional Time
To use Pell Formula 1, the program must:
Measure academic progress in credit hours;
Be offered in semesters, trimesters, or quarters;
Define full-time enrollment for each term in the award year as at least 12 credit hours; and
Use an academic calendar providing at least 30 weeks of instructional time that meets either of the following sets of
requirements:
Important: These rounding rules do not apply if the amount disbursed would exceed the student9s Pell Grant
eligibility for the award year or place the student9s Lifetime Eligibility Used over 600%.
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1. The academic calendar consists of two semesters or trimesters (fall and spring) or three quarters (fall, winter,
and spring), none of which overlap any other term in the program (including a summer term, which need not
meet the definition of a standard term); or
2. The academic calendar consists of any two semesters or trimesters or any three quarters where4
The school starts the terms for different cohorts of students on a periodic basis (e.g., monthly);
The program is offered exclusively in semesters, trimesters, or quarters; and
Students are not allowed to be enrolled simultaneously in overlapping terms and must stay with the cohort
in which they start unless they withdraw from a term (or skip a term) and re-enroll in a subsequent term.
For Formula 1, the term is the payment period, and you divide the student9s annual award by the number of terms in the
program9s academic year. You can combine modules into a standard term that meets the requirements for Formula 1.
(See the discussion under "Combining modules into a standard term" in Volume 3, Chapter 1 for examples.) You must use
the same formula for a program for all payment periods in an award year.
Pell Formula 1 Examples
Pell Formula 1
34 CFR 690.63(a)(1)
34 CFR 690.63(b)
Note: Examples use fictional maximum ($7,500) and minimum ($750) Pell Grant award amounts for
demonstration purposes only. Award amounts in examples in this volume should not be used in packaging Pell
Grants for the 2025-26 award year.
Volume 7, Chapter 4, Example 1: Traditional Academic Calendar
In Formula 1, the annual award is simply divided by the number of terms in the fall through spring at a school with
a traditional academic calendar.
Full-time definition: 30 weeks of instruction; 12 credits per term
Scheduled Pell Grant award: $7,500
Semester Disbursement Schedule
Fall Spring
Credit Hours (Enrollment Intensity %) 12 (100%) 15 (100%)
Annual Pell Award $3,750 $3,750
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Quarter Disbursement Schedule
Fall Winter Spring
Credit Hours (Enrollment Intensity %) 12 (100%) 15 (100%) 12 (100%)
Annual Pell Award $2,500 $2,500 $2,500
Since the student is enrolled full time in either two semesters or three quarters, they will have received a full
Scheduled Award at the end of the spring term. If the student enrolls in a summer term, they may be eligible to
receive further Pell funds from the Year-Round Pell provision. See the Year-Round Pell Grant section in Chapter 5
of this volume.
Volume 7, Chapter 4, Example 2: Nontraditional Academic Calendar
A school offers a program that has an academic year of 36 weeks of instructional time and 36 quarter hours and is
offered exclusively in quarters. A new cohort of students starts a quarter on the first workday of each month, and
a student is not allowed to take courses in overlapping terms outside that student9s cohort.
Any three quarters of the program provide at least 30 weeks of instructional time since each quarter is 12 weeks
of instructional time in length. To be full time, a student must be enrolled in at least 12 quarter hours each term. A
student enrolled full time in any three quarters would have their Scheduled Award divided by 3 to determine their
disbursement for each payment period.
Full-time definition: 30 weeks of instruction; 12 credits per term
Scheduled Pell Grant award: $7,500
Disbursement Schedule
Term 1 Term 2 Term 3
Credit Hours (Enrollment Intensity %) 12 (100%) 15 (100%) 12 (100%)
Annual Pell Award $2,500 $2,500 $2,500
If the student enrolls in a fourth term, they may be eligible to receive further Pell funds from the Year-Round Pell
provision. See the Year-Round Pell Grant section in Chapter 5 of this volume.
Volume 7, Chapter 4, Example 3: Enrollment Intensity Change
Full-time definition: 30 weeks of instruction; 12 semester credits per term
Scheduled Pell Grant award: $7,500
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Disbursement Schedule (Full-time)
Fall Spring
Credit Hours (Enrollment Intensity %) 12 (100%) 15 (100%)
Annual Pell Award $3,750 $3,750
If the same student enrolls in 12 credits in the fall and but reduces their spring enrollment to 9 credits before the
start of the spring semester, their spring payment will be based on 75% enrollment intensity for spring, rather
than the full-time Scheduled Award.
Full-time Scheduled Pell Grant award: $7,500
Disbursement Schedule (Less than full-time)
Fall Spring
Credit Hours (Enrollment
Intensity %)
12
(100%)
9 (75%)
Annual Pell Award $3,750 ($7,500 x 75%) ÷ 2 = $2,812.50 (which may be rounded to
$2,813)
Volume 7, Chapter 4, Example 4: Less-than-half-time Enrollment and Pell Grant COA
A student plans to enroll full time in the fall and spring semesters. The school determines the student9s
disbursement schedule, shown below.
Full-time definition: 30 weeks of instruction; 12 credits per term
FT Pell Grant COA: $9,000
FT Scheduled Pell Grant award: $7,500
Semester Disbursement Schedule
Fall Spring
Credit Hours (Enrollment Intensity %) 12 (100%) 15 (1 00%)
Annual Pell Award $3,750 $3,750
Before the start of the fall semester, the student decides they need to reduce their planned enrollment to 3
credits in each term, which is less than half time. The school determines the student9s less than half-time (LTHT)
Pell Grant COA is $3,500, based on the restrictions on which COA components can be included for a less-than-half-
time student. See <Less Than Half Time Pell Grant Cost of Attendance= in Chapter 3 of this volume for further
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Formula 1 Alternate Calculation
If a standard-term program meets the requirements to use Formula 1 or Formula 2, you have the option of dividing the
annual award by the number of all the terms (including the summer term) in the award year.
Pell Formula 2: Standard-Term Programs with Less Than 30 Weeks in the Fall Through Spring
The regulations provide an option for standard-term programs whose fall through spring terms provide less than 30 weeks
discussion of this topic.
LTHT Pell Grant COA: $3,500
LTHT Scheduled Pell Grant award: $3,500
Since the student9s Scheduled Award is limited by the student9s LTHT Pell Grant COA, the school uses the capped
Scheduled Award as the starting point for prorating the award by the enrollment intensity.
Semester Disbursement Schedule
Fall Spring
Credit Hours
(Enrollment Intensity
%)
3 (25%) 3 (25%)
Annual Pell Award ($3,500 x 25%) ÷ 2 = $437.50 (whic h
may be rounded up to $438)
($3,500 x 25%) ÷ 2 = $437.50 (which may
be rounded down to $437)
After completing 3 credits in the fall, the student decides they can handle an extra course in the spring semester
and enrolls in 6 credits. Since the student is enrolled at least half time in the spring, the school uses the full-time,
full-year Pell Grant COA to determine the student9s Scheduled Award ($7,500).
Semester Disbursement Schedule
Fall Spring
Credit Hours (Enrollment
Intensity %)
3 (25%) 6 (50%)
Annual Pell Award ($3,500 x 25%) ÷ 2 = $437.50 (whic h may be rounded
up to $438)
($7,500 x 50%) ÷ 2 =
$1,875
Note: In this example, the student9s total annual award based on less-than-half-time enrollment in the fall
(25% enrollment intensity) and half-time enrollment in the spring (50% enrollment intensity) is $2,313
($438 in the fall plus $1,875 in the spring). COD will only accept one Pell COA and one annual award for
the award year. Schools should report the larger COA and total annual award to COD to calculate the
Scheduled Award and Pell LEU correctly.
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of instructional time. Formula 2 may be advantageous for your summer term calculations as it allows you to pay the same
Pell amount for the summer term as you would for a traditional fall through spring term. You may use Formula 2 if the
program:
Has an academic calendar that consists of two semesters or trimesters (in the fall through the following spring) or
three quarters (in the fall, winter, and spring);
Does not have overlapping terms; and
Measures progress in credit-hours and defines full-time enrollment for each term in the award year as at least 12
credit-hours.
Pell Formula 2 Example
Pell Formula 2
34 CFR 690.63(a)(2)
34 CFR 690.63(c)
Note: Examples use fictional maximum ($7,500) and minimum ($750) Pell Grant award amounts for
demonstration purposes only. Award amounts in examples in this volume should not be used in packaging Pell
Grants for the 2025-26 award year.
Volume 7, Chapter 4, Example 5: Calculation for Standard Terms With Fall Through Spring Terms Less
Than 30 Weeks
A school offers a program with a 14-week fall term, 15-week spring term, and 10-week summer term. The school
defines its academic year as 24 semester hours and 30 weeks. Because the fall and spring terms provide less
than the minimum 30 weeks of instructional time for an academic year, a student9s full-time Scheduled Award
must be prorated based on the number of weeks in the academic calendar to determine the annual Pell Grant
award. The annual Pell Grant award is then divided by the number of terms in the fall through spring.
Scheduled Award: $7,500
Weeks in the academic year (fall through spring): 29
Annual award: ($7,500 * 29) ÷ 30 = $7,250
Disbursement Schedule
Fall (14 weeks) Spring (15 weeks)
Credit Hours (Enrollment Intensity %) 12 (100%) 15 (100%)
Annual Pell Award $3,625 $3,625
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Formula 2 Alternate Calculation
Under Formula 2, you can perform the same alternate calculation as performed under Formula 1 if the weeks of
instructional time in the defined academic year are the same as the total number of weeks of instructional time in all the
terms in the award year.
Pell Formula 3: General Formula for Any Term-Based Program
Any term-based program may use this formula for Pell calculations, but you must use this formula for a term-based
program that does not qualify for Formulas 1 or 2 (for instance, a program that uses only nonstandard terms). To calculate
the payment for the term, you must prorate the Scheduled Award.
In Formula 3, the Scheduled Pell Award is prorated based on the number of weeks of instructional time in each term in the
academic year to determine the annual Pell Grant award by term. Unlike Formula 1, the annual award isn9t simply divided
evenly by the number of terms. And, unlike Formula 2 where you prorate the Scheduled Award based on the combined
total number of weeks in the fall through spring terms, Formula 3 requires you to prorate the Scheduled Award by the
number of weeks in each specific term, using the following formula:
(Scheduled Award x Weeks in the Term) ÷ Total Weeks in the Academic Year
Pell Formula 3 Examples
The total disbursed for this student ($7,250) is less than the student9s Scheduled Award ($7,500). This student
may be able to receive a disbursement comprising the remainder of their Scheduled Award during the summer
term. Additionally, the student may be eligible to receive funds from Year-Round Pell provisions. See the <Year-
Round Pell Grant= section in Chapter 5 of this volume.
Pell Formula 3
34 CFR 690.63(a)(3)
34 CFR 690.63(d)
Note: Examples use fictional maximum ($7,500) and minimum ($750) Pell Grant award amounts for
demonstration purposes only. Award amounts in examples in this volume should not be used in packaging Pell
Grants for the 2025-26 award year.
Volume 7, Chapter 4, Example 6: Payments for Standard Terms of Equal Length and Less Than 30
Weeks
For example, a college has a semester-based program with a 2-term academic calendar that comprises 28 weeks
of instructional time. The program9s academic year is defined as 24 semester hours and 30 weeks of instructional
time.
Scheduled Award: $7,500
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Disbursement Schedule
Fall (14 weeks) Spring (14 weeks)
Credit Hours (Enrollment Intensity %) 12 (100%) 15 (100%)
Calculation ($7,500 x 14) ÷ 30 ($7,500 x 14) ÷ 30
Annual Pell Award $3,500 $3,500
A single disbursement for a payment period generally cannot be for more than 50% of the annual award. If the
disbursement amount for one term would be more than 50% of the annual award, you must generally make the
payment in at least two disbursements in that payment period regardless of whether the term is a standard term
or a nonstandard term. You may disburse the remaining portion of the payment for the term that exceeds 50% of
the annual award once the student has completed half of the weeks of instructional time in the program9s
academic year definition.
However, if the disbursement for the payment period results in more than half of the annual award and occurs
after half of the weeks of instructional time of the academic year have passed during the payment period, you can
make a disbursement of the full payment for the payment period.
Single Disbursement May Not Exceed 50% of Award
34 CFR 690.63(f)
Volume 7, Chapter 4, Example 7: Disbursing More Than Half the Annual Award and the 50%
Requirement
For example, consider a program that must use Formula 3 and that has three terms with 17, 14, and 6 weeks of
instructional time. The program's academic year is defined as 30 weeks of instructional time and 24 semester
hours.
A student9s enrollment intensity is 50% in all three terms.
Scheduled Pell Award: $7,500
Annual Pell Award: $7,500 x 50% = $3,750
Disbursement Formula: (Annual Award x Weeks in the Term) ÷ Total Weeks in the Academic Year
Disbursement Schedule
Term 1 (17 weeks) Term 2 (14 weeks) Term 3 (6 weeks)
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Enrollment Intensity Standards for Nonstandard Terms
If you are using Formula 3 for a program that contains standard terms, the minimum full-time enrollment standards
previously discussed would still apply for the standard terms. However, if a program has nonstandard terms, the full-time
enrollment standard must be calculated for the nonstandard terms. Full-time enrollment status for a nonstandard term is
determined based on the length of the term in relation to the academic year:
[Weeks in nonstandard term ÷ weeks in academic year (at least 30)] x Credit-hours in academic year
After you determine the number of credit hours required for full-time enrollment, you can then determine the enrollment
intensity for the nonstandard term using the following formula:
Credit hours student takes in the nonstandard term ÷ Credit hours required for full-time enrollment in the nonstandard
term
Calculation ($3,750 x 17) ÷ 30 ($3,750 x 14) ÷ 30 ($3,750 x 6) ÷ 30
Disbursement 1st Disb.: $1,875
2nd Disb.: $250
$1,750 $750
For the first term, you may disburse 15/30 of the student9s award at the beginning of the term and the final 2/30
only after the 15th week of instructional time in the term. However, if the student establishes eligibility in the 16th
week of the term, you can make a disbursement of 17/30 of the annual award at that time. The student9s award
for the second and third terms may each be disbursed in a single disbursement.
Notes: These fractions use weeks of instructional time as defined in Volume 3, Chapter 1, which are not
necessarily the same number as the calendar weeks in an academic year.
If the program9s coursework is offered in whole credits, the resulting number is rounded up to the next whole
number (e.g., 3.3 is rounded up to 4).
If the program9s coursework is offered in fractions, the minimum number of credits required for full-time
enrollment need not be rounded. For example, 3.3 would remain 3.3 as full time, and a student taking 3.4 credits
in the term would be full time.
Determining Full-Time Enrollment for Nonstandard Te rms
34 CFR 668.2(b) <Full-time student=
Volume 7, Chapter 4, Example 8: Payments for Nonstandard Terms of Equal Length
A school has a program that consists of four 8-week terms. The school defines its academic year as 40 quarter
hours and 32 weeks of instructional time. Because this program does not use standard terms (semesters,
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trimesters, or quarters), the school must use Formula 3 to calculate Pell Grant disbursements for students in the
program.
Scheduled Award: $7,500
Full-time calculation: (8 weeks in term x 40 quarter hours) ÷ 32 weeks in academic year
Full time: 10 quarter hours
To determine the student9s payment for each payment period, multiply the Scheduled Award by the length of the
nonstandard term compared to the length of the academic year.
Payment calculation: (8 weeks in term x $7,500) ÷ 32 weeks in academic year = $1,875
Disbursement Schedule
Term 1 (8
weeks)
Term 2 (8
weeks)
Term 3 (8
weeks)
Term 4 (8
weeks)
Credit Hours (Enrollment
Intensity %)
10 (100%) 12 (100%) 10 (100%) 10 (100%)
Disbursement $1,875 $1,875 $1,875 $1,875
Because the student in this example will be enrolled on a full-time basis (at least 10 hours each term), the
student9s annual award is the same as the Scheduled Award. A student enrolled less than full-time must have
their Scheduled Award prorated based on enrollment intensity in each term. For example, a student enrolled in 8
credits in Term 1 would have enrollment intensity of 80%. Their disbursement for Term 1 would be [($7,500 X
80%) x 8] ÷ 32 = $1,500. This is a term-based, credit-hour program, so the payment period is the term.
Volume 7, Chapter 4, Example 9: Payments for Nonstandard Terms of Unequal Length
A school has a 10-week nonstandard term between two 12-week nonstandard terms. The terms do not overlap.
The academic year for the program is defined as 34 weeks of instructional time and 24 semester hours. Courses
are offered in whole credits. The school must use Formula 3 to calculate Pell Grant payments for students in this
program.
A student enrolls in six credit hours in each of the three terms. Because the program has nonstandard terms, the
school must determine the number of credit-hours required for full-time enrollment in each term, as follows.
For the first and third terms:
(12 weeks in term x 24 semester hours) ÷ 34 weeks in academic year = 8.47 (round up to 9)
For the second term:
(10 weeks in term x 24 semester hours) ÷ 34 weeks in academic year = 7.06 (round up to 8)
To be full time a student must enroll in nine semester hours (rounded up from 8.47) in the first and third terms,
and eight semester hours (rounded up from 7.06) in the second term.
Below is a sample disbursement schedule for a student who enrolls in 6 credits in each of the three terms.
Scheduled award: $7,005
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Pell Formula 4: Clock-Hour and Non-Term Credit-Hour Programs
All clock-hour and non-term credit-hour programs must use Formula 4.
Enrollment Intensity in Clock-Hour and Non-Term Credit-Hour Programs
For clock-hour programs and for non-term credit-hour programs, enrollment intensity only makes a difference if the
student is attending less than half time. If that9s the case, only certain components of the COA are used (see the
discussion in Volume 3, Chapter 2 of the FSA Handbook).
The annual award for a student in a clock-hour or non-term credit-hour program is always based on the full-
time Scheduled Award, even if the student is attending less than full time.
Calculating Payment Amounts in Clock-Hour and Non-Term Credit-Hour Programs
Pell Grants must be paid in installments over the course of the academic year or program of study to help meet the
student9s costs in each payment period. The payment period determines when Pell funds are disbursed and the exact
amount to be disbursed. You must use the rules discussed in Chapter 1 of Volume 3 to determine the payment periods for
clock-hour and non-term credit-hour programs.
In non-term programs, the student9s Pell award is not reduced for part-time enrollment unless the student is enrolled less
than half time, in which case the student9s COA must be adjusted. However, if a program is less than an academic year in
length (in either clock/credit hours or weeks of instructional time), students enrolled in the program won9t receive a full
Scheduled Award.
Enrollment intensity: Terms 1 and 3 = 6 ÷ 9 or 67%; Term 2 = 6 ÷ 8 or 75%
Disbursement Schedule
Term 1 (12 weeks) Term 2 (10 weeks) Term 3 (12 weeks)
Credits
(Enrollment
Intensity %)
6 (67%) 6 (75%) 6 (67%)
Annual Award $7,005 x 67% = $4,693.35
(may be rounded to $4,693)
$7,005 x 75% = $5,253.75
(may be rounded to $5,254)
$7,005 x 67% = $4,693.35
(may be rounded to $4,693)
Disbursement ($4,693 x 12) ÷ 34 =
$1,656.35 (may be rounded to
$1,656)
($5,254 x 10) ÷ 34 =
$1,545.29 (may be rounded to
$1,545)
($4,693 x 12) ÷ 34 =
$1,656.35 (may be rounded to
$1,656)
Pell Formula 4
34 CFR 690.63(a)(4)
34 CFR 690.63(e)
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As in the case of the other formulas, you must perform comparable prorations of the award for each payment period in
the student9s program. The calculation for the payment period prorates a student9s Scheduled Award based on either (1)
the number of credit or clock hours in the payment period compared to the credit or clock hours in the defined academic
year or (2) the number of weeks of instructional time in the payment period compared to the weeks of instructional time
in the academic year. To determine the payment for a payment period, multiply the student9s Scheduled Award by the
lesser of:
Number of credit/clock hours in the payment period ÷ Number of credit/clock hours in the program9s academic year
OR
Weeks in the payment period ÷ Weeks in the program9s academic year
Enrollment Intensity Standards for Clock-Hour and Other Non-Term Programs
For non-term programs, the enrollment minimums are:
Full-time enrollment (clock hours): at least 24 clock hours per calendar week.
Full-time enrollment (credit hours): 24 semester hours, 24 trimester hours, or 36 quarter hours per academic year.
Less than half-time enrollment (clock hours and credit hours) is defined as less than half of the workload of the
minimum full-time requirement.
Pell Formula 4 Examples
Note: These fractions use weeks of instructional time as defined in Volume 3, Chapter 1, which are not
necessarily the same number as the calendar weeks in an academic year. The program9s defined academic year
must be at least 30 weeks for credit-hour programs or 26 weeks for clock-hour programs.
Note: Examples use fictional maximum ($7,500) and minimum ($750) Pell Grant award amounts for
demonstration purposes only. Award amounts in examples in this volume should not be used in packaging Pell
Grants for the 2025-26 award year.
Volume 7, Chapter 4, Example 10: Payments for Clock-Hour Program
A school offers a program that is 900 clock-hours and 22 weeks of instructional time in length. The school defines
the academic year for the program based on the regulatory minimums: 900 clock-hours and 26 weeks of
instructional time. The school has established two payment periods of 450 clock hours and 11 weeks each for this
program.
To determine the disbursement for the payment period, the school must multiply the Scheduled Award by the
lesser of:
the fraction comparing the hours in the payment period to the hours in the academic year (450/900), or
the fraction comparing the weeks in the payment period to the weeks in the academic year (11/26).
If the student9s Scheduled Award is $7,500, the two possible calculations would be as follows:
(450 clock hours in the payment period * $7,500) ÷ 900 clock hours in the academic year = $3,750; or
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Coursework Completion Requirement and Withdrawal/Re-entry in Non-term Programs
Students in non-term programs must successfully complete a payment period to receive subsequent payments. We
discuss the effect of withdrawal and re-entry into a program in Volume 5.
Pell Formula 5: Calculations for Correspondence Study Programs
Formulas 5A and 5B must be used for correspondence study programs. Students enrolled in correspondence courses are
eligible for aid under Title IV programs only if the courses are part of a program leading to an associate9s, bachelor9s, or
graduate degree. In addition, the correspondence program must meet the criteria for an eligible program (see Volume 2
of the FSA Handbook).
Pell COA for Correspondence Study Programs
(11 weeks in the payment period * $7,500) ÷ 26 weeks in the program9s academic year = $3,173.08
In this example, the lesser fraction is the one based on weeks. Therefore, the student9s payment for the first
payment period will be $3,173.08 (or $3,173 if your school does not award cents). The student can get this
payment when they begin the program. They can receive a second payment of $3,173.08 (or $3,173 if your
school does not award cents) after the student successfully completes the 450 clock hours and 11 weeks in the
first payment period.
Volume 7, Chapter 4, Example 11: Payments for Credit-Hour Non-term Program
A school offers a program that is 24 quarter hours and 20 weeks of instructional time in length. The academic
year for the program is defined as 36 quarter hours and 30 weeks of instructional time. The school has established
two payment periods of 12 quarter hours and 10 weeks each for this program. To determine the disbursement for
the payment period, the school must multiply the Scheduled Award by the lesser of:
the fraction comparing the hours in the payment period to the hours in the academic year (12/36), or
the fraction comparing the weeks in the payment period to the weeks in the academic year (10/30).
If a student9s Scheduled Award is $7,500, the two possible calculations would be as follows:
(12 quarter hours x $7,500) ÷ 36 quarter hours in academic year = $2,500; or
(10 weeks * $7,500) ÷ 30 weeks in program's academic year = $2,500
Since the two resulting fractions (12/36 and 10/30) are the same, either calculation produces the same result:
$2,500. Thus, the student9s payment for the first payment period will be $2,500. The student can receive this
payment when they begin the program. The school can make a second payment of $2,500 after the school has
determined that the student has successfully completed 12 quarter hours and 10 weeks of instructional time of
the program.
Pell Grants for Correspondence Study
34 CFR 690.66
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The cost of attendance (COA) for students engaged in a program of study by correspondence must include tuition and
fees and, if required, books, course materials, supplies, and equipment. A school may also include an allowance for travel,
housing, and food costs incurred specifically for a period of residential training. The COA must be based on the costs for a
full-time student for a full academic year for the relevant component. If the student9s program or period of enrollment, as
measured in credit hours, is longer or shorter than an academic year as measured in credit hours, the tuition and fees for
the program or enrollment period must be prorated.
Because the correspondence study COA for the nonresidential component only includes costs associated with credit
hours, your school always uses the credit-hour-related fraction to prorate the COA. (Because there are no costs associated
with weeks of instructional time in the correspondence cost of attendance, your school must prorate the cost only if the
number of hours in the program is shorter or longer than in an academic year):
Credit hours in program9s definition of an academic year ÷ Credit hours to which the costs apply
The resulting amount is the full-time, full-academic-year cost used for calculating Pell Grant eligibility.
Pell Enrollment Intensity for Correspondence Study Programs
Students enrolled in programs of correspondence study are no more than half-time students (the equivalent of 50%
enrollment intensity), even if they are enrolled in enough coursework to be full time. However, if the correspondence
study is combined with regular coursework, the student9s enrollment intensity might be more than 50%. For a student
enrolled in a term-based correspondence program, your school must determine how many credits to include in the
numerator of the enrollment intensity formula to determine the student9s annual award. See the <Students taking a
combination of regular and correspondence courses= section in Chapter 3 for additional guidance.
A student enrolled only in a non-term correspondence program always has their award calculated based on 50%
enrollment intensity.
Pell Correspondence Payment Periods and Timing of Payments
For a
non-term correspondence program, there must be two equal payment periods in each academic year. Each payment
period is the lesser of half the academic year or half the program (measured in credit hours). In addition, you can9t
disburse a Pell payment for the first payment period until the student has completed 25% of the work in the academic
year or the program, whichever is shorter. You can9t make the second payment until the student has completed 75% of
the work in the academic year or program.
For a
term-based correspondence program, as for other term-based programs, the payment period is the term. However,
you can9t disburse Pell for a payment period until the student has completed 50% of the lessons or completes 50% of the
work for the term, whichever is later.
If the correspondence program has a required period of
residential training, you must treat the residential training as an
additional payment period and determine the payment for that payment period using either Formula 3 or Formula 4. Note
that the correspondence portion of the program is still treated as a separate portion of the program that9s divided into
equal payment periods.
Pell Calculations in Correspondence Programs
Formula 5 is used for students enrolled only in correspondence courses (not including residential components of
correspondence programs). There are two versions of Formula 5:
Pell Grant Correspondence Program Disbursements
34 CFR 690.66
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1. Formula 5A (which is like Formula 4) is used for non-term programs, and
2. Formula 5B (which is like Formula 3) is used for term-based programs.
For a residential component of a correspondence program, you must use either Formula 3 or Formula 4. If the residential
component is a term, you must Formula 3; otherwise, you use Formula 4.
For non-term correspondence programs, this step of the calculation is like the step under Formula 4. For term-based
correspondence programs, this step is the same as under Formula 3.
For the Pell calculation, you are required to determine the number of weeks of instructional time in the program by
preparing a written schedule for the lessons that the student will submit. A non-term correspondence program must
require at least 12 hours of preparation per week. A term-based correspondence program must require at least 30 hours
of preparation per semester hour or at least 20 hours of preparation per quarter hour during the term.
Formula 5A: Non-Term Correspondence Program
You first multiply the annual award (50% of the Scheduled Award) by the lesser of:
Number of credit-hours in the payment period ÷ Credit-hours in the program9s academic year definition
OR
Weeks in the payment period ÷ Weeks in the program9s academic year definition
Notes:
Formula 5B: Term Correspondence Program
You multiply the annual award (Scheduled Award times enrollment intensity) by the weeks of instructional time in the
term divided by the weeks in the academic year:
Weeks in the term ÷ Weeks in the program9s academic year definition
These fractions use weeks of instructional time as defined in Volume 3, Chapter 1, which are not necessarily the same
number as the calendar weeks in an academic year.
A single disbursement for a payment period can never be more than 50% of the annual award. If the resulting amount is
more than 50% of the annual award, your school must make the payment in at least two disbursements in that payment
period. You may not disburse an amount that exceeds 50% of the annual award until the student has completed the time
in the payment period that equals 50% of the weeks of instructional time in the program9s academic year definition.
Correspondence Multiple Formulas Exception
Correspondence Payment Periods
34 CFR 690.66(b) 4 non-term
34 CFR 690.66(c)(3) and (c)(4) 4 term-based
Note: These fractions use weeks of instructional time as defined in Volume 3, Chapter 1, which are not
necessarily the same number as the calendar weeks in an academic year.
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If a correspondence student has one or more payment periods in an award year that contain only correspondence study,
and one or more payment periods in the same award year that contain a residential portion, your school will use two
different formulas for determining a student9s payment for each payment period. This is the only circumstance in which a
school would use two different Pell formulas within the same award year for students in the same program.
Academic Coursework
The phrase <academic coursework= does not necessarily refer to credits. If a student does not earn any credits until the
end of the term or program, <academic coursework= may refer to the lessons or other measures of learning within a
course or a program. For instance, if a course or program is made up of 40 equal lessons, the student reaches the halfway
point as follows:
If the student successfully completes the first 20 lessons before the calendar midpoint of the academic year, the
second payment period does not begin until the calendar midpoint.
If the student completes the first half of the academic year before successfully completing the first 20 lessons, the
second payment period does not begin until the student successfully completes the first 20 lessons.
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Chapter 5
Summer Terms, Crossover Payment Periods, and Year-Round Pell
Payment periods don9t always fall neatly into one award year or another. A payment period that begins before July 1 and
ends on or after July 1 is called a <crossover payment period.= The formula for calculating the payment for a crossover
payment period is the same as that for any other payment period in the award year.
Crossover Payment From the Proper Award Year
For Pell purposes, you must consider a crossover payment period to occur entirely within one award year and calculate
the student9s Pell award and disburse Pell funds from the award year selected. If you only have a valid FAFSA Submission
Summary/ISIR from one award year, you must rely on that record and the award year to which the valid FAFSA
Submission Summary/ISIR pertains. Aside from these considerations, the decision about which award year to use is based
on the student9s remaining eligibility in the earlier award year. This assessment is made according to your school9s
payment period policy, which for crossover Pell payment periods may apply to:
an individual student;
all students or a category of students without exception; or
all students or a category of students with allowance for exceptions in the case of individual students.
Although you may assign a crossover payment period to either of the relevant award years (subject to the limitations
described below), you must make the assignment based on what you determine will be most beneficial to students.
You may assign the Pell Grant award to a different award year than the rest of the student9s Title IV aid. You can make a
payment for a crossover payment period out of either award year if the student has a valid FAFSA Submission
Summary/ISIR for the award year selected. You may assign two consecutive crossover payment periods to the same
award year. For example, you could treat summer 2025 and summer 2026 as both being in the 2025-26 award year. You
may also source the Pell funds from different award years for different students, as their eligibility allows, depending on
their remaining eligibility and financial need.
You may not make a payment which will result in the student receiving more than their Scheduled Award for an award
year, unless the student is eligible for a Year-Round Pell award (see Year-Round Pell Grant section later in this chapter), in
which case the student may be eligible to receive up to 150% of their Scheduled Award for the award year.
Term Schools: Using the Formula for Summer Sessions
If your school offers a summer term in addition to fall through spring terms that qualify for Formula 1 or 2, you will
calculate the student9s payment for the summer term using the same formula that you used to calculate payments for the
other terms in the award year to which the summer term is assigned. If you use Formula 3 for Pell Grant calculations in
any of the terms in an award year, then you must use Formula 3 for all terms in that program occurring in that award
year, including the fall through spring terms. (Note that if your program is a standard-term program in the fall through
spring and does not define full-time enrollment in the summer as at least 12 credit-hours, you must use Formula 3 for Pell
calculations for all terms in the award year.) Your school must apply its definition of full-time status for the
summer term consistently for all Title IV program purposes.
Crossover Payment Periods
34 CFR 690.64
Dear Colleague Letter GEN-17-06
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Pell Grant COA for Summer Terms
Costs used to determine Pell Grant eligibility for summer terms are figured in the same way as for any other payment
period; that is, the costs are based on the costs for a full-time student for a full academic year. If your school has fall and
spring semesters that comprise an academic year, you can9t add the costs for the summer term to the costs for the fall
and spring semesters. The award for the summer term is still based on the costs for one academic year. However, if the
academic year definition includes the summer term, then the costs for the summer term
must be included in the cost for
a full academic year.
If the student was previously enrolled in the award year, you may be able to use the same Pell Grant COA for the summer
term that you used for the immediately preceding term that the student attended. However, this isn9t possible if the costs
are different from the fall through spring, such as a different tuition charge per credit hour, or if you are required to
recalculate the Pell Grant COA. If it9s necessary to base the student9s Pell Grant COA on the summer term, you must
prorate the summer costs to the length of an academic year to establish the cost for a full academic year. See Chapter 3
of this volume for additional information on prorating costs in the Pell Grant program.
If the summer session is the first term in the award year for that student (for example, your school is paying a student for
the summer 2025 term from the 2025-26 award year), you must establish the student9s full-year cost based on the costs
for the
summer term. If the student enrolls in another term in that award year, you may have to recalculate the student9s
costs for the later term.
Receiving Less Than the Scheduled Award Due to Crossover
A student may also receive less than a Scheduled Award in an award year if the student9s program crosses award years
and the student9s Pell Grant award in one of the award years is for a portion of the program that is less than a full
academic year. For example, if a student9s last term of enrollment to complete their academic program is summer 2025,
and the school treats the payment period as a header to the 2025-26 academic year, the student may receive a Pell Grant
disbursement for that one payment period, which will be less than the student9s full Scheduled Award for 2025-26.
Crossover Pell and Withdrawal
For details on how to perform Return of
Title IV Funds calculations in a crossover Pell situation, see Volume 5, Chapter 2 of
the FSA Handbook.
Summer Modules
If a term-based school offers a series of modules that overlap two award years, these modules may be combined and
treated as one term. Schools are not required to combine modules. However, if you do not combine the modules to create
a single term and the modules overlap, the program must be considered a non-term program.
When you combine modules into a single term (i.e., payment period), the weeks of instructional time in the combined
term are the weeks of instructional time from the beginning of the first module to the date the last module ends. The
student9s enrollment intensity for the entire payment period must be calculated based on the total number of credits the
student is projected to take for all modules. You must project the enrollment intensity for a student based on the credits
the student has:
Pre-registered or registered to take for all modules;
Committed to take for all modules in an academic plan or enrollment contract; or
Committed to take for all modules in some other document.
Volume 7, Chapter 5, Example 1: Module Enrollment Intensity
A student is enrolled in a summer session with three-week modules that School A has combined into one term.
The school uses Formula 1 to calculate the student9s payment for the combined term and must define full-time
enrollment as at least 12 credit hours, even though full-time enrollment for an individual module may be defined
as fewer than 12 credit hours. The student is enrolled for six credits during the combined summer term. The
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When you combine the modules into a single term, a student cannot be paid more than the amount for one payment
period for completing any combination of the modules. If the modules are not combined into a single payment period and
they do not overlap each other, you must treat each module as a separate nonstandard term and generally must use
Formula 3 to calculate Pell Grant payments for the program. If, for each module, you define full time as at least 12 credit
hours, you may be able to use Formula 1 or 2 if the program otherwise qualifies for one of these formulas.
If a combined module term crosses over the June 30 award year end date to include the July 1 award year begin date, the
combined term must be treated as a crossover payment period regardless of which modules students attend. If your
program has two summer modules and only one of the modules crosses over the award year date boundary and you do
not combine the sessions into a larger term, then only the term that spans the award year boundary is considered a
crossover payment period.
If the modules are combined in a single term and a student does not begin attendance in all the modules that they were
expected to attend, recalculation of prior disbursements is required based on the resulting changed enrollment status.
Also, if you use Formula 3 for any of the summer modules, or any other nonstandard term (e.g., a winter intersession that
is not attached to an adjacent standard term), remember that you must also use it for all other terms in the award year,
including fall through spring.
student9s enrollment intensity is equal to the proportion of the number of credits for which the student is enrolled
to the number of credit hours in the school9s definition of full-time enrollment for the combined term. Therefore,
the student9s enrollment intensity is 50% for the combined summer term.
Volume 7, Chapter 5, Example 2: Modules Combined Into One Term
A student enrolls part time at a school which defines its academic year as 24 semester hours and 30 weeks of
instructional time. In addition to fall and spring semesters, the school offers three summer modules. Each module
provides four weeks of instructional time (as defined in Volume 3, Chapter 1). The school can either combine the
modules into a single standard term or treat each module as a separate nonstandard term. The school chooses to
combine the modules into a single term providing 12 weeks of instructional time with full-time enrollment defined
as 12 semester hours. If the school meets the conditions for use of Formula 1 in its fall and spring semesters, it
can use Formula 1 to calculate Pell Grant payments for this summer session.
The student enrolls for three semester hours in each of the modules (nine hours total in the combined term) which
is 75% enrollment intensity. The student9s Scheduled Award is $7,500 and their annual award is $5,625 ($7,500 x
75%). To calculate the student9s payment, the school simply divides the annual award by two, the number of
terms in the fall through spring: $5,625/2 = $2,812.50. The school may round the payment up to $2,813.
Volume 7, Chapter 5, Example 3: Modules Treated as Nonstandard Terms
If the school didn9t combine these modules and defined full-time enrollment for each 4-week module as fewer
than 12 semester hours, it would have to calculate all Pell payments for the program using Formula 3. Because
these are nonstandard terms, the school would have to determine the student9s enrollment intensity for each
module by prorating the standard for full-time enrollment in a full academic year (24 semester hours):
(24 semester hours × 4 weeks in module) ÷ 30 weeks in academic year = 3.2 semester hours (round up to 4
semester hours because the school only offers courses in whole credits)
Note: Weeks of instructional time are defined in Volume 3, Chapter 1, which are not necessarily the same number
as the calendar weeks in an academic year.
For each of the 4-week modules, a full-time student must enroll in 4 semester hours, and based on that standard,
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Year-Round Pell Grant
Students may be eligible to receive up to 150% of their Pell Grant Scheduled Award for an award year. This provision is
called "Year-Round Pell" or "additional Pell=. Students eligible for Year-Round Pell awards are subject to the normal
duration of eligibility rules and LEU limits.
Year-Round Pell allows students who have already exhausted their Scheduled Award for an award year to continue
receiving Pell funds (for example, for a summer trailer term), or to receive Pell funds without prematurely reducing their
Pell eligibility for the remainder of the award year (for example, for a summer header term). A student9s Year-Round Pell
eligibility is certified by the Additional Eligibility Indicator (AEI) in COD.
With Year-Round Pell, students do not receive more Pell Grant funds in each payment period. They receive the same
amount as is normally calculated for a payment period, but students who are otherwise eligible for Pell Grants may
receive Pell Grant funds for an award year up to 150% of their Scheduled Award.
Further, a student may receive funds from the first 100% of their Scheduled Award and some portion of the additional
50% of their Scheduled Award from the Year-Round provisions in the same payment period.
the 3 semester hours that the student is attending in each module count as 75% enrollment intensity (3 ÷ 4). The
student9s Scheduled Award is $7,500 and their annual award is $5,625 ($7,500 x 75%). Note that the school would
use the Pell COA for a full-time student attending a full academic year.
The school would determine the student9s payment for each module (assuming the student9s Scheduled Award
remains unchanged across both award years):
(4 weeks in module × $5,625) ÷ 30 weeks in academic year = $750
The student would receive $750 for each of the modules, for a total of $2,250 for the summer. Again, these
payments for one or more modules that are in the prior award year may need to be reduced if the student had
previously received payments for the fall and spring semesters in the same award year. Also, the school must use
Formula 3 for the fall through spring terms.
Volume 7, Chapter 5, Example 4: Year-Round Pell at a Semester School with Full-Time Enrollment
A student attends a school which provides coursework on a semester calendar, defines full time as 12 credits, and
awards Pell using Formula 1. The student9s enrollment begins in the fall semester. The student9s Scheduled Award
is $6,005. The student plans to enroll full-time in the fall and spring semesters, so their annual award is equal to
the Scheduled Award. Since the school9s academic calendar consists of two semesters, the school divides the
Scheduled Award by 2 to determine the student9s payment for the fall and spring terms ($6,005 ÷ 2 = $3,002.50
which the school rounds to $3,003 in the fall and down to $3,002 in the spring). The student has now received
100% of their Scheduled Award for the year.
The student decides to enroll for the summer term, which the school treats as a trailer to the previous award year.
Without Year-Round Pell, the student9s Pell eligibility would be exhausted, but the Year-Round Pell provision allows
the student to receive their calculated award of up to $3,002.50 in additional Pell funds for the summer term,
based on their enrollment intensity, not to exceed 150% of their Scheduled Award. If the student enrolls full-time
and the school chooses to award in whole dollars, the school should truncate (not round) the cents and award
$3,002 for the summer term so as not to exceed 150% of the Scheduled Award.
Year-Round Pell
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HEA Section 401(b)(9)
Dear Colleague Letter GEN-17-06
Volume 7, Chapter 5, Example 5: Year-Round Pell at a Semester School with Part-Time Enrollment
A student attends a school which provides coursework on a semester calendar, defines full time as 12 credits, and
awards Pell using Formula 1. The student9s enrollment begins in the summer, which the school treats as a header
to the 2025-26 award year. The student has a Scheduled Award of $7,000. The student enrolls in 9 credits in the
summer term. The student9s enrollment intensity is 75% (9 credits enrolled ÷ 12 credits required for full-time). To
determine the annual award, the school multiplies the Scheduled Award by the enrollment intensity ($7,000 x
75% = $5,250). Since the school9s academic calendar consists of two semesters, the school divides the annual
award by 2 to determine the student9s payment for the summer term ($5,250 ÷ 2 = $2,625). This represents
37.5% of the student9s Scheduled Award.
After the summer term, the student continues in the fall and enrolls full time. The student9s fall Pell award is
$3,500 (the school disburses 50% of a Scheduled Award for the fall semester). The student has now received
87.5% ($6,125) of their $7,000 Scheduled Award, leaving 12.5% ($875) in remaining eligibility.
The student again enrolls full time in the spring term. Under Pell rules, the student has only 12.5% ($875) in
remaining eligibility from their Scheduled Award. However, since the student meets all the other standard Pell
eligibility criteria, the student is eligible for a Year-Round Pell award amount of up to 50% of their Scheduled
Award. This means that the student could receive a total of up to $10,500 (150% of their Scheduled Award
amount of $7,000) for the award year. However, the disbursement for each term must be calculated per the Pell
rules described in this volume, so the actual amount the student receives may be less than this maximum.
The school normally awards a full-time student 50% of their annual award for a standard spring semester, and the
award amount for the term under Year-Round Pell is calculated by the same method as for a student9s Scheduled
Award, so the student's spring semester award would be $3,500. Adding this amount to the $6,125 the student
has already received for the award year totals $9,625, which is less than 150% of the student's Scheduled Award
(specifically, this is 137.5% of the student9s Scheduled Award). Therefore, the school can award the spring Pell
award of $3,500 as calculated.
In this example, the spring term disbursement is made up of 12.5% ($875) remaining from the student9s
Scheduled Award and 37.5% ($2,625) from the Year-Round Pell eligibility.
Volume 7, Chapter 5, Example 6: Year-Round Pell in a Clock-hour Program
A student enrolls in an 1,125 clock-hour program over 32.5 weeks. The program is scheduled to occur entirely
within the 2025-26 award year and has an academic year of 900 clock hours and 26 weeks of instructional time.
Payment periods 1 and 2 consist of 450 clock hours and 13 weeks; payment period 3 consists of 225 clock hours
and 6.5 weeks. The student has a Scheduled Award of $7,000.
The school awards the student $3,500 in Pell for each of the first two payment periods of 450 clock hours and 13
weeks of instructional time. For the remaining 225 hours and 6.5 weeks of instructional time in the program, the
school calculates that the student would be eligible to receive $1,750 in Pell if the student9s Scheduled Award
would allow it. Without Year-Round Pell, the student would have no remaining Pell Grant eligibility, as they have
already received a 100% Scheduled Award of $7,000 for 2025-26, but with Year-Round Pell, if the student remains
in all other ways Pell-eligible, the student is eligible to receive up to an additional 50% of their $7,000 Scheduled
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Award, for a maximum total of $10,500.
Adding $1,750 to the $7,000 the student has already received, the school sees that the student will be awarded a
total of $8,750 for 2025-26, which is within their $10,500 Year-Round Pell maximum. Note that the school does
not increase the student9s final award for the award year to match their Year-Round Pell maximum; the student9s
awards for each payment period are calculated according to the Pell rules described previously in this volume.
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Chapter 6
Transfer Students and Remaining Eligibility
Calculating and Awarding Remaining Eligibility
The Pell payment for a transfer student is calculated in the same way as for any new student. That is, you must calculate
payments for each payment period following the rules given in previously in this volume. However, a transfer student9s
remaining Pell eligibility at your school is reduced if the student received Pell funds for the same award year at any prior
schools. You can identify the student9s prior Pell disbursements when you review their Financial Aid History in NSLDS and
COD.
Calculating Remaining Eligibility
Once you9ve identified the Pell amounts that a transfer student has already received for the award year, you must
calculate the percentage of the Scheduled Award that has been used. This percentage is calculated by dividing the
amount disbursed at the previous school by the student9s Scheduled Award at that school (COD calculates this and you
can refer to COD to see what the percentage of remaining eligibility will be for a student).
Pell disbursed at prior school ÷ Scheduled Award at prior school = % of Scheduled Award used
Then subtract this percentage from 100% (or 150%, if the student is enrolled and eligible for a Year-Round award). The
result is the maximum percentage of the Scheduled Award that the student may receive at your school. Note that a
transfer student receives the same payments as any other student until the limit (up to 150% of a Scheduled Award; see
the Year-Round Pell Grant section in Chapter 5 of this volume) is reached. Give the student the full amount for each
payment period, rather than trying to ration the remaining amount by splitting it evenly across the
remaining terms.
A transfer student must repay any amount received in an award year that exceeds their Scheduled Award (or 150% of
their Scheduled Award, if enrolled and eligible for Year-Round Pell), unless the school that disbursed the award was at
fault by failing to follow the administrative requirements in
34 CFR 668.
Why Percentages Are Used
A student may have different Scheduled Awards at different schools/programs. Using percentages ensures that a student
does not receive more than 100% (or 150%, if enrolled and eligible for Year-Round Pell) of the student9s Scheduled Award.
For example, the COAs at the two schools may be different or one school may modify data elements on the FAFSA form
due to professional judgment where another school did not. The percentages are also used to compare the portions of a
student9s total eligibility that have been used at both schools. If the student9s Scheduled Award is the same at both
schools, the financial aid administrator can find the amount of the student9s remaining eligibility simply by subtracting the
amount received at the first school from the Scheduled Award.
Payment Period for a Transfer Student at a Non-Term School
When a student transfers into a non-term credit-hour or clock-hour program at a new school, that student is starting a
new payment period. For non-term programs, you must use the payment period rules described in/Volume 3, Chapter 1/to
determine the payment periods for the remainder of the student9s program.
However, for a transfer student, the length of the program is the number of clock or credit-hours and the number of weeks
of instructional time that the student will be required to complete in the new program. If the remaining clock or credit
hours/or weeks of instructional time/are half an academic year or less, then the remaining hours and weeks of instructional
time constitute one payment period.
Transfer Students and Remaining Eligibility
Consider a student who is eligible for Pell Grant funds and who transfers from School A to School B within the same award
year. Before paying any Pell funds to the student, School B must determine the percentage of eligibility remaining for the
student. After transferring, a student9s remaining eligibility for a Scheduled Award during an award year is equal to the
percentage of the student9s Scheduled Award that remains unused, multiplied by the student9s Scheduled Award at the
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new school.
School B may pay the student a Pell Grant only for that portion of an academic year in which the student is enrolled and in
attendance at School B. The grant must be adjusted, as necessary, to ensure that the funds received by the student for
the award year do not exceed the student9s Scheduled Award for that award year or the student9s maximum Lifetime
Eligibility Used.
The award for each payment period is calculated using the (full) Scheduled Award. The student receives a full award until
the student has received 100% of the student9s remaining eligibility for a Scheduled Award (or 150% if the student is
enrolled and otherwise eligible for a Year-Round Pell award) or 600% LEU. This avoids a school having to ration the
remaining amount by splitting it evenly across the remaining payment periods.
To calculate a transfer student9s remaining eligibility for a Scheduled Award, School B must first determine what
percentage of the Scheduled Award the student used at School A. Check COD for the most up-to-date information on what
aid has been disbursed to the student at all schools. The remainder is the unused percentage of the student9s Scheduled
Award4the percentage the student may receive at School B. (Use percentages rather than dollars because a transfer
student may have different Scheduled Awards at the two schools; using percentages rather than dollars adjusts for this
possible difference.) School B then multiplies the percent of eligibility remaining by the Scheduled Award at School B. The
result is the maximum amount of Federal Pell Grant funds the student may receive at School B during the balance of the
award year.
Pell Grant Eligibility for Transfer Students
34 CFR 690.65
Dear Colleague Letter GEN-01-09
Volume 7, Chapter 6, Example 1: Transfer Student Remaining Eligibility
On August 1, 2025, a student enrolls at School X. After completing a portion of the program, the student
withdraws from school. On February 1, 2026, the student enrolls at School Y as a transfer student and is awarded
400 clock hours of transfer credit toward School Y9s 1,000 clock-hour program (the program9s defined academic
year is 900 clock hours and 30 weeks of instructional time). The student9s program length at School Y is 600 clock-
hours and 20 weeks of instructional time.
The FAA at School Y examines the student9s 2025-26 ISIR and finds the following entry:
%Sch. Used: 112.5
As Of: 01/28/2026
Pell Eligible: Y
Based on the student9s FAFSA results, their Scheduled Award is $4,500. Since the student is eligible for Year-
Round Pell, the FAA subtracts the 112.5% of the student's Scheduled Award previously used from 150%, which
results in a remaining unused percentage of 37.5%. Therefore, the student is eligible to receive 37.5% of their
scheduled Pell award of $4,500 during the balance of the award year.
The FAA uses the 600 hours and 20 weeks of instructional time remaining in the student9s program to establish
the appropriate two payment periods of 300 clock-hours and 10 weeks of instructional time each (See Volume 3,
Chapter 1 for a full discussion on payment periods). The aid administrator multiplies the student's Scheduled
Award ($4,500) by the remaining unused percentage (37.5%) and determines that the student may receive as
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NSLDS Financial Aid History and Transfer Monitoring
Before disbursing
Title IV funds to a transfer student, you must obtain a financial aid history for the student and must
inform NSLDS about the transfer student so that you can receive updates through the Transfer Student Monitoring
Process. The financial aid history will identify Pell Grant disbursements that the student received at other schools, along
with Title IV defaults or overpayments, if the student has reached or exceeded the annual or aggregate loan limits, or if
the student has reached the Pell LEU limit. There are several ways for you to get a student9s financial aid history from
NSLDS. You can:
Use the NSLDS Financial Aid History section of the ISIR;
Log on to the NSLDS Professional Access website and access the data online for a student;
For multiple students, use the Financial Aid History Report (FAT001), which you submit from the Reports tab on the
NSLDS site (you retrieve the results through SAIG); or
Send a batch Transfer Student Monitoring/Financial Aid History (TSM/FAH) Inform file to request aid history data for
several students.
The <NSLDS Transfer Student Monitoring & Financial Aid History User Guide= provides instructions on how to use Transfer
Student Monitoring (TSM) online, how to request Financial Aid History (FAH), and the TSM/FAH Batch process. This
resource is published in the Knowledge Center Library in the "Publications by Resource Type" section under "NSLDS User
Resources."
If a student has not self-identified as a transfer student, data on the student9s ISIR can sometimes alert a school to the
fact that a student has already received a Pell Grant during the current award year. Schools should examine the Pell
payment data on the ISIR generated from the student9s most recent transaction to see if the percentage of the Scheduled
Award used for the award year is greater than 0. If the ISIR is the most recent and the percentage of the Scheduled Award
used for the award year is greater than zero, the school should request transfer monitoring of that student and wait until
it has received the results of that process through NSLDS before creating a Pell award for that student in the COD System.
Concurrent Enrollment and Pell Potential Overaward
When multiple schools report disbursements for a student and the enrollment dates reported are within 30 calendar days
of each other, the COD System identifies a potential concurrent enrollment and sends a warning message to all schools
involved. The COD System sends the school that submitted the second or subsequent disbursement information a
response document that contains warning edit 69. Warning edit 69 informs schools that submit second or subsequent
disbursement information that Pell disbursements for a student have been received from two or more schools and the
enrollment dates for the student are within 30 days of one another. The COD System also sends a multiple reporting
record (MRR) to all the schools with accepted disbursement information in the COD system for the student and the award
year. The MRR alerts the schools to a possible overlap in enrollment. The Department expects all schools involved to
cooperate in resolving the concurrent enrollment issue. To help facilitate resolution, the MRR contains the Pell contact
much as $1,687.50 if the student remains enrolled at School Y for the balance of the award year.
During the first payment period, the student receives $1,500 in Pell funds:
(300 hours in payment period x $4,500) ÷ 900 hours in academic year = $1,500
However, in the second payment period, the student can only receive funds until their total Pell at School Y
reaches $1,687.50 (and the student9s total for the award year reaches 150% their Scheduled Award amount of
$4,500). Therefore, for the second payment period at School Y, the student can only receive $187.50 ($1,687.50 3
$1,500 = $187.50).
Note that if the student received a Direct Loan at School X and now wishes to borrow a Direct Loan at School Y,
the method for determining the remaining eligibility for Direct Loan funds in transfer student situations is very
different from the method of determining remaining Pell Grant eligibility. Refer to
Volume 8 for a complete
discussion of this topic.
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information, as reported by the schools to the COD System, for the schools involved.
Pell Potential Overaward Process
A student may receive disbursements from more than one school during an award year. When more than one school
reports disbursements for a student, the COD System checks to make sure the student has not received more than 100%
(or 150% if qualifying under <Year-round= Pell) of the student9s eligibility for a Pell Grant.
If the COD System receives disbursement information that will cause a student to receive more than 100% (or 150% if
qualifying under <Year-round= Pell) of the student9s <total eligibility used= or TEU, the student has entered a potential
overaward (POP) situation. Remember, to certify eligibility for the <Year-round= Pell provision, the Additional Eligibility
Indicator (AEI) must be submitted for disbursements exceeding 100% of the Scheduled Award to be accepted in the COD
System.
The COD System will accept the disbursement and notify the schools involved in the POP in the following three ways:
COD sends the school that submitted the disbursement that caused the student to exceed the 100% (or 150% for
<Year-round= Pell) TEU for the year warning edit 68 in the response document.
Weekly, COD sends all schools that have accepted and posted disbursements for students in a POP status a Pell POP
report that will identify the student and schools involved.
COD sends all schools that have accepted and posted disbursements for the student in the award year an MRR
containing the Pell contact information for the schools involved.
Warning edit 68 informs the school that submitted the disbursement that caused the student to exceed the 100% (or
150% if qualifying under <Year-round= Pell) TEU for the year that:
Pell disbursements for a student have been received from two or more schools.
The student9s TEU is greater than 100.000% or 150.000% as applicable.
The POP situation must be resolved within 30 calendar days.
During the 30-day period, the Department expects each school involved in the potential overaward to review the
student9s award and disbursements and perform the proper eligibility calculations. The COD System will accept and post
disbursements that decrease or increase the student9s year-to-date disbursement amount. Students will be removed from
POP status within 30 days of the date the student was initially placed in the POP if the student9s TEU becomes 100% (or
150% for <Year-round= Pell) or below based on downward disbursement adjustments submitted by the schools. If after 30
calendar days the situation has not been resolved, the COD System generates a negative disbursement that reduces all
accepted and posted disbursements to $0 for the student in the award year in question at all schools involved. Schools
should document any phone calls, emails, and letters that were part of their attempts to resolve the POP with the student
and the other schools involved and be prepared to provide that documentation to COD School Relations, if requested.
Schools, along with the student, must work together to resolve the POP before contacting COD School
Relations for help. A school that has attempted to resolve an overaward situation with the other schools that have
submitted disbursement records for the student and has been unable to arrive at a satisfactory solution should call the
COD School Relations Center to request <escalated mediation=. The school should be prepared to provide the name and
social security number of the student involved. The COD School Relations Center will review the POP situation and, if
necessary, refer the case to the Department for additional action.
To prevent repeated POP situations from occurring, schools must:
ensure that students do not receive Pell awards for concurrent enrollment at two or more schools;
take action when they receive warning notices from the COD System; and
correct overaward situations prior to submitting subsequent disbursement records to COD.
Schools should remember that failure to comply with these requirements may call into question a school9s administrative
capability and fiscal responsibility and might eventually result in the Department taking action to limit, suspend, or
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terminate a school9s participation in the Title IV programs.
Regarding COD processing and POPs:
The COD System accepts disbursement information from a maximum of three schools for a student in a POP
situation.
The COD System does not prevent the same schools from creating another POP situation for the same student.
Schools do not need to request post-deadline processing (extended processing) to submit upward adjustment
records after the end of the processing year to correct a POP situation.
The COD System accepts downward adjustments to disbursement or award information at any time.
Disbursement information can be submitted via the COD website for those schools that do not wish, or are not able,
to reopen any software they may have used to process the affected award year.
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Chapter 7
Initial Calculations, Recalculations, and Overawards
Initial Pell Calculation
An initial calculation is the first calculation that is made on or after the date the school has received a Department-
produced SAI such as the student9s initial FAFSA Submission Summary or ISIR with an official SAI and a Pell Eligibility Flag
of <Y=. This may be from a FAFSA Submission Summary or ISIR, the FAFSA Partner Portal, or FAFSA.gov. The initial
calculation uses the student9s enrollment intensity at the time of the calculation. If you9ve estimated the student9s
eligibility before receiving a FAFSA Submission Summary or ISIR for the student, you must confirm prior estimated
eligibility or determine the student9s eligibility at the time you receive the FAFSA Submission Summary or ISIR.
If a school performs an initial calculation before a student has registered for specific classes, the school may rely on the
student9s general estimate of intended enrollment when performing the initial calculation. For example, a school could
perform an initial calculation using 50% enrollment intensity if a student indicated that they planned to enroll half time.
You should document the date you initially calculate a student9s Pell Grant, which can be no earlier than the date your
school received a Department-produced SAI. If you fail to document the date of the initial calculation, you must use the
later of:
The date the FAFSA Submission Summary or ISIR is first received and the student9s enrollment intensity as of that
date; or
The date the student enrolls.
Your school is considered to have received the ISIR on the date it was processed. This date is labeled <Processed Date= on
the ISIR. In the case of a FAFSA Submission Summary, your school is considered to have received it on the date processed
unless you document a later date. The processing date on a FAFSA Submission Summary is the date above the SAI.
Pell Recalculation Due to Change in SAI or Other Pell Eligibility Indicators
If the student9s SAI or one of the other Pell eligibility indicators change due to corrections, updates, or an adjustment, and
the change would alter the amount of the Pell award, you must recalculate the Pell award for the entire award year. In
addition to the SAI, these indicators include the Max Pell, Minimum Pell, CFH, or IASG indicators. If the student has
received more than their Scheduled Award amount due to the recalculation, then the student has received an
overpayment. In some cases, you may be able to adjust an award by reducing or canceling later payments to the student
(see Volume 4, Chapter 3 for more information).
A student selected for verification can be paid based on the corrected output document you receive during the
<verification extension= (120 days after the student9s last day of enrollment, or the deadline date established by a Federal
Register notice, whichever is earlier). For example, if you receive a reprocessed ISIR reflecting the results of the student9s
verification during the extension period and the ISIR has a lower SAI than the previous ISIR (increasing the student9s
eligibility), you calculate the student9s Pell Grant based on the reprocessed ISIR.
If you receive a FAFSA Submission Summary or ISIR with a SAI different from the one you used for the payment
calculation, you must first decide which document is valid. If the new information is the correct information, the new
FAFSA Submission Summary or ISIR is the valid record. In most cases, you must recalculate the student9s Pell award for
the entire award year based on the new SAI. For more information on FAFSA Submission Summaries, ISIRs, and SAI, see
the Application and Verification Guide.
Pell Recalculation 3 Change in SAI
34 CFR 690.80(a)
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Pell Recalculation Due to Change in Enrollment Intensity
The process for recalculating a student9s Pell Grant award due to changes in enrollment intensity depends on when the
change occurs.
Change in Enrollment Intensity
Between Academic Terms
In a credit-hour program that uses terms, you must calculate a student9s payment for each term based on the enrollment
intensity for that term. For example, if a student attended full time for the first term and then enrolled less than full time
in the second term, you must use the less-than-full-time enrollment intensity to calculate the student9s payment for the
second term.
Change in Enrollment Intensity
Within a Payment Period Before a Student Begins Attendance in All Classes
You must report changes to a student9s enrollment intensity to NSLDS in a timely manner. Any change requiring a
recalculation of an award may also require an update to the student9s enrollment intensity. If the student doesn9t begin
attendance in all classes for a payment period, resulting in a change in the student9s enrollment intensity, you must
recalculate the student9s award for that payment period based on the lower enrollment intensity. A student is considered
to have begun attendance in all classes if the student attends at least one day of each class whose credits are counted for
purposes of determining the student9s enrollment intensity for Pell Grant eligibility. Note that clock-hour and non-term
programs are always based on full-time enrollment intensity for Pell.
Your school must have a procedure in place to know whether a student has begun attendance in all classes for purposes
of the Pell Grant program. The Department does not dictate the method a school uses to document that a student has
begun attendance. However, a student is considered not to have begun attendance in any class in which the school is
unable to document that attendance.
If you recalculate a Pell award because the student9s enrollment intensity has changed, you must also consider any
changes in the student9s costs at that time. For example, if a student enrolls full time for the first semester and then drops
to less than half time during that semester, the student9s costs will change, because only certain cost components are
allowed for less-than-half-time students. However, the COA components for a less-than-half-time student must still be
based on the costs for a full-time student for a full academic year when calculating the student9s less-than-half-time
enrollment intensity and Pell Grant award.
Change in Enrollment Intensity
Within a Payment Period After a Student Has Begun Attendance in All Classes
Pell Recalculation 3 Change in Enrollment
34 CFR 690.80(b)
Volume 7, Chapter 7, Example 1: Enrollment Intensity Change Pell Recalculation
A student registers for a full-time course load (15 credit hours) and their school makes an initial disbursement on
that basis 10 days before the first term starts. When the term starts, the student only begins attendance in three
classes (9 credit hours). The school must recalculate the student9s Pell award based on the lower enrollment
intensity. Any difference between the amount the student received and the new recalculated award is an
overpayment for which the student is responsible. See Volume 4, Chapter 3 for more detail on overpayments.
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The regulations don9t require recalculation of Pell Grant awards based on changes in enrollment intensity during a
payment period after the student has begun attendance in all their classes. However, your school may have a
policy of recalculating awards in this situation. Your school9s recalculation policy must be documented in writing, must
consider any changes in the student9s COA, and must be applied consistently to all students in a program. If your school
chooses to recalculate for a student whose enrollment intensity increases, your school must also recalculate for a student
whose enrollment intensity decreases.
Your school9s policy may set a date after which Pell Grants will not be recalculated for enrollment intensity changes during
a payment period. This date is sometimes referred to as the "Pell recalculation date" or "PRD." For example, you could
establish a policy that you will recalculate Pell awards only for enrollment intensity changes that occur up to the
<add/drop= date of a term. If you establish a policy that Pell Grants will not be recalculated after a certain date, the policy
must be applied in all cases, even when there is compressed coursework.
Note that a school may establish more than one PRD within the same payment period. For example, if a term is divided
into two or more modules, a school could establish a PRD within each module. However, in this case only one PRD will
apply to a student, and that will be the PRD for the latest class or module in which the student begins attendance. Once
the school determines which PRD applies to the student, the school must go back to the beginning of the term and review
which courses the student dropped, added, or completed up until the student9s PRD to calculate the student9s Pell Grant
enrollment intensity.
If your school has a policy of recalculating Pell Grant awards for a student whose projected enrollment intensity has
changed as of your established PRD (if the student began attendance in all classes), and if the initial calculation of the
student's Pell Grant occurred before the recalculation date, the recalculation is based on the student's new enrollment
intensity as of the recalculation date.
In some cases, a student may not be enrolled in any classes as of a school's PRD, but the student enrolls later during the
payment period (for example, in the second module of a term). Since there is no Pell Grant enrollment intensity of "zero,"
in this circumstance the student remains Pell-eligible based on the initial Pell Grant calculation (if the student began
attendance in all classes on which the enrollment intensity for the initial calculation was based), and the recalculation is
based on the student's enrollment intensity at the time they begin enrollment later in the term.
The initial calculation of a student9s Pell Grant may in some cases occur after a school's PRD for a term, including a term
Volume 7, Chapter 7, Example 2: Multiple Pell Recalculation Dates
A school uses multiple Pell recalculation dates within a payment period and must recalculate Pell up to the Pell
recalculation date for the last class or module in which the student begins attendance. The fall semester is divided
into two modules. The school establishes one PRD in each module, and a third PRD for the full semester:
Module 1 PRD: September 7
Full Semester PRD: September 21
Module 2 PRD: November 1
As of the Full Semester PRD (September 21), a student had begun attendance in four classes (12 credit hours) for
the full semester.
On October 3, the student drops two classes (6 credit hours). On October 20, the student enrolls and begins
attendance in a 3-credit-hour class in Module 2. As of the Module 2 PRD (November 1), the student is enrolled for
and has begun attendance in nine credit hours.
In this example, the Module 2 PRD (November 1) applies to the student, so the student's final Pell Grant
enrollment intensity is based on 9 credits (9 ÷ 12 = 75%). If the student had not enrolled and begun attendance
in the class in Module 2, the Full Semester PRD (September 21) would apply, and the student's final Pell Grant
enrollment intensity would have been full time.
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with compressed coursework. In this circumstance, you must use the student9s effective enrollment intensity on the date
of the initial calculation, and there is no recalculation of the student9s Pell Grant for the term due to a subsequent change
in enrollment intensity, if the student began attendance in each class.
If the student9s payment for the term is being disbursed in a subsequent payment period, you may pay the student only
for the coursework completed in the term (including earned Fs). Additional information about retroactive payments is
available in Volume 4, Chapter 2.
In the case of programs offered with compressed coursework or modules within the terms, your school may adopt a policy
of setting the PRD based on the add/drop date of the last class in which the student is enrolled, or is expected to enroll,
for the term. In this circumstance, your school must consider all adjustments to the enrollment intensity, both increases
and decreases, up to the add/drop date of the last class in which the student begins attendance.
If you don9t establish a policy of recalculating based on changes in enrollment intensity that occur during a payment
period, a student who begins attendance in all classes would be paid based on the initial calculation, even if their
Volume 7, Chapter 7, Example 3: Enrollment Intensity Change Within the Payment Period
A student registers for 15 credit hours which is full time and 100% enrollment intensity. Their school initially
calculates a full-time award, based on its definition of full-time enrollment as 12 or more credits for financial aid
purposes. The student begins attending all classes but subsequently drops two classes (6 credits) bringing their
enrollment down to 9 credit hours, or 75% enrollment intensity. The school does not recalculate Pell Grant awards
based on enrollment intensity changes during a payment period, so the student may still be paid based on full-
time enrollment if the student is otherwise eligible for payment.
If the school did not receive the student9s first processed valid FAFSA Submission Summary or ISIR with an official
SAI until after the student dropped to 75% enrollment intensity, the Pell initial calculation would be based on the
student9s enrollment intensity at the time the school received the output document, which was 75%.
If the school had a policy of recalculating Pell Grant awards if a student9s enrollment intensity for a payment
period has changed as of a specified recalculation date, and if the student had dropped to 75% enrollment
intensity as of that date, the school would recalculate the student9s award based on 75% enrollment intensity.
Volume 7, Chapter 7, Example 4: Enrollment Intensity Change Between Payment Periods
A student registers for 15 credit hours, which is full time and 100% enrollment intensity because the institution
defines full-time enrollment as 12 or more credits for financial aid purposes. The school initially calculates a full-
time Pell Grant award for the fall and spring semesters. Each semester is divided into two 8-week modules that
are combined and treated as a single 16-week standard term. The student begins attendance in all classes in the
fall.
In the spring semester, the student is not enrolled in any classes during the first 8-week module or any classes
that span the entire 16-week semester. However, the student is enrolled in two 3-credit courses during the second
8-week module.
The school9s Pell Grant recalculation date for the spring semester is during the first 8-week module. Although the
student is not enrolled in any classes as of the recalculation date, their enrollment during the second module of
the semester allows them to be paid up to their original full-time enrollment status as determined by the initial
Pell Grant calculation. However, because the student is enrolled for only six hours in the second module, the
school pays the student at 50% enrollment intensity. No further adjustments to the student's award will be made
if there are subsequent enrollment intensity changes during the term.
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enrollment intensity changes before the disbursement is made. If the student withdraws from all classes (or doesn9t begin
attending any classes), you must follow the procedures discussed in Volume 5.
Pell Recalculation Due to Change in COA
When a student9s COA changes during the award year, and their enrollment intensity remains the same, you may (but are
not required to) establish a policy under which you recalculate the student9s Pell Grant award. Once established, you must
consistently apply such a recalculation policy to all students in the program.
Tuition and Fee Charges and Recalculation
If your school recalculates a student9s Pell Grant due to a change in enrollment intensity but continues to charge tuition
and fees for credit hours that are no longer included in the student9s enrollment intensity for Pell Grant purposes, this
does not affect the requirement to recalculate the student9s Pell Grant award.
For example, if a student enrolls as a full-time student with 12 credits, but never starts attendance in a 3-credit class that
starts after the school9s <add/drop= date, the student9s award must be recalculated based on 9 credits or 75% enrollment
intensity. This is true, even though the school charges tuition for any classes dropped after the <add/ drop= date, and
therefore continues to charge the student for 12 credits.
Recalculation of Pell Grant Awards for Students Who Graduate Early From a Clock-Hour Program
Under the regulations that govern the treatment of
Title IV funds when a student withdraws, a student who completes all
the requirements for graduation from a program before completing the days or hours they were scheduled to complete is
not considered to have withdrawn, and no return of Title IV funds calculation is required (see Volume 5 for more detail).
However, a school may be required to return a portion of the Pell Grant funds that were awarded to a student who
successfully completes the requirements for graduation from a clock-hour program before completing the number of clock
hours that they were scheduled to complete. Note that successfully completed clock hours may include a limited number
of clock hours for which the student was granted an excused absence if your school has an excused absence policy that
meets the requirements described in 34 CFR 668.4(e). For more information, see the discussion of "Excused absences in
clock-hour programs" in Volume 3, Chapter 1.
A student's eligibility to receive Title IV aid for a clock-hour program is based, in part, on the total number of clock hours
in the program. If a school allows a student to graduate from a clock-hour program without completing all the originally
established hours for the program, the school has effectively shortened the program length and reduced a student's Title
IV aid eligibility for the program. In this circumstance, the school must recalculate the student's Pell Grant award based on
the number of hours the student completed. The school must return to the Department the difference between the
recalculated award amount and the Pell Grant amount that the student originally received. (For a student who received a
Direct Loan, the school must also prorate the student's annual loan limit in this situation, or, if the loan limit was originally
subject to proration, recalculate the original prorated loan limit. See Volume 8 for more information.)
Volume 7, Chapter 7, Example 5: Pell Recalculation for Early Graduation From a Clock-Hour Program
Consider a student who enrolls in a 900 clock-hour program, with the academic year defined as 900 clock hours
and 26 weeks of instructional time. The school assumes that the student will complete 900 clock hours, and the
student9s Scheduled Award is $7,500, paid in disbursements of $3,750 in each payment period (see Chapter 1 of
Volume 3 for guidance on determining payment periods).
The school considers the student to have met the requirements for graduation from the program after the student
has completed only 750 of the originally scheduled 900 clock hours. As soon as practicable after determining that
the student will meet the graduation requirements, the school must recalculate the student's Pell Grant award as
if the student had been enrolled in a 750 clock-hour program. Although the school will recalculate the student's
award using Formula 4 (as described in Chapter 4), in this circumstance only the number of clock hours in the
payment periods are considered. There is no comparison of hours and weeks fractions, as is normally required
with Formula 4.
The school determines the recalculated award amount for each payment period by multiplying the student's
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The recalculation requirement described above applies only to clock-hour programs, and it applies regardless of the
length of the program or remaining portion of a program. For example, if a student who received Pell Grant funds for
enrollment in a 600 clock-hour program meets the graduation requirements after completing only 500 clock hours, the
student's Pell Grant award must be recalculated.
Overawards and Overpayments
A Pell Grant overaward exists when the award is greater than the amount for which the student is eligible. An overaward
only becomes an overpayment if a school cannot correct the overaward before all funds are disbursed to the student.
A correctly determined Pell Grant, based on eligibility criteria described in Chapter 2, is never adjusted to account for
other forms of aid. Therefore, if a student9s aid package exceeds his or her need, you must attempt to eliminate the
overaward by reducing other
Title IV aid or other aid your school controls. You may not reduce a student9s correctly
awarded and disbursed Pell Grant to address overpayments in other programs.
If a student received more Pell Grant funds than they were eligible for because their eligibility for the grant decreased,
you can try to eliminate the overpayment by adjusting later disbursements for the award year. Additionally, a Pell Grant
awarded to an ineligible student or based on an incorrect enrollment intensity greater than that for which the student is
enrolled is an overaward. See Volume 4, Chapter 3 for additional guidance on resolving overawards.
Pell Grant Overawards
A Pell Grant overaward can be caused by a school making an error in determining Pell Grant eligibility. For example, the
school may use the wrong SAI or fail to limit the award by the student9s COA. A Pell Grant overaward can also result if the
student enters incorrect data on the FAFSA form and the SAI derived from the incorrect data is lower than it should be (for
more detail about the FAFSA form and SAI data, see the
Application and Verification Guide). A Pell overaward also exists if
a student scheduled to receive a Pell Grant fails to begin classes or is otherwise determined to be ineligible for Title IV
Funds (for example, having exceeded the Pell LEU). Finally, an overaward exists whenever a student is scheduled to
receive or is receiving a Pell Grant for attendance at two or more schools concurrently. All these Pell Grant overawards
must be corrected.
This is not an exclusive list of all the ways in which a Pell Grant may be overawarded. In addition to avoiding these
mistakes, schools should also be sure to submit timely Pell actual disbursement records to COD, according to the Annual
Deadline Date Notice as published in the Knowledge Center.
$7,500 Pell Grant award by 375 (the number of clock hours in each payment period based on the total of 750
hours that the student completed), then dividing the result by 900 (the number of clock hours in the program's
academic year). This results in two recalculated disbursements of $3,125 each, for a total award of $6,250. The
school reduces the original first and second disbursements by $625, then returns the total difference of $1,250 to
the Department. Note that the school 3 not the student 3 is responsible for returning the excess Pell Grant funds in
this situation.
Note: It is possible for a correctly awarded Pell Grant to exceed the student9s financial need. For example, a
student9s SAI may exceed their COA, but the student may still qualify for a Minimum Pell Grant, based on that set
of eligibility criteria. Further, a student may be eligible for a Max Pell Grant under the Special Rule regardless of
their SAI. In these situations, the correctly determined Pell Grant is not considered an overaward, but the student
is not eligible for any other need-based Title IV aid. See Volume 3, Chapter 3 for additional packaging guidance.
Liability For and Recovery of Pell Grant Overpaymen ts
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Declining and/or Returning Pell Funds
A student may decline or return all or part of a disbursement of Pell Grant funds that they are eligible to receive or have
received. However, returns may only be made in the same award year as the funds were received. You are not required to
comply with a student9s request to decline a Pell Grant disbursement that has already been applied to the student9s
account for institutional charges. This should be a rare action and need not be advertised as a possibility by your school.
For more detail on the requirements of declining or returning Pell funds, see
Dear Colleague Letter GEN-12-18.
34 CFR 690.79
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Chapter 8
Pell Grant Lifetime Eligibility Used (LEU)
Duration of Eligibility
Per the
Consolidated Appropriations Act, 2012, a student9s maximum duration of Pell eligibility is six Scheduled Awards, as
measured by the percentage of <Lifetime Eligibility Used= (LEU) field in COD (one Scheduled Award equals 100% LEU). A
student is ineligible to receive further Pell Grant funds if they have reached or exceeded the 600% limit. This limitation
includes all grants disbursed since the beginning of the program (1973-74).
The Department provides weekly Pell LEU reports through the SAIG Mailbox under Message Class PGLEXXOP (where XX =
the year) for your Pell-eligible students (and students who listed your school code on their FAFSA form) who have a Pell
LEU greater than or equal to 450%. The COD website will show the current Pell LEU level for all aid recipients (updated as
transactions are processed). COD also provides the LEU for the Pell Multiple Reporting Record (MRR), Pell Reconciliation
Report, and Pell Year-to-Date file.
Students will fall into one of the following categories:
Student not on report (Code <N= on the student9s ISIR under Lifetime Limit Flag): Students in this category have
LEU of less than 400%. These students9 Pell awards will be awarded as normal, since even if they receive a full
Scheduled Award, they will not go over the 600% LEU maximum.
LEU greater than 400% but less than or equal to 500% (Code <H= on the student9s ISIR under Lifetime Limit
Flag): Students in this category will likely have Scheduled Award eligibility for 2025-26. However, a student9s 2025-
26 Pell eligibility may be reduced if, for example, another Pell disbursement is reported after a report has been
created, putting the student9s 2025-26 baseline LEU over 500%.
LEU greater than 500% but less than 600% (Code <C= on the student9s ISIR under Lifetime Limit Flag): These
students will not have full Pell eligibility for 2025-26 since their baseline LEU has less than 100% remaining.
LEU 600% or higher (Code <E= on the student9s ISIR under Lifetime Limit Flag): These students will have no Pell
eligibility remaining, as they have already met or exceeded the maximum LEU amount.
To aid in identifying students who are approaching their LEU limits, COD returns warning code 177 or 178 when a
student9s Pell LEU is near or exceeds 600%. COD has a hard reject (Edit 201) for Pell Grant actual disbursements with a
Pell Grant LEU greater than 600%. Also, you will be able to see this data in the Common Record Response, and LEU is also
visible in the NSLDS system. The FAFSA Processing System (FPS) reports the Pell Grant LEU limit flags and percentages on
FAFSA Submission Summaries and ISIRs. COD calculates a student9s LEU to three decimal places, and you may round
awards as described in Chapter 4 of this volume. However, you may not round up if that would cause the student to
exceed either their Scheduled Award or 600% LEU.
Pell Grant LEU
34 CFR 690.6
HEA Section 401(d)
Dear Colleague Letter GEN-12-01
Dear Colleague Letter GEN-13-14
Electronic Announcement April 18, 2014
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To calculate an award for a student whose LEU level will reduce the student9s eligibility (i.e., an LEU greater than 450%
but less than 600%), you must first check the most current LEU level in COD. Subtract the LEU percentage from 600%,
then multiply the student9s Scheduled Award by the resulting percentage. For example, if a student has 533% LEU in COD,
your school will subtract 533% from 600%, leaving the student with 67% of a Scheduled Award remaining. If the student9s
Scheduled Award is $7,455, your school multiplies $7,455 by 0.67, which equals $4,994.85. This amount is then disbursed
per the normal Pell formula and payment period rules. If your school only disburses funds in whole dollars, you will
truncate the amount to $4,994 (rather than rounding up to $4,995, as this would put the student over 600% LEU).
For students whose eligibility is less than a full Scheduled Award, you award the student a Pell Grant as you would for a
transfer student who received Pell at another school during the same award year. That is, you determine the student9s
remaining Pell Grant eligibility as a percentage of LEU and then award each payment until that eligibility is used (see the
discussion in Chapter 6 of this volume).
Pell Grant and Iraq and Afghanistan Service Grant LEU
Prior to the 2024-25 award year, the Pell Grant and Iraq and Afghanistan Service Grant (IASG) were separate programs
and LEUs were tracked independently for each program. In the Spring of 2024, any student who received IASG funds had
their IASG LEU percentage converted to and combined with a Pell Grant LEU percentage. A student whose newly
combined Pell Grant LEU percentage reaches or exceeds the 600% limit will not be eligible for Pell Grant funds. However,
a student whose newly combined Pell LEU exceeds 600% is not considered to have received a Pell Grant overaward.
Prior Pell LEU Prior IASG LEU Combined Pell LEU Remainin g Eligibility?
100% 200% 300% Yes 3 300%
300% 300% 600% No
400% 300% 700% No
See "Maximum Pell Grant Eligibility for Dependents of Certain Deceased Servicemembers and Public Safety Officers= in
Chapter 1 for further discussion of Pell Grant eligibility under the Special Rule.
Timely Pell Grant Reporting Requirements
Because of Pell Grant Lifetime Eligibility Used (LEU) monitoring, it is important to submit Pell Grant disbursement
information in a timely manner. You must submit Pell Grant disbursement information to COD no later than 15 calendar
days after making a disbursement or adjustment. To ensure you and other schools have the most accurate information
available about students9 LEUs, you should submit information to COD as early as possible in the required 15-day time
frame. Doing so may help prevent an overaward. Failure to submit the data within the 15 days could result in the
Department disallowing the disbursement.
Pell Grants under the Special Rule
HEA Section 401(c)
NSLDS Reporting Requirements for Pell
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Changes in LEU
A student9s LEU changes whenever they receive a Pell Grant disbursement and may change any time a student9s
Scheduled Award is adjusted (up or down). It may also change through an LEU adjustment based on an LEU Dispute,
Closed School Restoration, Restoration for Eligible Loan Discharge, or other adjustment type deemed necessary by the
Department.
A student9s Pell Grant LEU can limit the student9s Pell Grant eligibility for an award year. For example, since the maximum
LEU is 600%, if a student9s Pell Grant award originally was calculated based on an LEU of 550%, then that student9s award
would be limited to 50% of the Scheduled Award. A change to a disbursement in the current or previous award year may
alter a student9s LEU. For details on LEU limitations, see the Pell Grant Lifetime Eligibility Used guidance earlier in this
chapter.
When a school becomes aware that a student9s LEU has changed, it should determine whether the adjustment affects the
student9s eligibility for a Pell Grant in the current or most recently completed award year.
If the student becomes eligible for additional Pell Grant funds due to a change to the student9s LEU, the school must make
a correction to the student9s award and make any disbursements of Pell Grant funds for which the student is now eligible
and that the school is permitted to make under the late and retroactive disbursement requirements (for more detail on
disbursement requirements and timing, see
Volume 4, Chapter 2).
Minimum Pell Grant and LEU
Under HEA section 401(a)(2)(F), the minimum award is set at 10% of the maximum award appropriated each year,
rounded to the nearest $5. There is, however, no de minimis award amount for purposes of determining a student9s award
because of the 600% LEU limitation. Therefore, an otherwise eligible student with even a very small remaining LEU is
eligible to receive the calculated amount of the Pell Grant, up to the LEU.
Pell LEU Restoration
In 2017, following several cases of closed schools, the Department began restoring Federal Pell Grant eligibility for Pell
Grant recipients who were unable to complete their course of study due to the closing of a school. This process is known
as <Pell LEU Restoration for Closed Schools=.
Dear Colleague Letter GEN-14-07
Dear Colleague Letter GEN-14-17
Volume 7, Chapter 8, Example 1: Minimum Pell Grant and LEU
A full-time student with a Scheduled Award equal to $7,500 with a LEU of 599.500% would be eligible for the
remaining 0.500% which is $37.50 (if your school only disburses in whole dollars, this amount must be truncated
to $37, because $38 would exceed the student9s LEU).
Pell LEU Restoration for Closed Schools
Electronic Announcements posted:
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In 2021, the FAFSA Simplification Act codified Pell LEU Restoration for Closed Schools into law and expanded the
restoration of Pell Grant eligibility to include students who received a closed school, false certification, identity theft, or
borrower defense loan discharge. This expanded authority is known as <Pell LEU Restoration for Eligible Loan Discharge=.
The Department implemented changes in the COD System to accommodate this new authority on July 30, 2023.
A closed school may be considered for the Pell LEU Restoration for Closed Schools process if all the following are true:
The school's main location is officially closed with the Department;
The school closed after 1994 (i.e., 1995 to present);
All final disbursements have been submitted to the COD system and accepted by the Department;
All final enrollment data has been submitted to NSLDS so that the Department may determine if students are eligible
for restoration; and
The school has completed the close-out process with the Department.
A student may be eligible for restoration under the Pell LEU Restoration for Closed Schools process if all the following are
true:
The student received a Pell Grant disbursement at an eligible closed school (see criteria for an eligible closed school
above);
The student did not complete their program at the closed school; and
The student had a valid enrollment status at the closed school within two years of the school9s closure.
A student may be eligible for restoration under the Pell LEU Restoration for Eligible Loan Discharge process if the following
are true:
The student received an eligible loan discharge on or after July 1, 2017; and
The student received Pell Grant disbursement for the same OPEID and award year as the discharged loan.
School Impact Due to Pell LEU Restorations
Schools do not have to take any action related to either the Pell LEU Restoration for Closed Schools or the Pell LEU
Restoration for Loan Discharge processing. The Department has modified the COD system to restore Pell Grant eligibility
for affected students.
However, if a student9s eligibility for Pell in the current award year is affected by an LEU adjustment, the school will be
notified. Notifications of Pell eligibility restoration adjustments for students associated with their school are sent through
multiple sources:
December 21, 2016
April 3, 2017
October 4, 2017
Pell LEU Restoration for Eligible Loan Discharge
Electronic Announcement posted July 20, 2023
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COD Warning Edits (#221 for Closed School adjustments; #229 for Loan Discharge adjustments);
Targeted emails with instructions to download a list of affected students from the COD Web;
NSLDS post screening;
Updated LEU within response file; and
Details of the LEU adjustment(s) displayed on the students9 Pell LEU History screen in COD Web.
Student Impact and Eligibility for Pell LEU Restorations
Neither the Pell LEU Restoration for Closed Schools nor the Pell LEU Restoration for Eligible Loan Discharge process
requires student intervention. Students who are potentially eligible for additional Pell because some or all their Pell
eligibility has been restored are sent a targeted email.
Pell Grant LEU Disputes
A school or student may dispute the accuracy of a student9s Pell Grant data which resulted in the student9s LEU
percentage in COD. It is the student9s current school9s responsibility to coordinate the resolution of the dispute. You may
create, view, and edit Pell LEU disputes (including uploading documentation) using the COD Web Portal.
Pell Grant LEU disputes
Electronic Announcements posted:
June 27, 2013
April 18, 2014
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Appendix A
Pell Formula Summaries
Formula 1 Summary
Standard-term, credit-hour programs, including subscription-based programs, with 30 weeks of instructional time (or
waiver applies). For a program with a traditional academic calendar, the program:
must have an academic calendar that consists, in the fall through spring, of two semesters or trimesters, or three
quarters (note that summer may not be a standard term);
must have at least 30 weeks of instructional time in fall through spring terms;
must not have overlapping terms; and
must measure progress in credit hours and must define full-time enrollment for each term in the award year as at
least 12 credit hours.
Other programs offered in standard terms may use Formula 1 if they start the terms for different cohorts of students on a
periodic basis (for example, monthly). These programs:
must have an academic calendar that consists exclusively of semesters, trimesters, or quarters;
must have at least 30 weeks of instructional time in any two semesters or trimesters or any three quarters;
must start the terms for different cohorts of students on a periodic basis (for example, monthly);
must not allow students to be enrolled in overlapping terms and the students must stay with the cohort in which they
start unless they withdraw from a term (or skip a term) and re-enroll in a subsequent term; and
must define full-time enrollment for each term in the award year as at least 12 credit hours and must measure
progress in credit hours.
Step 1: Determine Enrollment Intensity
Enrolled credits divided by full-time minimum credits.
Step 2: Calculate Pell COA
Full-time, full academic year costs.
Step 3: Determine Annual Award
If the student9s enrollment intensity is full time, the annual award is the Scheduled Award. If the student9s
enrollment intensity is less than 100%, the annual award is the Scheduled Award multiplied by the enrollment
intensity percentage.
Step 4: Determine Payment Periods
Payment period is the academic term.
Step 5: Calculate Payment for a Payment Period
Annual award ÷ 2 for programs with semesters or trimesters or 3 for programs with quarters
OR
For alternate calculation:
Annual award ÷ Number of terms in the award year
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Formula 2 Summary
Standard-term, credit-hour programs, including subscription-based programs, with fewer than 30 weeks of instructional
time, and waiver does not apply.
Enrollment for at least 12 credit hours each term required for full-time status
Program terms don9t overlap
Academic calendar includes two semesters/trimesters (fall and spring) or three quarters (fall, winter, and spring)
Fall through spring terms are less than 30 weeks of instructional time
Formula 3 Summary
Any term-based, credit-hour program, including subscription-based programs; may include programs that qualify for
Formulas 1 and 2.
Step 1: Determine Enrollment Intensity
Enrolled credits divided by full-time minimum credits.
Step 2: Calculate Pell COA
Full-time, full academic year costs.
Cost for fall through spring terms prorated. If fall through spring terms provide the same number of credit hours
as are in the academic year definition, prorated COA is the same as non-prorated COA.
Step 3: Determine Annual Award
If the student9s enrollment intensity is full time, the annual award is the Scheduled Award. If the student9s
enrollment intensity is less than 100%, the annual award is the Scheduled Award multiplied by the enrollment
intensity percentage.
Step 4: Determine Payment Periods
Payment period is the academic term.
Step 5: Calculate Payment for a Payment Period
[(Annual award × Weeks of instructional time in fall through spring terms) ÷ Weeks of instructional time in
program's academic year definition] ÷ 2 (if semesters or trimesters) OR 3 (if quarters)
OR
For alternate calculation:
Annual award ÷ Number of terms in the award year
Step 1: Determine Enrollment Intensity
Enrolled credits divided by full-time minimum credits.
Step 2: Calculate Pell COA
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Formula 4 Summary
Clock-hour programs and credit-hour programs without terms, residential portion of non-term correspondence programs.
Full-time, full academic year costs.
Cost for program or period not equal to academic year prorated. Two fractions are compared:
Hours in program9s definition of academic year ÷ Hours to which the costs apply
Weeks of instructional time in program9s definition of academic year ÷ Weeks of instructional time in the
enrollment period to which the costs apply
The entire cost is multiplied by the lesser of the two fractions to determine Pell COA.
Step 3: Determine Annual Award
If the student9s enrollment intensity is full time, the annual award is the Scheduled Award. If the student9s
enrollment intensity is less than 100%, the annual award is the Scheduled Award multiplied by the enrollment
intensity percentage.
Step 4: Determine Payment Periods
Payment period is the academic term.
Step 5: Calculate Payment for a Payment Period
[(Annual award x Weeks of instructional time in the term) ÷ Weeks of instructional time in the program9s
academic year definition]
Note: A single disbursement can9t exceed 50% of the annual award.
Step 1: Determine Enrollment Intensity
At least half-time or less-than-half-time.
Step 2: Calculate Pell COA
Full-time, full academic year costs.
Cost for program or period not equal to academic year prorated. Two fractions compared:
Hours in program9s definition of academic year ÷ Hours to which the costs apply
Weeks of instructional time in program9s definition of academic year ÷ Weeks of instructional time in the
enrollment period to which the costs apply
The entire cost is multiplied by the lesser of the two fractions to determine Pell COA.
Step 3: Determine Annual Award
Always equal to Scheduled Award. Does not mean students are always considered full-time.
Step 4: Determine Payment Periods
Length of payment period measured in credit or clock hours and weeks of instructional time. Minimum of two
equal payment periods required for programs shorter than an academic year, or two equal payment periods in
each full academic year (or final portion longer than half an academic year) for programs longer than or equal to
an academic year.
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Formula 5A Summary
Correspondence programs non-term correspondence component. For residential portion, use Formula 4 to calculate
payment periods and amounts. The schedule for the submission of lessons must reflect a workload of at least 12 hours of
preparation per week of instructional time.
Step 5: Calculate Payment for a Payment Period
Annual award multiplied by the lesser of:
The number of credit or clock hours in the payment period ÷ The number of credit or clock hours in the program9s
academic year
OR
The number of weeks of instructional time in the payment period ÷ The number of weeks of instructional time in
the program9s academic year
Note: A single disbursement can9t exceed 50% of the annual award.
Step 1: Determine Enrollment Intensity
Enrollment intensity is never more than 50%.
Step 2: Calculate Pell COA
Full-time, full academic year costs (for applicable components).
Cost for program or enrollment period not equal to academic year prorated according to the following formula for
tuition and fees:
Costs × (Credit hours in program9s definition of academic year ÷ Credit hours to which costs apply)
Step 3: Determine Annual Award
Annual award is the Scheduled Award multiplied by enrollment intensity, capped at 50%.
Step 4: Determine Payment Periods
Length of payment period measured in credit hours.
The first payment period is the period of time in which the student completes the lesser of the first half of the
academic year or the first half of the program. (First payment can be made only after the student has completed
25% of the lessons or otherwise completed 25% of the work scheduled, whichever comes last.)
The second payment period is the period of time in which the student completes the lesser of the second half of
the academic year or the second half of the program. (Second payment may be made only after the student has
submitted 75% of the lessons or otherwise completed 75% of the work scheduled, whichever comes last.)
Step 5: Calculate Payment for a Payment Period
Annual award is multiplied by the lesser of:
Number of credit hours in the payment period ÷ Number of credit hours in the program9s academic year
OR
Weeks of instructional time in the payment period ÷ Weeks of instructional time in the program9s academic year
Note: A single disbursement can9t exceed 50% of the annual award.
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Formula 5B Summary
Programs of study by correspondence, term correspondence component. During each term, the written schedule for the
submission of lessons must reflect a workload of at least 30 hours of preparation per semester hour or at least 20 hours of
preparation per quarter hour.
Step 1: Determine Enrollment Intensity
Enrollment intensity is never more than 50%.
Step 2: Calculate Pell COA
Full-time, full academic year costs (for applicable components).
Cost for program or enrollment period not equal to academic year prorated according to the following formula for
tuition and fees:
Cost × (Credit hours in program9s definition of academic year ÷ Credit hours to which costs apply)
Step 3: Determine Annual Award
Annual award is the Scheduled Award multiplied by enrollment intensity, capped at 50%.
Step 4: Determine Payment Periods
Length of payment period is the academic term.
Step 5: Calculate Payment for a Payment Period
(Annual award x Weeks of instructional time in the term) ÷ Weeks of instructional time in the program9s academic
year definition
When there is a residential portion in a term-based correspondence program, Formula 3 is used to calculate the
student9s payment for a payment period for the residential portion.
Note: A single disbursement cannot exceed 50% of the annual award.
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Volume 8
The Direct Loan Program
Introduction
Under the William D. Ford Federal Direct Loan Program (Direct Loan Program), the U.S. Department of Education (the
Department) makes loans to help students and parents pay the cost of attendance (COA) at a postsecondary school. This
volume of the
Federal Student Aid Handbook provides information to assist schools in determining student and parent
eligibility for Direct Loans, counseling student borrowers, and awarding Direct Loans.
Changes for 2025-2026
We have made the following changes in
Volume 8 for 2025-2026:
In Chapter 3, we have revised the discussion of loan periods to provide a limited exception to the longstanding
requirement that the loan period for a Direct Loan may not include any terms in which the borrower is ineligible to
receive Direct Loan funds.
Also in Chapter 3, we have added a slightly revised and expanded version of guidance on the treatment of Direct
Loan disbursements made after the date of a borrower9s death that was previously in Volume 4, Chapter 2 of the FSA
Handbook under the heading <Checking Eligibility at the Time of Disbursement.= Because this guidance is specific to
Direct Loans, we believe Volume 8 is a more appropriate location.
In Chapter 5, we have revised Example 6 to reflect the limited exception to the requirement that a loan period may
not include terms in which the borrower is ineligible (see Chapter 3 changes above).
In Chapter 7, we have revised the discussion of transfer students and abbreviated loan periods to clarify that in some
circumstances a transfer student may be eligible to receive more Direct Loan funds for the program at the new
school than a non-transfer student would be eligible to receive for that same program.
Except as noted above, there are no other substantive changes to Volume 8 for 2025-2026.
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Chapter 1
Student and Parent Eligibility for Direct Loans
Overview
To be eligible for Direct Loans, a student must be enrolled on at least a half-time basis at a school that participates in the
Direct Loan Program, and students and parents must meet the general federal student aid eligibility requirements
covered in Volume 1 of the Federal Student Aid Handbook. This chapter discusses other eligibility requirements that are
specific to the Direct Loan Program.
Direct Subsidized Loans and Direct Unsubsidized Loans
Only students who have financial need may receive Direct Subsidized Loans. The federal government does not charge
interest on Direct Subsidized Loans while the borrower is enrolled on at least a half-time basis, during the grace and
deferment periods, and during certain other periods (for example, during certain periods of repayment under certain
repayment plans that determine the required monthly payment amount based on the borrower9s income and family size).
If a student has received a determination of need for a Direct Subsidized Loan in an amount of $200 or less, a school may
choose not to originate a Direct Subsidized Loan and may instead include that amount as part of a Direct Unsubsidized
Loan.
Financial need is not an eligibility requirement to receive a Direct Unsubsidized Loan. The federal government generally
charges interest on Direct Unsubsidized Loans during all periods, with limited exceptions (for example, during periods of
deferment for cancer treatment).
To be eligible to receive a Direct Subsidized Loan or Direct Unsubsidized Loan, an undergraduate student attending a
school that participates in the Federal Pell Grant Program must first have received a determination of their Pell Grant
eligibility for the period of enrollment for which the student is requesting a loan.
No Minimum Age To Receive a Direct Loan
Students who are minors may receive Direct Loans, but they may not refuse to repay the loans based on a <defense of
infancy= (that is, by claiming that they were too young to enter into the contract of signing the promissory note).
Requirement To Offer Both Subsidized and Unsubsidized Loans
Direct Subsidized and Direct Unsubsidized Loans are two components of a single loan program. A school may not choose
to make only Direct Subsidized Loans or only Direct Unsubsidized Loans available to its eligible students. For more
Direct Loan Program Regulations
34 CFR Part 685
No Defense of Infancy
Higher Education Act (HEA) Sec. 484A(b)(2)
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information, see the discussion under <Direct Subsidized Loans and Direct Unsubsidized Loans= in DCL GEN-11-07.
Direct Unsubsidized Loans for Students Whose Parents Have Ended Financial Support or Refuse To File a FAFSA Form
If you verify that the parents of a dependent undergraduate student have refused to complete the parental information
sections of the Free Application for Federal Student Aid (FAFSA) form or that they have ended financial support for the
student, you may make a professional judgment decision to offer the student a Direct Unsubsidized Loan in an amount up
to the applicable annual loan limit for a dependent undergraduate. For instance, under these circumstances a dependent
second-year undergraduate could receive up to $6,500 in Direct Unsubsidized Loan funds (see Chapter 4 of this volume
for information on annual loan limits). However, the student may not receive Direct Subsidized Loans or aid from any of
the other Title IV programs.
Self-certification from the dependent student is not sufficient to verify that the parents have ended financial support or
have refused to complete the FAFSA form. In most cases, this requirement can be met by obtaining a signed and dated
statement from one of the student9s parents. For more information, see the discussion under <Dependent students
without parent support= in the <Professional Judgment= section of Chapter 5 of the Application and Verification Guide.
Direct PLUS Loans
Direct PLUS Loans are available to graduate and professional students, and to the parents of dependent undergraduate
students.
A parent may receive a Direct PLUS Loan only to pay for the education costs of a dependent undergraduate student who
meets the eligible student definition. A parent borrower must meet the same citizenship and residency requirements as a
student. Similarly, a parent who is in default on a
Title IV loan, or who owes an overpayment on a Title IV grant, is
ineligible for a Direct PLUS Loan unless they have made satisfactory arrangements to repay the loan or grant. A parent
who had a prior Title IV loan discharged for total and permanent disability must meet the same eligibility requirements
outlined for student borrowers in Volume 1, Chapter 3. Finally, a parent is not eligible for a Direct PLUS Loan if the federal
government holds a judgment lien on their property or if the parent is incarcerated. Note, however, that a parent9s
ineligibility for a Direct PLUS Loan does not affect the student9s eligibility for other Title IV aid, assuming that the student
is otherwise eligible.
Requirement To Offer Direct PLUS Loans to Both Student and Parent Borrowers
Schools may choose whether to offer Direct PLUS Loans. If your school chooses to participate in the Direct PLUS Loan
Program and has both undergraduate and graduate or professional students, you must make Direct PLUS Loans available
to both the parents of dependent undergraduate students and to graduate or professional students. You may not limit
Direct PLUS Loan borrowing only to parents or only to graduate or professional students. For more information, see the
discussion under <Direct PLUS Loans= in
DCL GEN-11-07.
Definition of <Parent= for Direct PLUS Loan Purposes
If they meet all other Direct PLUS Loan eligibility requirements, the following individuals can borrow Direct PLUS Loans on
behalf of a dependent undergraduate student:
The student9s biological parent;
The student9s legal adoptive parent; or
The student9s stepparent (spouse of the student9s biological or legal adoptive parent at the time of application), but
only if the stepparent is required to provide their information on the FAFSA form in accordance with the instructions
on the FAFSA form.
Grandparents and other family members are not eligible to take out Direct PLUS Loans on behalf of a dependent
undergraduate student unless they have legally adopted the student.
In addition to the parent(s) whose resources are reported on a student9s FAFSA form, any otherwise eligible biological or
legal adoptive parent of the dependent undergraduate student can also take out a Direct PLUS Loan on the student9s
behalf, even if that parent9s information is not reported on the FAFSA form.
Note also that more than one parent can take out a Direct PLUS Loan on behalf of the same dependent undergraduate
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student. For example, if a student9s biological or legal adoptive parents are divorced, they may decide to each take out a
Direct PLUS Loan for an agreed upon amount (not to exceed the student9s COA, minus other financial assistance (OFA)) to
help pay for the cost of the student9s education.
Requirement for Dependent Students To File a FAFSA Form
In all cases, the dependent student on whose behalf a parent has applied for a Direct PLUS Loan must have filed a FAFSA
form and received an Institutional Student Information Record (ISIR) or FAFSA Submission Summary (see Chapter 1 of the
Application and Verification Guide for information on the ISIR and FAFSA Submission Summary). This requirement ensures
that student eligibility data matches are conducted to verify that the dependent student on whose behalf the parent is
borrowing:
Is not in default on a Title IV loan and does not owe an overpayment on a Title IV grant;
Has had their Social Security number verified by the Social Security Administration; and
Has had their citizenship status confirmed by either the Social Security Administration or the Department of
Homeland Security.
Note that this requirement is for the student to submit a FAFSA form. It is not a requirement for the parent borrower to
submit a FAFSA form in the parent9s name, and it does not preclude an otherwise eligible parent whose information is not
included on the FAFSA form (sometimes referred to as a <non-custodial= parent) from obtaining a Direct PLUS Loan.
Before originating a Direct PLUS Loan for a parent borrower, schools must review the ISIR or FAFSA Submission Summary
of the dependent student to ensure there are no student eligibility issues that must be resolved before the parent can
receive the Direct PLUS Loan.
Adverse Credit History
An individual with an adverse credit history is prohibited from obtaining a Direct PLUS Loan unless they meet additional
eligibility requirements. The Department obtains a credit report on each student or parent applicant for a Direct PLUS
Loan. An applicant is considered to have an adverse credit history if:
They have one or more debts with a total combined outstanding balance greater than $2,085 that (1) are 90 or more
days delinquent as of the date of the credit report, or (2) have been placed in collection or charged-off during the two
years preceding the date of the credit report; or
During the five years preceding the date of the credit report, the applicant has been determined to be in default on a
debt; has had debts discharged in bankruptcy; or has been the subject of foreclosure, repossession, tax lien, wage
garnishment, or write-off of a Title IV debt.
For Direct PLUS Loan eligibility purposes, <charged-off= means a debt that has been written off as a loss, but that is still
subject to collection action. <In collection= means a debt that has been placed with a collection agency by a creditor or
that is subject to more intensive efforts by a creditor to recover amounts owed from a borrower who has not responded
satisfactorily to the routine demands of the creditor9s billing procedures.
An applicant cannot be denied a Direct PLUS Loan because they have no credit history. That is, the absence of a credit
history is not considered to be adverse credit.
There are two means by which a Direct PLUS Loan applicant with an adverse credit history can still qualify for a Direct
PLUS Loan. One option is for the applicant to obtain an endorser who doesn9t have an adverse credit history. An endorser
is someone who agrees to repay the Direct PLUS Loan if the borrower doesn9t repay it. For a parent borrower, the
endorser may not be the dependent student for whom the parent is borrowing.
As an alternative to obtaining an endorser, an applicant who has been determined to have an adverse credit history may
also qualify for a Direct PLUS Loan by submitting documentation to the Department showing that there are extenuating
circumstances associated with the adverse credit. The Department has the final decision on determining whether
extenuating circumstances exist.
A borrower who qualifies for a Direct PLUS Loan by obtaining an endorser or documenting to the satisfaction of the
Department that extenuating circumstances exist must also complete PLUS Loan Credit Counseling, as discussed below.
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If your school participates in the Direct PLUS program but a student9s parent cannot obtain a Direct PLUS Loan, the
student is allowed to borrow additional unsubsidized funds (see <Criteria for Dependent Students to Receive Additional
Direct Unsubsidized Loan Funds= in Chapter 4 of this volume).
Required Counseling for Direct PLUS Loan Applicants With Adverse Credit
Any student or parent Direct PLUS Loan applicant who has an adverse credit history but qualifies by obtaining an endorser
or documenting that there are extenuating circumstances must also complete PLUS Loan Credit Counseling on the
Department9s StudentAid.gov website.
Adverse Credit History and Default
Although a default on a
Title IV loan will generally appear in a student or parent Direct PLUS Loan applicant9s credit record
and result in the individual being determined to have an adverse credit history, being in default on a Title IV loan and
having an adverse credit history are separate eligibility issues. A Direct PLUS Loan applicant who is identified through the
Department9s National Student Loan Data System (NSLDS) as being in default on a Title IV loan and who has also been
determined to have an adverse credit history (due to the default and/or other adverse credit conditions) cannot qualify for
a Direct PLUS Loan simply by obtaining an endorser or by providing acceptable documentation of extenuating
circumstances. The applicant must also separately resolve the default status by one of the means discussed under
<Resolving Default Status= in Volume 1, Chapter 3.
In some cases, the Direct PLUS Loan credit check may not reveal a default on a Title IV loan, particularly if the default is
not recent. If a student or parent Direct PLUS Loan applicant who is identified in NSLDS as being in default on a Title IV
loan does not have any other adverse credit issues, the applicant will pass the PLUS credit check. In this circumstance you
cannot assume that the approved credit check result supersedes the information in NSLDS. The default must be resolved
before you can disburse Direct PLUS Loan funds or other Title IV aid to the applicant.
Direct PLUS Loan Application
Schools that offer Direct PLUS Loans have the option of requiring student and parent Direct PLUS Loan applicants to
complete the
Direct PLUS Loan Application (formally known as the "Federal Direct PLUS Loan Request for Supplemental
Information") on the Department's StudentAid.gov website as the first step in applying for a Direct PLUS Loan. The Direct
PLUS Loan Application collects the requested loan amount, the period of enrollment for which the loan is intended, and
other information related to processing the requested Direct PLUS Loan.
Use of the Direct PLUS Loan Application on StudentAid.gov is not required. Schools may choose to develop their own
processes for obtaining the information needed to originate Direct PLUS Loans.
Although the Department9s FAFSA Processing System (FPS) matches student Direct PLUS Loan applicants against NSLDS
to determine if they are in default on a Title IV loan, it does not perform this match for parent Direct PLUS Loan applicants.
However, the Department conducts an NSLDS default check on all Direct PLUS Loan applicants (both students and
parents) who complete the Direct PLUS Loan Application on StudentAid.gov.
Schools that use the Direct PLUS Loan Application are notified of the result of the NSLDS default check through the
Common Origination and Disbursement (COD) System. The result is reported as one of the following values:
"N" = The borrower is not in default on any Title IV loan.
Definition of <Adverse Credit History=
34 CFR 685.200(c)(2)(viii)(B)
34 CFR 685.200(b)(5)
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"Y" = The borrower is in default on a Title IV loan.
"E" = Unable to determine if the borrower is in default on a Title IV loan.
If the result is "N," a student or parent Direct PLUS Loan applicant who meets all other Direct PLUS Loan eligibility
requirements may receive a Direct PLUS Loan.
If the result is "Y," the student or parent may not receive a Direct PLUS Loan (or any other
Title IV aid) until the default
status is resolved (see "Resolving Default Status" in Volume 1, Chapter 3 for more information).
A result of "E" may be reported if for some reason it was not possible to conclusively determine that the applicant is not in
default. An <E= result is most commonly due to temporary systems issues involving the interface between the Direct PLUS
Loan Application and NSLDS. In this case, if the Direct PLUS Loan applicant is a graduate or professional student and the
NSLDS match performed by the FPS indicates that the student is not in default, you may rely on the results of that check.
If the applicant is a parent, you must separately check NSLDS to confirm that the parent is not in default before
originating a Direct PLUS Loan.
Ineligible Borrowers
The Department may determine that a borrower was ineligible to receive a Direct Loan if, at the time the loan was made
and without the knowledge of the Department or the school, the borrower (or the dependent student on whose behalf a
parent received a Direct PLUS Loan) provided false information, was convicted of or pled no contest or guilty to a crime
involving fraud in obtaining
Title IV funds, or took actions that caused the borrower or student to receive:
Loan funds for which they were wholly or partially ineligible;
Interest benefits on a loan for which they were ineligible; or
Loan funds for a period of enrollment for which they were ineligible.
If the Department determines that a Direct Loan borrower was ineligible, the Department sends the borrower a demand
letter that requires the borrower to repay some or all of the loan the borrower received, as applicable, within 30 days. If
the borrower fails to comply with the letter, the borrower is considered in default on the entire loan.
IMPORTANT: If you do not require Direct PLUS Loan applicants at your school to complete the Direct PLUS Loan
Application, you must check NSLDS for all parent Direct PLUS Loan applicants to confirm that they are not in
default before originating Direct PLUS Loans for these individuals.
Direct PLUS Loan Application NSLDS Default Check
October 18, 2016 Electronic Announcement
Ineligible Borrowers
34 CFR 685.211(e)
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Direct Loans at Multiple Schools
A student who is concurrently enrolled and eligible at more than one school may receive Direct Loans at each school. If
the student is receiving Direct Subsidized Loans or Direct Unsubsidized Loans, the schools that the student is attending
are responsible for coordinating to make sure that the total amount of the loans the student receives does not exceed the
applicable annual or aggregate loan limit. In addition, the schools must ensure that there is no duplication of non-
institutional costs when determining the student9s COA. Note that in the situation where a student is concurrently enrolled
and eligible at more than one school, which is different than the consortium arrangements discussed in
Volume 2, Chapter
2, loan funds awarded at one school are not to be included as OFA by any other school the student is attending when
determining the student9s loan eligibility for the same period.
Exceptions to the <Regular Student= Requirement for Direct Loans
As explained in Volume 1, Chapter 1, one of the eligibility requirements for a student to receive Title IV aid is that the
student must be enrolled at an eligible school for the purpose of obtaining a degree or certificate offered by the school.
Such a student is known as a <regular student.= However, there are two limited exceptions to this requirement for Direct
Loans: preparatory coursework and teacher certification coursework.
Preparatory Coursework
A student may receive a Direct Subsidized Loan or Direct Unsubsidized Loan (or a parent may receive a Direct PLUS Loan
on behalf of a dependent student) for preparatory coursework that the school has documented is necessary for the
student to enroll in an eligible program. The preparatory courses must be offered as part of an eligible program offered by
the school, though the student does not have to be enrolled in that program. A school may not award Direct Loans for
standalone courses that do not count towards an eligible program and exist solely to serve as preparatory coursework.
A student who is enrolled at least half time in preparatory coursework as described above is eligible to receive loans for a
maximum of one consecutive 12-month period (not per program) beginning on the first day of the loan period. If the
consecutive 12-month period of preparatory coursework spans more than one academic year, the student may receive
more than one annual loan limit.
To be eligible for loans under this exception, the student must be taking classes that are a prerequisite for admission. A
student who is only taking courses to raise their grade-point average in order to be admitted does not qualify.
Preparatory Coursework at a Different School
Regular Student
34 CFR 600.2
Preparatory Coursework
34 CFR 668.32(a)(1)(ii)
34 CFR 685.203(a)(6) and (c)(2)(vi)
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A student may take the preparatory courses at School A (as long as the courses are part of an eligible program there) that
are required for admission into a program at School B. As the awarding school, School A may require documentation from
School B that these courses are required for the student9s subsequent enrollment.
Teacher Certification Coursework
A student may receive a Direct Subsidized Loan or Direct Unsubsidized Loan (or a parent may receive a Direct PLUS Loan
on behalf of a dependent student) for courses that the student must complete to receive a professional credential or
certificate from a state that is required for employment as an elementary or secondary school teacher in that state, even
though the school where the student takes the courses does not award a degree or other credential upon the completion
of that coursework.
Volume 8, Chapter 1, Example 1: Eligible Preparatory Coursework
A student who previously received a bachelor9s degree with a major in mathematics now wants to enroll in a
graduate computer science program. The student needs 12 more semester hours of computer science coursework
to meet the admission requirements of the school that offers the program. The student enrolls in courses that are
part of one of the school9s undergraduate degree programs, but is not enrolled for the purpose of receiving a
degree and therefore is not a regular student. However, because the coursework is necessary for enrollment in
the graduate program, the student may receive Direct Loans for this coursework (for a maximum of one
consecutive 12-month period).
Volume 8, Chapter 1, Example 2: Ineligible Preparatory Coursework
A nursing school offers a 2-year program leading to a diploma. This is the only Title IV eligible program offered by
the school. To be admitted to the program, students must have:
Received a high school diploma or general educational development (GED) certificate;
Completed Human Anatomy and Physiology with a minimum grade of <C=;
Completed college level English Composition with a minimum grade of <C=; and
Completed college level Algebra with a minimum grade of <C=.
For applicants who have not successfully completed post-secondary courses in Human Anatomy and Physiology,
English Composition, and Algebra, the school offers 8-week courses that upon successful completion qualify
applicants for admission. Because the school does not offer a Title IV eligible program that includes its courses in
Human Anatomy and Physiology, English Composition, and Algebra, students enrolled in those stand-alone
courses are not eligible to receive Title IV funds.
Teacher Certification Coursework
34 CFR 668.32(a)(1)(iii)
34 CFR 685.203(a)(7) and (c)(2)(vii)
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Direct Loan Eligibility After an Enrollment Status Change
If a student who received a disbursement of Direct Loan funds prior to the first day of classes of a payment period begins
attendance on a less-than-half-time basis, there is no requirement for the school or the student to return the loan funds as
long as:
The student began attendance in at least one course during the payment period; and
At the time of the loan disbursement the student was enrolled (registered) for classes on at least a half-time basis.
However, the school must not make any subsequent disbursements of the loan unless the student resumes enrollment on
at least a half-time basis during the payment period.
A student who is no longer enrolled at least half time may not receive as a late disbursement any second or subsequent
disbursement of the loan.
Note that different requirements apply if a student who received a Direct Loan disbursement prior to the first day of
classes fails to begin attendance in any classes. See <When A Student Fails to Begin Attendance= in
Volume 4, Chapter 3.
If a student does not withdraw but ceases to be enrolled on at least a half-time basis, a school may make a late
disbursement of a Direct Loan for costs incurred by the student for a period in which the student was eligible. However,
this does not apply if the student dropped all future classes or modules, because the student never began classes as a
half-time student.
Title IV program funds (including Direct Loans) are disbursed to a student on the presumption that the student will attend
the hours for which aid has been awarded. Therefore, a school is not required to delay the disbursement of a Direct Loan
until a student has begun attendance in enough hours to establish half-time enrollment status. However, if a school has
not yet made a Direct Loan disbursement to a student who has dropped classes, and the school determines that the
student never began attendance in enough classes to establish half-time enrollment status, the school may not make a
first disbursement of a Direct Loan to that student.
Likewise, if a student who was enrolled in a series of modules drops all future classes before beginning attendance in
enough modules to establish half-time enrollment status, the school may not make a first disbursement of a Direct Loan
because the student never began attendance on at least a half-time basis. If a student who dropped to less-than-half-time
status resumes enrollment on a half-time basis during the payment period or period of enrollment, the school may make
remaining disbursements of a Direct Loan if the school documents (1) the student9s revised COA, and (2) that the student
continues to qualify for the entire amount of the loan, despite any reduction in the student9s COA caused by the
temporary cessation of enrollment on at least a half-time basis.
DCL GEN-16-10
Late Disbursements for Students Who Cease To Be Enr olled at Least Half Time
34 CFR 668.164(j)(3)(iii)
Direct Loan Disbursements to Students Who Temporari ly Cease Half-Time Enrollment
34 CFR 685.303(b)(3)(iv)
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Direct Loan Eligibility After Inadvertent Overborrowing
A student who has inadvertently received Direct Loan funds in excess of the annual or aggregate loan limits is ineligible to
receive any Title IV funds until the overborrowing is resolved. As explained in more detail below, the student can regain
eligibility for aid by repaying the amount that exceeded the annual or aggregate loan limits, or by making satisfactory
arrangements with the loan servicer to repay the excess amount.
The school where the student is requesting additional Title IV funds is responsible for identifying the loan(s) that resulted
in the overborrowing, determining that the overborrowing was inadvertent, discussing the overborrowing with the
student, and resolving any discrepancies in the information that is obtained. If the loan(s) that caused the student to
exceed the annual or aggregate loan limit were received for attendance at a different school, in some cases it may be
necessary for the school the student is currently attending to contact the other school for additional information in order
to determine that the excess borrowing was inadvertent.
Examples of circumstances that may have resulted in a student inadvertently exceeding an annual or aggregate loan limit
include, but are not limited to:
School processing errors;
Missing or incorrect NSLDS information; or
Unintentional student error or omission.
Overborrowing is not considered inadvertent if there is any evidence that it was the result of deliberate action on the part
of the school that determined the borrower9s eligibility for the loan, or on the part of the borrower who received the loan.
If a school determines that the overborrowing was the result of deliberate action on the part of another school or the
borrower, it must notify the Department9s Office of the Inspector General and provide evidence (see the contact number
at the end of this section).
Once the school where the student is requesting
Title IV funds has documented that the student has either repaid the
excess loan amount or has made satisfactory arrangements to repay the excess amount, it may award additional aid. For
Direct Loans, the student9s eligibility is retroactive to the beginning of the academic year in which the overborrowing was
resolved.
A student who regains eligibility after inadvertent overborrowing may or may not be eligible to receive additional loan
funds, depending on the circumstances. For example, a dependent undergraduate who inadvertently exceeded the
$23,000 aggregate limit for subsidized loans could not receive any additional Direct Subsidized Loan funds as a
dependent undergraduate unless the outstanding debt was paid down below the $23,000 limit (see Chapter 4 of this
volume for information on aggregate loan limits). However, the student could potentially receive additional Direct
Unsubsidized Loan funds, up to the $31,000 aggregate loan limit, or non-loan aid. An independent undergraduate who
inadvertently exceeded the $23,000 subsidized limit (but who has not reached the $57,500 combined aggregate loan limit
for independent undergraduates) could borrow additional Direct Unsubsidized Loan funds once they make satisfactory
arrangements to repay the subsidized amount that exceeds $23,000. For more on overborrowing and overawards, see
Volume 4.
A student who regains Title IV eligibility after having inadvertently exceeded an annual loan limit for an academic year is
not eligible to receive additional Direct Loan funds for that same academic year, but could receive other types of Title IV
aid. However, if the student exceeded only the annual subsidized limit and has regained eligibility, the student would be
eligible to receive Direct Unsubsidized Loans up to the applicable annual maximum.
Note: A student who inadvertently exceeded an undergraduate annual or aggregate loan limit does not
automatically become eligible to receive additional Direct Loans if they become eligible for an increased annual
loan limit as a result of progressing to a higher grade level, or if they become eligible for a higher aggregate loan
limit due to their dependency status changing from dependent to independent or by their enrollment in a
graduate or professional degree program. In either case, the inadvertent overborrowing must still be resolved
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Repayment of the Excess Loan Amount
If a student who has inadvertently overborrowed wishes to regain
Title IV eligibility by repaying the excess loan amount,
the student must contact the applicable servicer and comply with the servicer9s repayment instructions. The school may
assist the student in identifying and contacting the servicer, but the student, not the school, must make the payment of
the excess loan funds in accordance with the servicer9s instructions. Once the student has repaid the excess loan amount
in full, the servicer will send the student confirmation that the excess loan amount has been repaid. The student or
servicer must provide a copy of the repayment confirmation to the school. The inadvertent overborrowing is considered to
have been resolved as of the date the servicer received the borrower9s full payment of the excess loan amount.
Satisfactory Repayment Arrangements (<Reaffirmation=)
A student who has inadvertently overborrowed may also regain Title IV eligibility by making satisfactory repayment
arrangements to repay the excess loan amount. This requirement can be met if the student agrees in writing to repay the
excess amount according to the terms and conditions of the promissory note that supported the loan. This is called
<reaffirmation.= The reaffirmation process includes the following five steps:
1. Either the student or the school where the student is requesting additional Title IV funds contacts the servicer of the
loan that caused the overborrowing and explains that the student has inadvertently overborrowed and wishes to
reaffirm the debt.
2. The servicer sends the student a reaffirmation agreement.
3. The student reads, signs, and returns the reaffirmation agreement to the servicer.
4. The servicer sends the student confirmation that the reaffirmation agreement has been accepted. The student or
servicer must provide a copy of the confirmation to the school where the student is requesting Title IV funds.
5. The inadvertent overborrowing is considered to have been resolved as of the date the servicer receives the student9s
signed reaffirmation agreement.
Consolidation of Loan Amounts That Exceed the Annual or Aggregate Loan Limit
If a borrower who inadvertently received more than the annual or aggregate loan limits has consolidated the loan(s) that
caused the borrower to exceed the loan limit into a Direct Consolidation Loan, the Direct Consolidation Loan is considered
a satisfactory arrangement to repay the excess amount. This restores the borrower9s eligibility for Title IV aid. If the school
where the student is seeking aid confirms through NSLDS that the loan(s) have been consolidated, no further action is
required. Note, however, that consolidation of an amount that exceeded the combined aggregate loan limit for Direct
Subsidized Loans and Direct Unsubsidized Loans does not automatically make a student eligible for additional Direct Loan
funds.
before the student can receive additional Title IV aid.
Regaining Title IV Eligibility After Inadvertent Overborrowing
34 CFR 668.35(d)
DCL GEN-15-20
DCL GEN-13-02
Department of Education Office of the Inspector Gen eral Hotline
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Refusing To Originate a Loan or Originating for Less Than a Borrower9s Maximum Eligibility
On a case-by-case basis, you may refuse to originate a Direct Loan for an individual borrower, or you may originate a loan
for an amount less than the borrower9s maximum eligibility. If you choose to exercise this discretion, you must ensure
that your decisions are made on a case-by-case basis and do not constitute a pattern or practice that denies access to
Direct Loans for borrowers because of race, sex, color, income, religion, national origin, age, or disability status. When you
make a decision not to originate a loan or to reduce the amount of the loan, you must retain documentation supporting
the determination in the student9s file and provide the reason for the determination to the student in writing. Also note
that your school may not have a policy of limiting Direct Loan borrowing on an across-the-board or categorical basis. For
example, you may not have a policy of limiting borrowing to the amount needed to cover the school charges, or not
allowing otherwise eligible students to receive up to the full combined annual loan limit for Direct Subsidized Loans and
Direct Unsubsidized Loans.
Prohibition on Establishing Additional Eligibility Requirements for Direct Loans
You may not condition the disbursement of a Direct Loan on anything other than the eligibility criteria under the federal
regulations that govern the Direct Loan Program. For example, you may not:
Require students to participate in counseling beyond the required entrance counseling for first-time student
borrowers (see Chapter 2 of this volume for more information) as a condition for receiving a Direct Loan;
Require a student to complete a separate Direct Loan application as a condition for receiving a Direct Loan; or
Perform credit checks on students in connection with awarding Direct Loans or other Title IV aid.
Department of Education Office of the Inspector General Hotline Portal
1-800-MIS-USED (1-800-647-8733)
Refusing to Originate a Loan
HEA Sec. 479(A)(e)
34 CFR 685.301(a)(8)
DCL GEN-11-07
Prohibition on Requiring an Additional Application
March 18, 2014 Electronic Announcement
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Chapter 2
Direct Loan Counseling
Counseling Overview
First-time student borrowers must complete entrance counseling before they can receive the first disbursement of a
Direct Loan, and all student Direct Loan borrowers must complete exit counseling shortly before they cease to be enrolled
on at least a half-time basis. There is a special counseling requirement for student and parent Direct PLUS Loan borrowers
who meet the requirements to receive a Direct PLUS Loan after having been determined to have an adverse credit
history. This chapter discusses the counseling requirements for Direct Loan borrowers and associated school
responsibilities.
Entrance Counseling
Entrance counseling is required for all first-time student Direct Subsidized Loan, Direct Unsubsidized Loan, and student
Direct PLUS Loan borrowers. Entrance counseling is not required for parent Direct PLUS Loan borrowers.
For this purpose, a first-time Direct Subsidized Loan or Direct Unsubsidized Loan borrower is someone who has not
received a prior Direct Subsidized Loan, Direct Unsubsidized Loan, Subsidized Federal Stafford Loan, Unsubsidized Federal
Stafford Loan, or Federal Supplemental Loans for Students (SLS) Loan. In the case of a graduate or professional student
who requests a Direct PLUS Loan, a first-time Direct PLUS Loan borrower is someone who has not received a prior student
Direct PLUS Loan or student Federal PLUS Loan. Subsidized and Unsubsidized Federal Stafford Loans, Federal SLS Loans,
and Federal PLUS Loans are loan types that were made under the Federal Family Education Loan (FFEL) Program before
the authority to make new FFEL Program loans ended effective July 1, 2010.
Before making the first disbursement of a Direct Subsidized Loan, Direct Unsubsidized Loan, or student Direct PLUS Loan
to a first-time borrower, you must ensure that the student receives entrance counseling.
Entrance counseling provides borrowers with comprehensive information on the terms and conditions of the loan they are
about to receive, and their responsibility to repay the loan. This information may be provided during an in-person
counseling session, on a separate written form that the borrower signs and returns to the school, or online or by
interactive electronic means, with the borrower acknowledging receipt of the information.
If entrance counseling is conducted online or through interactive electronic means, your school must take reasonable
steps to ensure that students finish the counseling, which may include completing a test of their understanding of the
terms and conditions of the loan. If a standardized, interactive electronic tool is used for counseling, you must give the
borrower any required information that is not addressed in the tool either in person or in a separate written or electronic
document.
Your school must have someone with expertise in the
Title IV programs reasonably available shortly after the counseling
to answer students9 questions. As an alternative, if students are enrolled in an approved correspondence, distance
education, or study-abroad program, they may be provided with written counseling materials before the loan is disbursed.
You may not require students to complete additional counseling beyond entrance counseling. However, your entrance
counseling policy can require more than the minimum specified by the regulations as long as the additional requirements
are reasonable as to time, effort, and relevance to the students9 borrowing and are not administered in a way that
unreasonably impedes students9 ability to receive Direct Loans in a timely manner. For example, your entrance counseling
can include one or more of the following:
Extra information as part of in-person individual or group training or through your website, other electronic means,
written materials, or different methods;
A requirement for first-time student borrowers to take a test or evaluation of what they learned in counseling (though
you cannot establish a passing score that they must achieve to get a Direct Loan);
A requirement for students to complete a worksheet, budget, or other exercise designed to improve financial literacy
and understanding of the implications of borrowing (but you cannot require them to justify the need for a loan); or
A requirement for students to participate in a workshop, loan orientation presentation, or similar activity.
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You cannot require, but you can encourage borrowers to participate in counseling beyond entrance counseling to be
better informed about borrowing, the terms of their Direct Loans, their repayment responsibilities and options, and the
consequences of default. Your school can also offer financial literacy classes, on a credit or non-credit basis, that include
information on budgeting, debt management, anticipated earnings by profession, elements of loan counseling, etc.,
though eligibility for a Direct Loan cannot be contingent on completion of such a class.
Required Entrance Counseling Content for Direct Subsidized Loan and Direct Unsubsidized Loan Borrowers
Below we provide a summary of the information that must be covered in entrance counseling for Direct Subsidized Loan
and Direct Unsubsidized Loan borrowers. For more detailed information, refer to the regulations cited at the end of this
section.
Entrance counseling for Direct Subsidized and Unsubsidized loan borrowers must:
Explain the use of a Master Promissory Note (MPN);
Emphasize the importance of the loan repayment obligation;
Describe the likely consequences of default, including adverse credit reports, delinquent debt collection procedures
under Federal law, and litigation;
Emphasize that the borrower must repay the full amount of the loan even if the borrower does not complete the
program, does not complete the program within the regular time for program completion, is unable to obtain
employment upon completion, or is otherwise dissatisfied with or does not receive the educational or other services
that the student paid for with the loan;
Inform the student borrower of sample monthly repayment amounts based on a range of student levels of
indebtedness depending on the types of loans the borrower has received, or based on the average indebtedness of
other borrowers in the same program at the same school;
Explain how accepting the loan will affect the borrower9s eligibility for other forms of student financial assistance;
Provide information on how interest accrues and is capitalized during periods when the interest is not paid by either
the borrower or the Department;
Inform the borrower of the option to pay the interest on a Direct Unsubsidized Loan while the borrower is in school;
Explain the definition of half-time enrollment at the school and the consequences of not maintaining half-time
enrollment;
Explain the importance of contacting the appropriate offices at the school if the borrower withdraws before
Direct Loan Entrance Counseling
34 CFR 685.304(a)
Loan Counseling Requirements and Flexibilities
DCL GEN-15-06
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completing their program of study so that the school can provide exit counseling;
Provide information on how the borrower can access their records in the National Student Loan Data System
(NSLDS); and
Provide the name of the individual the borrower may contact if the borrower has questions about the borrower9s
rights and responsibilities or the terms and conditions of the loan.
Required Entrance Counseling Content for Graduate and Professional Student Direct PLUS Loan Borrowers
The information that must be covered in entrance counseling for graduate and professional student Direct PLUS Loan
borrowers is summarized below. For more detailed information, refer to the regulations cited at the end of this section.
Entrance counseling for graduate or professional student Direct PLUS Loan borrowers must:
Inform the student borrower of sample monthly repayment amounts based on a range of student levels of
indebtedness depending on the types of loans the borrower has received, or based on the average indebtedness of
other borrowers in the same program at the same school;
Inform the borrower of the option to pay interest on a Direct PLUS Loan while the borrower is in school;
For a graduate or professional student PLUS Loan borrower who has received a prior Direct Subsidized Loan, Direct
Unsubsidized Loan, Subsidized Federal Stafford Loan, or Unsubsidized Federal Stafford Loan, provide the borrower
with a comparison of:
The maximum interest rate for a Direct Subsidized Loan and a Direct Unsubsidized Loan and the maximum
interest rate for a Direct PLUS Loan;
Periods when interest accrues on a Direct Subsidized Loan and a Direct Unsubsidized Loan and periods when
interest accrues on a Direct PLUS Loan; and
The point when a Direct Subsidized Loan and a Direct Unsubsidized Loan enters repayment, and the point when
a Direct PLUS Loan enters repayment; and
For a graduate or professional student PLUS Loan borrower who has not received a prior Direct Subsidized Loan,
Direct Unsubsidized Loan, Subsidized Federal Stafford Loan, or Unsubsidized Federal Stafford Loan, provide the
information specified above under <Required Entrance Counseling Content for Direct Subsidized Loan and Direct
Unsubsidized Loan Borrowers.=
Required Content for Direct Subsidized Loan and Dir ect Unsubsidized Loan Entrance
Counseling
34 CFR 685.304(a)(6)
HEA Sec. 485(l)(2)(I)
Required Content for Student Direct PLUS Loan Entra nce Counseling
34 CFR 685.304(a)(7)
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Exit Counseling
A Direct Subsidized Loan, Direct Unsubsidized Loan, or student Direct PLUS Loan borrower who is graduating, leaving
school, or dropping below half-time enrollment is required to complete exit counseling. If the student withdraws without
notifying your school, you must confirm that they have completed online counseling or mail exit counseling material to
the student at their last known address. You may also email the information to the student9s home (not school) email
address if you have it. The PDF version of the
Direct Loan Exit Counseling Guide satisfies this requirement. You may also
send the student a direct link to the exit counseling materials online. Whatever method you choose must be used within
30 days of learning that the borrower has withdrawn or failed to participate in an exit counseling session.
When mailing exit materials to a student who has left school, you9re not required to use certified mail with a return receipt
requested, but you must document in their file that the materials were sent. If they don9t provide updated contact
information, you don9t need to take further action.
The required content of exit counseling is summarized in the section that follows. For more detailed information, refer to
the regulations cited at the end of the section.
Required Exit Counseling Content
Exit counseling must:
Inform the student borrower of the average anticipated monthly repayment amount based on the student borrower9s
indebtedness or on the average indebtedness of student borrowers who have received Direct Loans for attendance
at the same school or in the same program of study at the same school;
Review all available Direct Loan repayment plan options, including a description of the different features of each plan
and sample information showing the average anticipated monthly payments, and the difference in interest paid and
total payments under each plan;
Explain the options to prepay each loan, to pay each loan on a shorter schedule, and to change repayment plans;
Provide information on the effects of loan consolidation;
Include debt management strategies that are designed to facilitate repayment;
Explain to the borrower how to contact their loan servicer;
Explain the use of an MPN;
Emphasize the importance of the loan repayment obligation;
Emphasize that the borrower must repay the full amount of the loan even if the borrower does not complete the
program, does not complete the program within the regular time for program completion, is unable to obtain
employment upon completion, or is otherwise dissatisfied with or does not receive the educational or other services
that the student paid for with the loan;
Describe the likely consequences of default;
Provide a general description of the terms and conditions under which a borrower may obtain full or partial
forgiveness or discharge of a loan, defer repayment of a loan, or be granted forbearance on a loan;
Provide a copy, either in print or by electronic means, of the information the Department makes available in
accordance with section 485(d) of the HEA (see below);
Review information on the availability of the Department9s Student Loan Ombudsman9s office;
Inform the borrower of the availability of Title IV loan information in NSLDS and how NSLDS can be used to obtain
Title IV loan status information;
Inform the borrower that (1) they may be contacted during the repayment period by third-party student debt relief
companies; (2) the borrower should use caution when dealing with those companies; and (3) the services typically
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provided by those companies are already offered free of charge through the Department or the borrower's loan
servicer;
Provide a general description of the types of tax benefits that may be available to borrowers (i.e. student loan
interest deduction); and
Require the borrower to provide current information concerning their name, address, Social Security number,
references, and driver9s license number and state of issuance, as well as the borrower9s expected permanent
address, the address of their next of kin, and the name and address of the borrower9s expected employer, if known
(see also <Providing Borrower Information at Separation= below).
As stated above, Direct Loan exit counseling must provide borrowers with the information the Department makes
available in accordance with section 485(d) of the HEA. This section of the law requires the Department to make available
to postsecondary schools and other entities a wide variety of information about federal student assistance programs,
including information to help students assess the debt burden and repayment obligations that will be incurred as a result
of receiving Title IV loans. As noted below under <Counseling Methods,= documentation that a borrower has completed the
Department9s online exit counseling fully satisfies all Direct Loan exit counseling requirements. Schools that choose to
conduct their own exit counseling can meet the requirement to provide borrowers with the information made available by
the Department in accordance with section 485(d) of the HEA by providing borrowers with a copy of the Department9s
Direct Loan Exit Counseling Guide.
Providing Borrower Information at Separation
Schools that conduct their own exit counseling must provide the current personal information collected from the student
(name, address, references, etc.) to students9 loan servicers within 60 days. Students authorize their school to release
information to servicers in the loan promissory note they signed. No further permission is needed.
Students who complete online exit counseling on the Department9s
StudentAid.gov website fulfill this requirement as part
of the counseling session; NSLDS provides the information to the loan holders.
Counseling Methods
The Department offers Direct Loan Program online entrance and exit counseling for students on the StudentAid.gov
website. Your school will receive notification through the Student Aid Internet Gateway (SAIG) (see <Required Electronic
Processes= in Volume 2, Chapter 3 for more information) of online loan counseling completed by borrowers, and
completion information can also be viewed on the COD System website. If your school documents that borrowers have
completed the Department9s online counseling, it has satisfied its counseling responsibility. Documentation that a
borrower has completed the Department9s online entrance or exit counseling fully satisfies all Direct Loan entrance or exit
counseling requirements.
Your school may also choose to provide entrance or exit counseling through an in-person session or (for entrance
counseling) by providing a separate written form to the student that the student signs and returns to the school. If your
school conducts in-person counseling sessions, charts, handouts, audiovisual materials, and question-and-answer sessions
can help convey the information in a more dynamic manner. We also recommend the use of written tests or interactive
programs to ensure that students understand the terms and conditions of their loans. Counseling materials, such as the
entrance and exit counseling guides, are available in the Financial Aid Toolkit.
A school may adopt an alternative approach for entrance counseling as a part of its quality assurance plan. For more
information, see the regulation cited below.
Required Content for Exit Counseling
34 CFR 685.304(b)(4)
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Regardless of the counseling methods your school uses, it must document that the student received entrance and exit
counseling, and it must ensure that an individual with expertise in the Title IV programs is reasonably available shortly
after the counseling to answer the student9s questions.
Counseling for Correspondence and Study Abroad Students
If a first-time student borrower has enrolled in a study-abroad program (approved by a U.S. school for credit) or a
correspondence or distance learning program, the school must document that the student has completed online entrance
counseling that meets the regulatory Direct Loan entrance counseling requirements or provide written entrance
counseling information by mail or email before making the first disbursement of a Direct Loan to the student.
In the case of exit counseling for correspondence programs or study abroad programs, the school may mail or email the
borrower written counseling materials within 30 days after the borrower completes the program, with a request that they
provide the contact and personal information that would ordinarily have been collected through the counseling process.
Providing Additional Information
Your school can take additional steps to counsel students, such as assisting them with developing a budget, estimating
need for loans, and planning for repayment. You can also reinforce messages to borrowers. For example, with each
disbursement you can remind students about the importance of maintaining satisfactory academic progress (SAP; see
Volume 1, Chapter 1 for details on SAP requirements), planning for future employment, and staying in touch with the loan
servicer. Sample measures for loan counseling are given in the <Sample Default Prevention Plan= that can be found in the
regulations cited below.
PLUS Loan Credit Counseling
Special loan counseling is required for any student or parent Direct PLUS Loan applicant who has been determined to
have an adverse credit history, but who qualifies for a Direct PLUS Loan either by getting a loan endorser or by
documenting to the satisfaction of the Department that there are extenuating circumstances related to the adverse
credit. While the special PLUS Loan Credit Counseling is mandatory only for these borrowers, any PLUS borrower can
voluntarily complete this counseling. See Chapter 1 of this volume for more information about adverse credit.
Note that the special counseling described above is separate from the entrance counseling that all first-time graduate and
professional student Direct PLUS Loan borrowers must complete, as described earlier in this chapter.
Annual Student Loan Acknowledgement
The Department offers a tool on the StudentAid.gov website called the Annual Student Loan Acknowledgement. The
Alternative Approach for Entrance Counseling
34 CFR 685.304(a)(8)
Sample Default Prevention Plan
https://www.ecfr.gov/current/title-34/subtitle-B/chapter-VI/part-668/subpart-N/appendix-Appendix A to Subpart N
of Part 668">34 CFR 668 Subpart N, Appendix A
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Annual Student Loan Acknowledgement allows student and parent borrowers to view how much they currently owe in
federal student loans and acknowledge that they have seen this amount. Although it is not required, the Department
continues to encourage borrowers to complete an Annual Student Loan Acknowledgement each year they accept a new
Direct Loan to help them understand their loans and how those loans will affect their financial future.
Schools will receive information through the COD System about a borrower9s optional completion of the Annual Student
Loan Acknowledgment process. However, the COD System will not reject disbursement records submitted for a borrower
who has not completed the Annual Student Loan Acknowledgment.
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Chapter 3
Direct Loan Origination, Loan Periods, and Disbursements
Origination Overview
Origination is the process of creating a Direct Loan award in the school9s system. Before originating a Direct Loan, a
school must determine the student9s or parent9s eligibility for the loan. For each Direct Loan that a school disburses to a
student or parent, the school must submit a loan award record to the COD System that includes the student9s grade level,
the loan period and academic year dates, the loan amount, the anticipated and actual dates and amounts of the loan
disbursements, and other information. Submission of a loan award record serves as the school9s certification that it has
determined the borrower9s eligibility for the loan.
The specific Direct Loan amount that a student or parent borrower is eligible to receive is determined based on various
factors such as the student9s COA, Student Aid Index (SAI), OFA, and remaining eligibility under the annual and aggregate
loan limits (see Chapter 4 for guidance on annual and aggregate loan limits). Some of these factors are relevant only
when determining eligibility for certain types of Direct Loans. When originating a Direct Loan, the COA used in
determining the loan amount may include only those costs associated with the period of enrollment (loan period) for
which the loan is being originated.
Direct Subsidized Loans and Direct Unsubsidized Loans have annual and aggregate limits that are the same for all
students at a given grade level and dependency status. You may not originate a Direct Loan for an amount that:
Exceeds the amount requested by the borrower;
In the case of a Direct Subsidized Loan, exceeds the student9s COA minus the student9s SAI and OFA;
In the case of a Direct Unsubsidized Loan or Direct PLUS Loan, exceeds the student9s COA minus OFA; or
In the case of a Direct Subsidized Loan or Direct Unsubsidized Loan, would cause the student to exceed the annual or
aggregate limit.
See Volume 3, Chapter 3 for more information on packaging Direct Loans as part of a student9s financial aid award.
Originating a Loan
It9s important to remember that your school, not the Department, is responsible for determining a borrower9s eligibility for
a Direct Loan. Schools that originate and disburse loans to ineligible borrowers, or for loan amounts that exceed loan
limits or financial need, are subject to administrative actions such as a fine, limitation, suspension, and termination, as
well as liabilities including repayment to the government of interest and costs it has paid on the ineligible loans.
You must originate a Direct Loan while the student is enrolled and eligible for the period of enrollment for which the loan
is intended. You may not originate a loan for a period in which the student is no longer enrolled. For example, you may
not originate a loan for a prior academic year that has ended, even if the student is enrolled and eligible for the current
academic year. Similarly, if a student who was enrolled at least half time only for the fall and spring quarters of an
academic year consisting of fall, winter, and spring quarters does not request a loan until the spring, you may not at that
time originate a loan for the previous fall quarter.
For all Direct Loans, you must document the student9s COA, SAI, and OFA in the student9s file. This information must be
made available to the Department upon request.
You must confirm that the borrower meets the definition of eligible borrower by doing the following:
Determine that the student is enrolled at least half time and making satisfactory academic progress (see Volume 1);
Review the NSLDS information on the ISIR or the NSLDS Professional Access website to ensure that the student is not
in default, does not owe an overpayment on a Title IV grant or loan (see Volume 1), and will not exceed the annual or
aggregate loan limits (as described in Chapter 4 of this volume);
Ensure that the amount of the loan, in combination with other aid, will not exceed the student9s financial need or
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COA (see Volume 3, Chapter 3);
For parents receiving a Direct PLUS Loan, ensure that the student has completed a FAFSA form (review the student9s
ISIR or FAFSA Submission Summary); and
Ensure that the loan disbursement dates meet cash management and disbursement requirements.
For a Direct Subsidized/Unsubsidized Loan, you must also:
Determine the student9s Pell Grant eligibility and, if they are eligible, include the grant in the student9s aid package;
For a Direct Unsubsidized Loan made to an undergraduate student, first determine the student9s eligibility for a
Direct Subsidized Loan and, if the student is eligible, include the Direct Subsidized Loan in the student9s aid package;
Ensure that the amount of the loan will not exceed the student9s annual or aggregate loan limits; and
Prorate the annual loan limit for an undergraduate enrolled in a program or remaining period of study that is shorter
than an academic year (as described in Chapter 5 of this volume).
No Alternate SAI When Originating Loans for Periods Other Than Nine Months
If you originate a Direct Loan for a period shorter than a full academic year (for example, a loan for a single term or for a
program shorter than an academic year), the loan amount must be based on the reduced costs for that shorter period of
enrollment rather than the costs for the full academic year. However, as explained in Volume 3, Chapter 3, there are no
alternate SAIs for periods of enrollment other than nine months comparable to the alternate EFCs for periods other than
nine months that were used prior to the 2024-2025 award year. In all cases you must use the student9s full calculated 9-
month SAI in the formula to determine financial need for Direct Subsidized Loans and other need-based aid even though
the COA will reflect the reduced costs for the shorter loan period. This means that students enrolled for periods shorter
than nine months will have less financial need than would have been the case in the past when using a smaller alternate
EFC, because now the full calculated SAI must be subtracted from the reduced COA for the shorter period of enrollment
when determining financial need for purposes of Direct Subsidized Loan eligibility.
Volume 8, Chapter 3, Example 1: Effect of No Alternate SAI on Financial Need When Originating Loans for Periods
Less Than Nine Months
A first-year dependent student has a COA of $10,800 for an academic year consisting of the fall and spring
semesters and an SAI of 8,000, so the student9s financial need for the fall-spring enrollment period is $2,800 (see
Volume 3, Chapter 3 for guidance on determining financial need). The student is not eligible for a Pell Grant and
receives no Title IV aid except for Direct Loans. The student qualifies for a $2,800 Direct Subsidized Loan to fully
cover their financial need. (The student could also receive a Direct Unsubsidized Loan, but for purposes of this
example we cover only Direct Subsidized Loan eligibility.)
The student will also be enrolled for the summer term, which the school treats as a <trailer= to the preceding fall-
spring Scheduled Academic Year (SAY) for purposes of monitoring annual loan limits (see Chapter 6 of this
Volume). The summer term is four months in length and the COA for that term is $4,000. For students who attend
the summer term and request Direct Loan funds, the school9s normal practice is to originate a separate loan for
the summer term only. Because there is no alternate SAI for periods of enrollment less than nine months and the
student9s SAI of 8,000 is greater than the summer term COA, the student has no financial need for summer and is
therefore ineligible to receive a Direct Subsidized Loan for that term (but could receive a Direct Unsubsidized
Loan).
As an alternative to originating a separate summer-only loan, the school could choose to originate a single loan
for a loan period covering the fall-spring SAY plus the summer trailer term. The student9s COA for that period of
enrollment is $14,800. Subtracting the student9s SAI of 8,000 from the COA results in financial need of $6,800.
The student would therefore be eligible to receive a $3,500 Direct Subsidized Loan (the maximum subsidized
annual loan limit for a dependent first-year student) for the fall-spring-summer loan period.
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No Minimum Direct Loan Amount in COD System
The COD System does not set a minimum amount for which a school may originate a Direct Loan.
Sequestration
The Budget Control Act (BCA) put into place an automatic federal budget cut known as the sequester. For loans made
under the Direct Loan program, the sequester requires an increase in the amount of the loan fee (also known as the
origination fee) that is charged to borrowers. For details on the sequester-required changes to Direct Loan origination
fees, see the April 30, 2024 Electronic Announcement.
Resources for Schools
FSA Assessments
For a guide to reviewing and evaluating your procedures regarding Direct Loans, see the Direct Loans module of
FSA
Assessments.
EDExpress for Windows
The EDExpress for Windows software is a PC application that processes, packages, and manages Title IV student financial
aid records, including Direct Loan origination and disbursement records. Federal Student Aid provides EDExpress at no
charge to institutions. It is available for download in the Knowledge Center on the Software and Other Tools page.
FSA Partner and School Relations Center
1-800-848-0978
202532026 Common Origination and Disbursement (COD) Technical Reference(February 2025 Update)
Reporting Loan Information Changes
It's important for schools to accurately report academic year dates and loan period dates for all types of Direct Loans to
the COD System. You must also update a loan9s previously reported loan period dates or academic year dates if the
borrower9s actual attendance is different from the anticipated dates that were the basis for an initial reporting to the COD
System. Other circumstances when you must update loan data in the COD System include:
When the borrower requests the cancellation of a loan or a loan disbursement;
When the borrower does not begin attendance, or does not begin attendance on at least a half-time basis, in a
payment period that was included in the originally reported loan period and you did not make any disbursements for
that payment period (see Volume 3, Chapter 1 for information on payment periods);
When you determine that the borrower is not eligible to receive a Direct Loan for a payment period that was part of
the originally reported loan period (for example, due to the borrower9s failure to meet SAP standards, because the
borrower has an overpayment, or because a change in circumstances makes the borrower ineligible for a subsidized
loan);
When the borrower withdraws during a payment period that was included in the originally reported loan period, and
as a result, the entire amount of the loan that was intended for that payment period is returned under the Return of
Title IV Funds (R2T4) calculation;
For clock-hour programs, non-term credit-hour programs, and certain types of nonstandard term credit-hour
programs, when the borrower fails to progress to the next payment period or academic year as scheduled.
Note: In limited circumstances, it is not necessary to adjust the loan period for a Direct Loan if the borrower is ineligible
to receive a Direct Loan during one or more terms within the loan period due to not being enrolled or being enrolled on a
less-than-half-time basis. For details, see <Loan Periods= later in this chapter.
Correcting Direct Subsidized Loan or Direct Unsubsidized Loan Awarding Errors
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If you discover that, due to an error, a student borrower has received Direct Subsidized Loan funds in excess of their
financial need, and the student is still enrolled for the loan period, you must return the subsidized loan amount for which
the student was ineligible and ask the student if they wish to replace the subsidized funds with a Direct Unsubsidized
Loan. If the student agrees to accept the unsubsidized loan funds and they also received a Direct Unsubsidized Loan for
the same loan period as the Direct Subsidized Loan, you may increase the amount of the Direct Unsubsidized Loan
disbursements by the amount of the Direct Subsidized Loan that the student was ineligible to receive. If the student did
not receive a Direct Unsubsidized Loan, you may originate a new Direct Unsubsidized Loan for the amount of the Direct
Subsidized Loan that the student was ineligible to receive. The new Direct Unsubsidized Loan must have the same loan
period and disbursement dates as the Direct Subsidized Loan.
If the student does not agree to have the excess subsidized loan funds replaced by a Direct Unsubsidized Loan, you must
still return the ineligible Direct Subsidized Loan amount.
If you discover that a student received Direct Subsidized Loan funds in excess of financial need after the student is no
longer enrolled for the loan period, you are not required to take any action to eliminate the excess subsidized loan
amount.
If you discover that, due to an error, a student borrower who was eligible for a Direct Subsidized Loan instead received a
Direct Unsubsidized Loan, you must correct the error (even if the loan period has ended) by submitting a downward
adjustment to reduce or eliminate the Direct Unsubsidized Loan, as appropriate, and replacing it with the same amount of
Direct Subsidized Loan funds. You may do this either by adjusting an existing Direct Subsidized Loan upwards, or, if the
student does not have an existing Direct Subsidized Loan, by originating a new Direct Subsidized Loan. Replacing a Direct
Unsubsidized Loan with a Direct Subsidized Loan in this circumstance does not require obtaining the student9s consent.
Direct Loan Overawards
As explained in
Volume 4, Chapter 3, an overaward exists when a student9s aid package exceeds their need or overall
COA. If you discover that a student who received Direct Loans has been overawarded and your school has already
received and disbursed some or all of the Direct Loan funds, you have the following options:
If the student9s aid package includes a Direct Unsubsidized Loan, a Direct PLUS Loan, or a nonfederal education loan,
and the aid package doesn9t already apply these loans toward the student9s SAI, you may choose to adjust the aid
package to have all or a portion of these loans replace the SAI, thus reducing or eliminating the overaward (for more
detail and examples, see <Substituting for the SAI= in Volume 3, Chapter 3).
If you have not yet made the second or subsequent disbursement of a Direct Loan, you can reduce or cancel the
second or subsequent disbursement.
If the overaward situation occurs after the full amount of a Direct Loan has been disbursed, you do not need to adjust the
amount of the loan. However, you might have to adjust the aid package to prevent an overaward of Campus-Based funds
or to prevent the total aid package from exceeding the student9s need.
Although a school isn9t required to return Direct Loan funds that were disbursed to the borrower (either directly or by
applying them to the student's account) before the overaward situation occurred, the law doesn9t prevent your school
from returning funds that were applied to the student account if you choose to do so. A borrower who receives a direct
payment of loan funds is not required to repay an overawarded amount, unless the overaward was caused by the
borrower9s misreporting or withholding of information.
Loan Periods
The loan period (also referred to as the <period of enrollment=) is the period for which a Direct Loan is intended. It must
coincide with an academic period established by the school for which institutional charges are generally assessed (e.g.,
semester, trimester, quarter, length of the student9s program, or academic year). It9s important to define the loan period
at the beginning of the loan awarding process, because the timing and amount of Direct Loan disbursements are tied to
the loan period.
Generally, the loan period may not include terms in which a student is ineligible (for example, if the student is not enrolled
during a particular term or is enrolled less than half time during a term). There is a limited exception to this rule if the loan
period begins and ends with a term in which the student is eligible for Direct Loans, but the first and last terms of the loan
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period are separated by one or more terms in which the student is ineligible. For example, if a student is expected to be
enrolled on at least a half-time basis in the fall and spring quarters of an academic year consisting of the fall, winter, and
spring quarters, but the student indicates that they do not plan to attend the winter quarter (or that they plan to be
enrolled on a less than half-time basis during that quarter), the school may still originate a loan for a loan period covering
the fall, winter, and spring quarters. Of course, no costs associated with winter quarter may be included in the student9s
COA when determining the loan amount the student is eligible to receive for the fall and spring quarters. Similarly, if a
school initially originates a loan for a fall-winter-spring loan period based on a student9s anticipated enrollment status of
at least half time during all three quarters, but the student subsequently does not attend the winter quarter or temporarily
drops below half-time status for that term, and then resumes at least half-time enrollment in the spring, the school is not
required to make any changes to the original fall-winter-spring loan period. However, it may be necessary for the school
to adjust the originally approved loan amount if that amount is no longer supported by the reduced costs for the fall and
spring quarters only.
In the first scenario described above the school could also choose to originate two separate loans for fall-only and spring-
only loan periods. In the second scenario the school would also have the option of adjusting the original fall-winter-spring
loan period to fall-only, and then originating a new spring-only loan. Note, however, that in both cases the school would
then be required to separately subtract the student9s full SAI from the fall-only and spring-only costs when determining
the student9s Direct Subsidized Loan eligibility for those terms (see <No Alternate SAI When Originating Loans for Periods
Other Than Nine Months= earlier in this chapter). In some cases this could significantly reduce or even eliminate a
student9s need for Direct Subsidized Loans. In contrast, using a fall-winter-spring loan period (excluding all costs
associated with the winter quarter) would allow the school to subtract the full SAI from the higher combined costs for the
fall and spring terms, partially mitigating the effect of not having alternate SAIs for periods of enrollment other than nine
months.
The limited exception described above applies only if a student is eligible to receive a Direct Loan during the first and last
terms within the loan period. The term in which the student is ineligible cannot be the first or last term in the loan period.
For instance, a school may not originate a loan for a fall-winter-spring loan period if the student does not attend the fall
term or the spring term.
Note: See the guidance at the end of this chapter for certain exceptions to the normal loan period rules that apply when
periods of clinical work are included in a standard term.
Minimum Loan Periods
The minimum period for which a school may originate a Direct Loan varies depending on the school9s academic calendar.
As explained below and in Chapter 7, different rules apply for purposes of determining the minimum loan period for a
Direct Loan and the type of academic year that a school may use to monitor Direct Loan annual loan limits depending on
whether a program is term-based (including subscription-based programs; see
Volume 3, Chapter 1) with either standard
or nonstandard terms, or is a non-term program (all clock-hour programs are treated as non-term programs), and in the
case of a term-based program with nonstandard terms, depending on the type of nonstandard term, as described below.
Nonstandard terms may be one of the following types:
1. Nonstandard terms that are substantially equal (no term in the academic year differs in length from any
other term by more than two weeks), and each of the terms is at least nine weeks in length.
SE9W
Period of Enrollment (Loan Period) Definition
34 CFR 685.102(b)
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2. Nonstandard terms that are substantially equal, but one or more of the terms in the academic year
contains fewer than nine weeks.
Non-
SE9W
3. Nonstandard terms that are not substantially equal in length (one or more of the terms in the academic
year differs in length from another term by more than two weeks).
Non-
SE9W
We refer to the first type of nonstandard term as <SE9W= nonstandard terms. We group the second and third types
together and refer to them as <non-SE9W= nonstandard terms.
Programs with SE9W nonstandard terms are treated the same as standard-term programs for purposes of determining
minimum loan period length and monitoring annual loan limits. However, programs with non-SE9W nonstandard terms are
treated the same as non-term programs for these purposes.
Note that substantially equal nonstandard terms (the first two types of nonstandard terms described above) are treated
differently for purposes of determining Direct Loan payment periods than for determining minimum loan period length
and monitoring annual loan limits. As explained in
Volume 1, Chapter 1, if a program is offered in standard terms or in
nonstandard terms that are substantially equal in length (regardless of the length of the nonstandard term), the payment
period is the term.
However, for purposes of determining the minimum loan period for a Direct Loan and monitoring Direct Loan annual loan
limits, substantially equal nonstandard terms that contain fewer than nine weeks are treated the same as nonstandard
terms that are not substantially equal. This means that if a program has substantially equal nonstandard terms that are
less than nine weeks in length, you must make a Direct Loan disbursement each term (the same as would be the case if
the program were offered in standard terms), but the minimum loan period and the type of academic year used to
monitor Direct Loan annual loan limits must be determined in accordance with the rules that apply to non-term programs.
For detailed information on standard term, nonstandard term, and non-term programs, see
Volume 1, Chapter 1.
Minimum Loan Period: Standard Term and SE9W Nonstandard Term Programs
For credit-hour programs with standard terms (semesters, quarters, or trimesters), or with SE9W
nonstandard terms, the minimum loan period is a single academic term. For example, if a student will be enrolled in the
fall semester only and will skip the spring semester, you may originate a loan with a loan period that covers only the fall
term.
Minimum Loan Period: Clock-Hour, Non-Term, and Non-SE9W Nonstandard Term Programs
For all other programs (i.e., clock-hour, non-term, and non-SE9W nonstandard term programs), the minimum
loan period is generally the lesser of the program length (or remainder of the program, if there is less than full academic
year remaining) or the academic year. There are exceptions to this minimum loan period rule when originating loans for
transfer students, or for students who complete or otherwise cease enrollment in one program and then begin a different
program at the same school. We discuss these exceptions in detail in Chapter 7 of this volume.
Minimum Loan Period: Programs Offered in Modules
If a program is offered in modules, this does not change the minimum loan period rules for Direct Loans. For example, if a
standard or SE9W nonstandard term is divided into two or more modules, the minimum loan period for a Direct Loan is
still the term, even if the student does not attend all modules within the term. Similarly, if a clock-hour, non-term credit-
Minimum Loan Period
34 CFR 685.301(a)(10)(i)
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hour, or non-SE9W nonstandard term program is offered in modules, the minimum loan period is still the lesser of the
academic year or the program length (or remaining portion of the program).
For Title IV aid purposes, students are allowed to skip one or more modules. However, if a loan period includes modules
that the student does not attend, the COA for the loan period may not include costs associated with those modules.
Minimum Loan Period: Standard Term Combined With an Intersession
As we explain under <Intersessions= in Volume 3, Chapter 1, in limited cases for academic programs offered in standard
terms, a short nonstandard term (often called an <intersession=) may be combined with a preceding or following standard
term and considered to be a single standard term. In such cases, the minimum loan period for a Direct Loan is different
depending on whether a student attends the intersession. If a student who attends the intersession requests a loan for the
combined term, the loan period includes the standard term plus the intersession. However, if the student attends only the
standard term and is not enrolled in the intersession that is attached to that term, the loan period includes only the
standard term.
Maximum Loan Periods
The maximum period for which you may originate a Direct Loan is generally an academic year. However, if your school
applies the annual loan limit for Direct Subsidized Loans and Direct Unsubsidized Loans to a period of time greater than
an academic year, you may originate a Direct Loan for that longer period of time. For example, a school might offer an
1100 clock-hour program and define the academic year as 900 clock hours but could choose to allow students to receive
just one annual loan limit for the entire 1100-hour program. In that case, the loan period would correspond to the length
of the program, a period of time that is longer than the academic year.
Direct Loan Disbursement Requirements
For general guidance on the timing of disbursements made under the
Title IV programs, see Volume 3, Chapter 1. For
guidance on reporting Title IV program disbursements through the COD System and the rules for making early
disbursements, late disbursements, and retroactive payments, see Volume 4, Chapter 2. In this section we discuss certain
other disbursement requirements that are specific to the Direct Loan Program.
Note: See the guidance at the end of this chapter for certain exceptions to the normal Direct Loan disbursement
requirements that apply when periods of clinical work are included in a standard term.
Requirement for Substantially Equal Disbursements
Direct Loans must be disbursed in substantially equal installments, regardless of any difference in costs for different
payment periods that are within the same loan period, and no Direct Loan disbursement may exceed one-half of the loan
Maximum Loan Period
34 CFR 685.301(a)(10)(iv)
Determining Direct Loan Disbursement Dates and Amou nts
34 CFR 685.303(d)
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amount.
Direct Loan Disbursements When the Loan Period is a Single Payment Period
As explained in
Volume 3, Chapter 1, all Title IV program funds (including Direct Loan funds) except for Federal Work-
Study payments must be disbursed on a payment period basis. Except in certain cases for Direct Loans made to cover the
costs of a study abroad program (see below), if the loan period for a Direct Loan covers more than one payment period, a
school must make at least one Direct Loan disbursement in each payment period.
If the loan period for a Direct Loan is a single payment period, a school must generally make at least two disbursements
of a Direct Loan (see below for two exceptions to this requirement). The following requirements apply for the timing of the
second disbursement:
For credit-hour programs offered in standard terms or offered in nonstandard terms that are substantially equal in
length with no term less than nine weeks of instructional time in length, the second disbursement may not be made
until the calendar midpoint between the first and last scheduled days of class in the loan period.
For all other programs, including clock-hour and non-term credit-hour programs, and nonstandard term programs
with terms that are not substantially equal or with terms that are substantially equal and less than nine weeks of
instructional time in length, the second disbursement may not be made until the student successfully completes half
of the weeks of instructional time in the payment period, and half of the clock or credit hours in the payment period.
Exceptions to the Multiple Disbursement Requirement When the Loan Period is a Single Payment Period
If the loan period is not more than one semester, one trimester, one quarter or, for non-term-based schools or schools
with nonstandard terms, four months, a school with a cohort default rate of less than 15% for each of the three most
recent fiscal years for which data are available may disburse a Direct Loan in a single installment.
In addition, if the loan period is a single payment period and more than half of the payment period has elapsed before the
school has made a disbursement, the school may include in the disbursement loan proceeds for the entire payment
period.
Exception to the Multiple Disbursement Requirement for Study Abroad Programs
Substantially Equal Disbursements
34 CFR 685.303(d)(5)
Regulatory Citations
Loan period is more than one payment period: 34 CFR 685.303(d)(3)(i)
Loan period is one payment period: 34 CFR 685.303(d)(3)(ii)
Exception based on cohort default rate: 34 CFR 685.303(d)(6)(i)(A)
More than half of payment period has elapsed: 34 CFR 685.303(d)(4)(ii)
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Regardless of the length of the loan period, you may disburse a Direct Loan in a single installment if the loan is to cover a
student's COA in a study abroad program and your school9s calculated cohort default rate is less than 5% for the most
recent fiscal year for which data are available.
Direct Loan Disbursements for Completed Payment Periods
The Direct Loan Program regulations allow a school to include in a single disbursement the disbursements for any
payment periods that have ended. However, the COD System (except for schools exempted because of low default rates)
requires schools to enter at least two anticipated disbursement dates. Therefore, when creating a loan origination record
for a Direct Loan when you intend to include in a disbursement loan proceeds for any payment periods that have been
completed, you should enter the actual date you anticipate making the disbursement as the anticipated date for all
disbursements that would be included. For example, consider a school attempting to submit an origination when the data
is as follows:
Loan period: 09/01 - 05/30 (fall through spring)
Minimum number of disbursements normally required: 2
Payment period 1: 09/01 - 12/20
Payment period 2: 01/06 - 05/30
Date school creates origination record: 01/09
If you anticipate disbursing the loan proceeds for both payment periods on January 16, you should enter January 16 as the
date for both the first and second disbursements when you create the origination record.
Direct Loan Disbursements Made After the Date of the Borrower9s Death
If a school learns that a student or parent Direct Loan borrower has died before one or more disbursements of a loan have
been made, the school must cancel all pending disbursements. Direct Loan funds cannot be disbursed when there is no
possibility of repayment. In addition, if a school is not informed of a student or parent borrower9s death until after one or
more loan disbursements have been made, the school must return to the Department the full amount of all loan funds
that were credited to the student9s school account after the date of the borrower9s death (if the post-death disbursement
created a credit balance that was paid directly to the student or parent, the school is not responsible for returning the
credit balance amount).
Disbursements after the date of the borrower9s death are most likely to occur when a parent Direct PLUS Loan borrower
dies. If an enrolled student dies, the school will generally learn of the death in a timely manner and can cancel any
pending loan disbursements. However, if a parent Direct PLUS Loan borrower dies, the student or other family members
Study Abroad Program Exception
34 CFR 685.303(d)(6)(i)(B)
Direct Loan Disbursement After One or More Payment Periods Have Elapsed
34 CFR 685.303(d)(4)(i)
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may not notify the school or the loan servicer right away, particularly if the parent borrower had requested a deferment of
payments while the student was enrolled at least half time.
If a school is required to return Direct PLUS Loan funds that were disbursed after the date of the parent borrower9s death,
the school should determine whether there is a surviving parent who can take out a Direct PLUS Loan for the amount of
the original Direct PLUS loan that must be returned. If this is not an option, the school may award additional Direct
Unsubsidized Loan funds (up to the amounts normally available only to independent undergraduates) to the dependent
student (see <Annual Loan Limits for Independent Undergraduates and Certain Dependent Undergraduates= in Chapter 4
of this volume). In this specific circumstance, a school may originate a Direct PLUS Loan for a surviving parent or originate
a Direct Unsubsidized Loan for the dependent student even if the loan period has ended.
For additional guidance on other actions that a school must take when a Title IV aid recipient dies, see Appendix B of the
FSA Handbook.
Exceptions to the Normal Loan Period and Disbursement Requirements When Clinical Work is Included in a Standard Term
Volume 3, Chapter 1 of the FSA Handbook describes standard terms (semesters, quarters, and trimesters) and
nonstandard terms, and explains that standard terms or nonstandard terms that are substantially equal and at least nine
weeks in length (<SE9W= nonstandard terms) may not include periods of clinical work, such as medical and education
program work which is conducted outside the classroom, unless certain requirements are met (see <Inclusion of Clinical
Work in a Standard Term=). If a standard term or SE9W nonstandard term contains clinical work that meets all the criteria
to be included in the term, this may result in certain exceptions to the normal loan period and disbursement rules as
discussed earlier in this chapter. We discuss these exceptions below.
If clinical work meets the criteria described in Volume 3 to be included in a standard term or SE9W nonstandard
term, the school must associate the clinical work with the term during which the majority of the clinical work occurs.
If a student receives a Direct Loan for a term that includes clinical work and the clinical work begins before the
starting date of the term with which the clinical work is associated, the loan period start date is the beginning date of
the clinical work (rather than the starting date of the term, as would normally be the case).
For example, if a school originates a Direct Loan for a Scheduled Academic Year (SAY) consisting of fall and spring
semesters that run from September 1 through May 31, and the fall semester includes clinical work that begins on
August 15, the school would report the loan period dates as August 15 through May 31. If the clinical work does not
begin until on or after the starting date of the term with which it is associated, the loan period start date would be
the beginning date of the term.
If the clinical work ends after the ending date of the term with which it is associated, the loan period end date for a
Direct Loan is the ending date of the clinical work (instead of the ending date of the term, as would normally be the
case).
For example, if a school originates a Direct Loan for a Scheduled Academic Year (SAY) consisting of fall and spring
semesters that run from September 1 through December 31 (fall) and January 1 through May 31 (spring), and the
spring semester includes clinical work that ends on June 20, the school would report the loan period dates as
September 1 through June 20. However, if the clinical work ends on or before the ending date of the term with which
it is associated, the loan period end date would be the ending date of the term.
If loan period dates are adjusted as explained above to account for clinical work that begins before or ends after the
normal term starting and ending dates, the academic year period to which the Direct Loan annual loan limit applies,
and the payment period dates must also be adjusted accordingly. Using the example above where the spring term of
a fall-spring SAY contains clinical work that ends on June 20, and assuming that the annual loan limit applies to that
fall-spring SAY period, the school would report the academic year dates associated with the loan as September 1
through June 20, and would report the dates of the second payment period (the spring semester) as January 1
through June 20 (see Volume 3, Chapter 1 for guidance on payment periods, and Chapter 6 of this volume for
information on SAYs and monitoring annual loan limits).
If there are two consecutive loan periods for standard terms or SE9W nonstandard terms that include clinical work,
and the first loan period has not ended when the clinical work associated with the next loan period is scheduled to
begin (because the clinical work associated with the term has not yet been completed), it is permissible for the two
loan periods (and the associated payment periods) to overlap.
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If a loan period includes more than one standard or SE9W nonstandard term, the second or subsequent disbursement
of a Direct Loan disbursement normally can be made up to 10 days before the first day of classes of the second or
subsequent term. However, if a second or subsequent term in a loan period includes clinical work that a student has
not yet started when the term begins (because the clinical work associated with that term does not start until some
point after the beginning date of the term), the second or subsequent loan disbursement can be made no earlier
than 10 days before the beginning of the clinical work. (Note: The scenario described here assumes that the term
includes only clinical work. If, in addition to the clinical work that starts later, the term also includes regular
coursework that starts on the beginning date of the term, the normal early disbursement rules apply and the second
or subsequent disbursement can be made up to 10 days before the first day of classes of the term.)
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Chapter 4
Annual and Aggregate Loan Limits
Annual Loan Limit Overview
Direct Subsidized Loans and Direct Unsubsidized Loans have annual loan limits that vary based on the student9s grade
level and (for Direct Unsubsidized Loans) dependency status. The annual loan limits are the maximum amounts that a
student may receive for an academic year. The actual loan amount that a student is eligible to receive may be less than
the annual loan limit. (There are also aggregate loan limits for Direct Subsidized Loans and Direct Unsubsidized Loans,
discussed later in this chapter.)
There are higher Direct Unsubsidized Loan annual loan limits for students enrolled in certain health professions programs,
and special loan limits for certain students who are not enrolled in a program that leads to a degree or certificate awarded
by the school they are attending. Also, the annual loan limits for undergraduate students must be prorated (reduced) in
some cases.
Depending on the academic calendar of the program, a student who has reached the annual loan limit cannot receive
another Direct Subsidized Loan or Direct Unsubsidized Loan until they either begin another academic year, or, in some
cases, progress within an academic year to a grade level with a higher annual loan limit.
Annual Loan Limits: Basic Principles
For undergraduate students, there is a combined annual loan limit for Direct Subsidized Loans and Direct
Unsubsidized Loans, of which not more than a specified amount may be comprised of Direct Subsidized Loans.
For graduate or professional students, the annual loan limit is only for Direct Unsubsidized Loans. Graduate or
professional students are not eligible to receive Direct Subsidized Loans.
An undergraduate student who is ineligible for Direct Subsidized Loans may receive up to the full combined
subsidized and unsubsidized annual loan limit in Direct Unsubsidized Loans.
The Direct Subsidized Loan annual loan limits are the same for both dependent and independent undergraduates.
Dependent students have lower combined subsidized and unsubsidized annual loan limits than independent
students. However, if a dependent student9s parent(s) cannot borrow a Direct PLUS Loan, the student becomes
eligible for the higher combined subsidized and unsubsidized annual loan limits that are otherwise available only to
independent students, allowing the dependent student to receive additional Direct Unsubsidized Loan funds (but this
does not change the student9s dependency status).
The annual loan limits apply to the academic year (that is, the annual loan limit is the maximum loan amount that a
student may receive for one academic year).
The student9s maximum annual loan limit increases as the student progresses to higher grade levels.
For undergraduate students, the loan limit must be prorated if the student is enrolled in a program (or in the
remaining portion of a program) that is less than an academic year in length.
Annual Loan Limits for Dependent Undergraduates
Direct Loan Annual Loan Limits
34 CFR 685.203
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For dependent undergraduate students (excluding dependent undergraduates whose parents are unable to obtain Direct
PLUS Loans), the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual loan limits are shown in Table 1A
below.
The <Total (Subsidized and Unsubsidized)= limits in Table 1A represent the total of all Direct Subsidized Loans and Direct
Unsubsidized Loans a dependent undergraduate student may borrow at each level of study for a single academic year.
For example, a dependent first-year undergraduate may receive up to $5,500 in Direct Subsidized Loans and/or Direct
Unsubsidized Loans for a single academic year, but no more than $3,500 of this amount may be subsidized. A dependent
first-year undergraduate who has no subsidized loan eligibility may receive up to the full $5,500 in Direct Unsubsidized
Loans.
Volume 8, Chapter 4, Table 1A: Dependent Undergraduate Annual Limits for Direct Subsidized Loans and Direct
Unsubsidized Loans
Dependent Undergraduates (Excluding Dependent Students
Whose Parents Can9t Get Direct PLUS Loans)
Total (Subsidized and
Unsubsidized)
Maximum
Subsidized
First Year $5,500 $3,500
Second Year $6,500 $4,500
Third Year and Beyond $7,500 $5,500
Annual Loan Limits for Independent Undergraduates and Certain Dependent Undergraduates
The maximum Direct Subsidized Loan amount that an undergraduate student may receive each academic year is the
same for both dependent and independent undergraduates. However, there are higher Direct Unsubsidized Loan annual
loan limits for independent undergraduate students and for dependent undergraduates whose parents are unable to
obtain Direct PLUS Loans. For these students, the combined Direct Subsidized Loan and Direct Unsubsidized Loan annual
loan limits are shown below in Table 1B.
As with the loan limits for dependent undergraduates, the <Total (Subsidized and Unsubsidized)= limits represent the total
of all Direct Subsidized Loans and Direct Unsubsidized Loans that an independent undergraduate student (or a dependent
undergraduate whose parent is unable to obtain a Direct PLUS Loan) may borrow at each level of study, for a single
academic year. For example, an independent, first-year undergraduate may receive up to $9,500 in Direct Subsidized
Loans and Direct Unsubsidized Loans for a single academic year, but no more than $3,500 of this amount may be
subsidized. An independent first-year undergraduate who has no subsidized loan eligibility may receive up to the full
$9,500 in Direct Unsubsidized Loan funds.
Although a dependent undergraduate whose parent is unable to obtain a Direct PLUS Loan has access to the same higher
Direct Unsubsidized Loan annual loan limits as an independent undergraduate at the same grade level, the student is still
considered to be a dependent student for all other
Title IV purposes.
For more detail on the conditions under which a dependent undergraduate can receive increased Direct Unsubsidized
Loan amounts, see <Criteria for Dependent Students to Receive Additional Direct Unsubsidized Loan Funds= below.
Volume 8, Chapter 4, Table 1B: Independent Undergraduate Annual Limits for Direct Subsidized Loans and Direct
Unsubsidized Loans
Independent Undergraduates (and Dependent Undergraduates
Whose Parents Can9t Get Direct PLUS Loans)
Total (Subsidized and
Unsubsidized)
Maximum
Subsidized
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First Year $9,500 $3,500
Second Year $10,500 $4,500
Third Year and Beyond $12,500 $5,500
Criteria for Dependent Students to Receive Additional Direct Unsubsidized Loan Funds
Dependent students whose parents are unable to borrow Direct PLUS Loans due to adverse credit or other exceptional
circumstances may receive additional Direct Unsubsidized Loan funds up to the same amount that is available to
independent undergraduate students. Because Direct PLUS Loans can be made for up to the full COA minus other financial
assistance received, the additional Direct Unsubsidized Loan amount may not be sufficient to substitute entirely for the
amount a parent could receive under the Direct PLUS Loan program. Therefore, you should determine whether the
parents may be able to borrow a Direct PLUS Loan by obtaining an endorser who does not have an adverse credit history
before originating additional unsubsidized loan amounts for the dependent student. Before a dependent student can
receive the additional Direct Unsubsidized Loan amount, you must document the basis of the student9s eligibility. Some
basic guidelines for making this determination are discussed below. However, keep in mind that none of the following, by
themselves, are sufficient to make a dependent student eligible for additional Direct Unsubsidized Loan funds:
The parent9s unwillingness to borrow a Direct PLUS Loan (even though the parent would otherwise be eligible to
borrow);
The school9s decision not to participate in the Direct PLUS Loan program; or
The financial aid administrator9s belief that the parent should not borrow a Direct PLUS Loan.
General Guidelines for Determining That a Dependent Student May Receive Additional Unsubsidized Funds
The sections that follow provide general guidelines for making a determination that a dependent student is eligible to
receive additional Direct Unsubsidized Loan funds under various circumstances.
Only One Parent Has Applied for a Direct PLUS Loan and Been Denied
If only one of a student9s parents has applied for a Direct PLUS Loan and been denied based on adverse credit, you may
award additional Direct Unsubsidized Loan funds on that basis, without first determining whether there is another parent
who could take out a Direct PLUS Loan. However, if both parents apply independently and one is approved and the other
denied, the dependent student is not eligible for the additional unsubsidized loan amounts.
A Previously Approved Parent Later Requests Additional Direct PLUS Loan Funds and Is Denied
The dependent student may become eligible at any time during an academic year if a parent has first been approved and
then later denied a Direct PLUS Loan. For example, if a parent was approved for and received the full amount of a Direct
PLUS Loan for a fall-spring loan period, but the parent is subsequently determined ineligible due to having an adverse
credit history when they request additional Direct PLUS Loan funds later during the spring semester, you may award
Increased Direct Unsubsidized Loan Eligibility for Independent Undergraduates and Certain
Dependent Undergraduates
34 CFR 685.203(c)
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additional Direct Unsubsidized Loan funds to the student. However, the Direct PLUS Loan funds that the parent previously
received during the same period of enrollment must be treated as OFA when determining the additional Direct
Unsubsidized Loan amount that the student is eligible to receive.
A Parent Is Unable To Borrow a Direct PLUS Loan For Reasons Other Than Adverse Credit History (Exceptional
Circumstances)
In addition to cases in which a parent has been denied a Direct PLUS Loan due to adverse credit, a dependent
undergraduate student may also be eligible for increased unsubsidized loan amounts if you determine and document the
existence of exceptional circumstances other than adverse credit that would prevent a parent from borrowing a Direct
PLUS Loan.
If you make such a determination, you may award increased Direct Unsubsidized Loan amounts to a dependent
undergraduate even if the student9s parent previously applied for a Direct PLUS Loan and was found to not have an
adverse credit history. Similarly, if you make such a determination before a parent has requested a Direct PLUS Loan, you
may award the increased Direct Unsubsidized Loan funds to the dependent student without requiring the parent to apply
for a Direct PLUS Loan.
Examples of such exceptional circumstances include, but are not limited, to the following:
The parent is incarcerated.
The parent9s whereabouts are unknown.
The parent has filed for bankruptcy and has provided a letter from the bankruptcy court stating that as a condition of
the bankruptcy filing, the parent may not incur any additional debt.
The parent9s income is limited to public assistance or disability benefits, and you have documented that the parent
would not be able to repay the Direct PLUS Loan.
You have examined the family financial information and documented the parent9s likely inability to repay the Direct
PLUS Loan due to an existing debt burden or the parent9s expected income-to-debt ratio.
The parent of a dependent student is not a U.S. citizen or permanent resident, is not a qualified alien, or is not able
to provide evidence from the Department of Homeland Security (DHS) that they are in the United States for other
than a temporary purpose with the intention of becoming a citizen or permanent resident.
Before originating a loan for the increased Direct Unsubsidized Loan amounts based on a parent9s ineligibility for a Direct
PLUS Loan due to adverse credit or other exceptional circumstances, you must document the basis of the dependent
student9s eligibility.
A determination that a parent is ineligible for a Direct PLUS Loan in one academic year based on adverse credit or other
exceptional circumstances does not automatically support the dependent student9s additional unsubsidized loan eligibility
in subsequent years. If a dependent student is determined to be eligible for additional unsubsidized loan amounts in one
academic year, you must re-examine and document that the basis for the student9s eligibility continues to exist before
originating additional unsubsidized loan amounts for the student in a subsequent year.
Annual Loan Limit for Graduate and Professional Students
The annual loan limit for graduate or professional students is shown below in Table 1C. Graduate and professional
students are not eligible to receive Direct Subsidized Loans, so the annual loan limit for these students represents only
Direct Unsubsidized Loans.
A student in an undergraduate program is not eligible for the graduate loan limit based on taking graduate coursework as
a part of the undergraduate program. In contrast, a graduate student taking some undergraduate coursework is eligible
for the graduate loan limit if the student is enrolled at least half time in courses (graduate or undergraduate) that can be
applied to the graduate program. However, the student must already be admitted into the graduate program.
A student with a bachelor9s 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.
See the discussion later in this chapter on annual loan limits for students taking preparatory coursework.
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Volume 8, Chapter 4, Table 1C: Graduate and Professional Student Annual Limits for Direct Unsubsidized Loans
Graduate and Professional Students Total (Unsubsidized Only)
All years $20,500
Loan Limit Level for Transfer Students
If you9re awarding a Direct Loan to a student who is transferring from a program at another school to a program at your
school that is greater than one academic year in length, you may use the loan limits for a second-year or higher
undergraduate if your school classifies the student at that level based on the number of academic credits it accepts from
the prior school, or based on the granting of advance standing in the new program (but see below for guidance on when
schools are required to use the third-year and beyond undergraduate annual loan limits for a transfer student).
Loan Limit When a Baccalaureate or Associate Degree Is Required for Admission to an Undergraduate Program
For a student who has an associate or baccalaureate degree that is required for admission into an undergraduate
program, you must use the third-year and beyond undergraduate loan limits for that student.
Annual Loan Limits for Direct PLUS Loans
There are no fixed annual loan limits for Direct PLUS Loans. A graduate or professional student may be awarded a Direct
PLUS Loan for up to the student9s COA minus OFA (see Volume 3, Chapter 3 for packaging rules). Therefore, a graduate or
professional student who has received the maximum Direct Unsubsidized Loan amount for an academic year may have
additional Direct PLUS Loan eligibility. Similarly, the total Direct PLUS Loan amount borrowed by a parent on behalf of a
dependent student may not exceed the student9s estimated COA minus OFA the student receives for the period of
enrollment. This is the only borrowing limit for Direct PLUS Loans.
Annual Loan Limit for Programs Greater Than One Academic Year, But Less Than Two Academic Years in Length
The <Eligibility and Certification Approval Report= (ECAR) lists <one-year= as the highest educational program offered by a
school if its longest program is one academic year or more in length, but less than two academic years. Students who
have successfully completed the first academic year of such programs can be treated as second-year undergraduates for
annual loan limit purposes, even though the ECAR lists the school9s highest program offering as <one-year.= For instance,
a student enrolled in a 1,500 clock-hour program would be eligible for the second-year loan limits after completing the
first 900 clock hours and 26 weeks of instructional time. However, because the remaining portion of the program would be
less than a full academic year in length, the loan limit would have to be prorated, as explained in Chapter 5 of this
volume.
Annual Loan Limits for One-Year and Two-Year Programs
If a program can normally be completed in one year of full-time study, a student in that program can never receive more
than the first-year annual loan limit, even if it takes the student more than one academic year to finish the program.
Similarly, a student in a program that students are expected to complete in two years can never receive more than the
second-year annual loan limit for an academic year, even if individual students sometimes take more than two years to
finish the program. However, some schools offer associate degree programs that have been approved by the school9s
state licensing agency or accrediting agency as programs that require more than two academic years of study for a full-
time student to complete. Students enrolled in such a program may receive Direct Loans at the third-year annual loan
limit after they have successfully completed the first two academic years of the program and if the school has a grade
level progression standard that allows for third year level loans.
Note also that a school may not link two stand-alone one-year programs by making one a prerequisite for admission and
then classify students beginning the second one-year program as second-year undergraduates for loan limit purposes.
However, hours or credits earned in a prior certificate program could be used to classify a transfer student at a grade
level higher than grade level one if the student transfers into a program that is greater than one academic year in length
and the new school accepts a year9s worth of credits or hours from the prior program. For instance, if a school admits a
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