How Subsidized Loan Usage Limit and Transferring Can Affect Your Eligibility

This article is slated to be updated with the latest FAFSA, Scholarship, and Financial Information. For more updated information, please refer to our 2023 and 2024 articles.

For many students from middle-income families, at least a portion of their student loans will be subsidized—i.e., interest-free during the school years and for the first six months after graduation.

Recently, however, a new rule called the “Subsidized Usage Limit” (SULA) has been put in place to limit those loans.  This, of course, can affect what your students end up paying for their education.

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Here are the current limits on subsidized loans:

Direct Subsidized Loan Eligibility Limits (School Years):

  • Bachelor’s Degree – 6 years
  • Associate’s – 3 years
  • Certificate or Degree – 1.5 years

While many people feel the above limits are more than enough time to finish a program, others may find themselves losing out on eligibility for a variety of reasons.

In our workshop “How to Pay for College Without Going Broke,” we talk about the current college completion statistics. The current trends show that 30% of freshman don’t return for their sophomore year, 33% transfer schools and the average time spent in college is 6.2 years.  What these statistics show is that students are not going to a “right fit” college and, as a result, are losing out on potentially beneficial loans. In my experience students who transfer schools tend to be at the highest risk of losing out on direct subsidized loan elibility.

How can transferring affect my direct subsidized loan eligibility?

The 30% of students who do not return for their sophomore year may not see an effect unless they plan on attending a shorter program such as an Associate’s degree or certificate program.  In these cases they could have used up to two-thirds of their direct subsidized loan eligibility depending on the length of program, which would make them ineligible for subsidized loan in your final year.

Transferring schools can affect you as well, especially if not all of your credits transfer. Make sure your credits will transfer so you are not adding an extra year or two to your degree. Many times students transfer to a new school only to find out that few credits transfer. If this happens you may lose out on years of direct subsidized loan eligibility.

The average time spent in college is 6.2 years, which, based on the information outlined above, guarantees you will miss out on at least 1 year of direct subsidized loan eligibility.

The best way to avoid missing out on subsidized loan eligibility is to make sure you are in a school and program that meets all of your needs.  Research each campus and take advantage of your visits so you can make sure your experience is a success.  My College Planning Team is always here to help.



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