Merit Award Converted Subsidized to Unsubsidized Loan

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Merit Award Converted Subsidized to Unsubsidized Loan

Postby ruralwoman » Mon Apr 01, 2013 6:23 pm

My son is a college senior at a state university. He received a Presidential Scholarship from his college all 4 yrs which amounted to 1/2 tuition and a local scholarship for $1,000. He has worked summers & winter breaks and tutors for the school. He has lived off campus the last 2 yrs. Summer 2012, he was not able to work for 5 wks due to a class required field camp. He has received subsidized student loans each year but has kept this to a minimum. Subsidized loans are the only assistance he has received due to the FAFSA.

For his senior year, he needed more assistance and took out both subsidized and unsubsidized student loans. He received these loans for both semesters. At the end of February, he was awarded 2 $1,000 awards from his department for his achievements (not need-based). Also, his school gives a $500 completion scholarship to students who start at this school, live in-state, and complete in 4 yrs. He received this in March.

We just realized this weekend that after receiving these awards of $2,500 for his achievements, the financial aid dept has pulled back his spring subsidized student loan, added this amount to his unsubsidized loan, taken administrative fees out of his award money, and given him a check for the difference. They back-dated these achievement awards to Dec. 28, 2012. He did not owe the bursar's office anything, all had already been paid. This money needs to be used to pay for his rent and living expenses. He must continue paying rent under his contract until Aug., 2013. He has been in to talk to them 2 times today and they told him that this is the federal gov'ts requirement. So, these achievement awards have cancelled out his subsidized loan and are now costing him interest on his unsubsidized loans. All of this was done without his knowledge. He has received a grad school assistantship which would have allowed the subsidized loan to be deferred. Instead, he owes $2,500 more on his unsubsidized loan plus interest. How can they go back and consider this as past income in figuring his subsidized student loans? Also, how can they eliminate his subsidized student loan and increase his unsubsidized loan without his knowledge? He has a 3.7 GPA, the highest in his department, now he is being punished for his achievements.
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Re: Merit Award Converted Subsidized to Unsubsidized Loan

Postby steve.blank » Sun Apr 07, 2013 8:11 am

According to the federal rules, one cannot receive more need-based financial aid than they have need (eligibility) based on the cost of attendance minus the Expected Family Contribution (EFC) from the FAFSA.
Academic and outside scholarships reduce that need.
It sounds like initially after subtracting his tuition scholarship and local scholarship, his only remaining eligibility was filled with the subsidized loan.
When he received additional gift aid, it reduced his need and the school would have to either cancel his subsidized loan or convert it to unsubsidized.
Since the semester bill had already been paid, these new gift aids in addition to the loans made a credit balance, which they refunded to you.
He is not being punished since that excess put more money back in your hands.
You can use that refund to pay off the loan if you wish, so the net result is that he owes less.
Steven Blank
College Financial Aid Consultants
29 Ives Hill Court
Cheshire, CT 06410
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