SULA Repeal Simplifies Requirements for Schools and Students

By Matt de Vries, CPA | June 18, 2021

Administering the Federal Direct Loan program just got a little simpler, as the Department of Education (ED) recently announced that the 150% Direct Subsidized Loan limit, or “SULA” is being repealed.  What exactly does this mean for postsecondary institutions and for their students? McClintock & Associates has reviewed the final regulation and provided a summary:

  • For students who receive Federal Direct Subsidized Loans first disbursed on July 1, 2021 or later, SULA restrictions do not apply, regardless of the award year associated with the loan.
  • For students whose interest subsidy benefits were lost due to having a remaining eligibility period of zero or less, subsidy benefits will be restored for all subsidized loans with outstanding balances on July 1, 2021. The interest subsidies will be retroactively applied for all subsidized loans issued since the 2013-2014 award year.
  • Direct loan entrance counseling will no longer be required to include information on the eligibility limitation of subsidized loans based on a borrower’s subsidized usage period.
  • Direct loan exit counseling will no longer need to include SULA information, including:
    • How a borrower’s maximum eligibility period, remaining eligibility period, and subsidized usage period are determined;
    • The sum of a borrower’s subsidized usage periods at the time of exit counseling;
    • The consequences of continued borrowing or enrollment;
    • The impact of the borrower becoming responsible for accruing interest on total student debt;
    • That the Secretary will inform the student borrower of whether he or she is responsible for accruing interest on his or her Direct Subsidized Loans; and
    • That the borrower can access the National Student Loan Data System (NSLDS) to determine whether he or she is responsible for accruing interest on any Direct Subsidized Loans.

The final regulation lists numerous benefits of the SULA repeal, for both students and higher education institutions. Students who had outstanding loan balances and had lost their interest subsidy will benefit from the retroactive restoration of their interest subsidy, and future students will no longer need to make decisions based on the potential loss of their interest subsidy. Institutions will benefit through reduced disclosure requirements to borrowers during entrance and exit counseling, fewer headaches when trying to determine if a student is eligible for a Direct Subsidized Loan, and the repeal will potentially generate revenue as students will no longer be hindered by SULA.

ED will be rolling out the SULA repeal in two phases. Phase 1 involves modifying the Common Origination and Disbursement (COD) system and the National Student Loan Data System (NSLDS). Phase 2 involves evaluating and implementing the changes on other platforms such as, FSA Partner Connect, and any other interfaces and reports that include SULA data.

For more information regarding this recent rule change, please contact us to setup a meeting with one of our industry experts.

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