This guidance is not award-year-specific and applies across award years.
Scenario: The student has an overlapping academic year (AY) where the AY end date at the previous school is 4/21. The end date of this AY will be in the middle of Quarter 2 at our school. ED guidance states that an abbreviated loan period should be created with a start date of 12/9 and an end date of 4/21. All courses run concurrently.
Our program is a clock-hour program taught in quarter-based terms. The courses in each quarter begin and end on the same date. The total program is 1,500 clock hours. AY1 is 900 clock hours and AY2 is 600 clock hours.
Answers: Guidance received from the U.S. Department of Education (ED) indicates that the next loan period for this student would begin 4/22 and extend for up to one AY, according the school’s definition of an AY in this program. Please see ED’s responses below:
1. Would the new loan period begin 4/22? Yes.
2. Would the new loan period end after applying the school’s definition of an AY (i.e., 900 hours and XX weeks) starting 4/22? Yes, assuming there is at least an AY’s worth of hours and weeks left.
3. If so, is it possible there might be remaining clock hours to complete, for which another loan could be borrowed after applying a prorated annual loan limit? If there are hours left after the second loan period, then yes the student could receive prorated loans for the remaining loan period. This assumes they have not reached their aggregate limits, etc.
4. When would the second disbursement be scheduled? We’re assuming you’re talking about the second disbursement in the final period of study, and it depends on how long the remaining portion is in the final loan period. If the remaining program is less than half of an AY, then the remaining portion is the final payment period and you would make two disbursements on a Direct Loan--one at the beginning of the payment period and the second one at the point where the student has completed half the hours and half the weeks in the final payment period. If, however, the final period is greater than half of an AY, then you have to break up the final period into two equal payment periods, (at which the second Direct Loan disbursement would occur when the student enters the second payment period.
Also refer to guidance under "Transfer into clock-hour, non-term, or non-SE9W nonstandard term program (BBAY 3): abbreviated loan periods" in Volume 8, Chapter 7 of the FSA Handbook.
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