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$18,000 in-state loan limit: Does it mean anything?

Wilson98Wilson98 397 replies3 postsRegistered User Member
My D is an in-state student who recently received her third-year financial aid package. I've seen for years that UVA promises to limit the required loans to be taken out for in-state students with need to $4500 a year on average, or $18,000 total. (With a $7000 a year limit for out-of-state students.) Yet the loans included in my D's packages have been $5500, $6500, and $7500, or up to $18,500 already. (Each year $2000 is unsubsidized and the rest is subsidized.) She asked UVA about how this could be said to be limiting her loans to $18,000, and the response was that the policy to have $5500, $6500, $7500, and $7500, or $27,000 over 4 years. Before I go back to UVA to sort this out, I wonder if anyone else has encountered this issue, and if they know why UVA would include $27,000 in a student's FA packages while claiming to limit loans to $18,000.
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Replies to: $18,000 in-state loan limit: Does it mean anything?

  • Mwfan1921Mwfan1921 2011 replies28 postsRegistered User Senior Member
    edited July 20
    I've seen for years that UVA promises to limit the required loans to be taken out for in-state students with need to $4500 a year on average, or $18,000 total.

    Here is what UVA's website says: "We limit your debt. We limit need-based loans to an average of $4,500 per year for in-state students and $7,000 per year for out-of-state students". https://financialaid.virginia.edu/

    Obviously there is wiggle room here with UVA using the terms 'need-based' and 'average'.
    She asked UVA about how this could be said to be limiting her loans to $18,000, and the response was that the policy to have $5500, $6500, $7500, and $7500, or $27,000 over 4 years.

    This $27K, spread over the 4 ug years as above, is the Federal Direct Student Loan limit amount.
    edited July 20
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  • Wilson98Wilson98 397 replies3 postsRegistered User Member
    @Mwfan1921 Well, yes, their wording could legally allow for something like "We don't really mean a limit of $4500 a year average ($18,000 total) for each individual in-state student over their four years here. We mean collectively they average $4500 a year with some at $1000 and some at $7000." However, the first interpretation seems a pretty reasonable one. (People generally want to know what their loans will be, not the average loans of everybody in the state.) And my D's response from UVA seems to say that the federal maximum of $27,000 is just the standard even for an in-state student like her, and not something well above the average.
    "Need-based" is trickier. UVA might say that when they figure out your need, only $18,000 of the loans they offer are needed to cover it, and the other $9000 they offer are additional loans you could take to cover some of your expected contribution. In that case, only $18,000 would be "need-based." This is just a theory I made up, though, and no explanation is given anywhere that this is the case.

    I don't mean to make a big deal of this. I do realize that if UVA were to provide enough financial aid to in-state students to make their loan debt $9,000 less it would be a very unusual and good benefit compared to other state schools. But if in-state and out-of-state packages both look the same with $27,000 loan totals, there is no real indication they are providing this benefit. UVA should at least have more clarity here.
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  • cptofthehousecptofthehouse 28772 replies56 postsRegistered User Senior Member
    Here is what my understanding of this which still does not add up to $18k:

    Only the subsidized loans cost as true financial aid by some definitions. Anyone, including Billionaire kids are permitted to borrow the Direct Loan amount on their own. It’s not like the kid with financial aid is getting anything in being permitted to borrow those amounts of $5500/$6500/$7500/$7500 over the 4 years.

    What you can get when you are eligible for financial aid is subsidization of a part of those loans while still in school. The subsidized maximum amounts are: $3500/4500/5500/5500 which total $19k out of the $27k over those 4 years.

    I agree that the use of the term “average” could mean that the school seeks to average those loan amounts to $18k for in state students with need and $28k for OOS with need does not each and every student will be limitedvto those numbers any more than saying the average grant amount is $20k means each student gets that amount
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  • Wilson98Wilson98 397 replies3 postsRegistered User Member
    @cptofthehouse It did seem from the response we got from UVA that they may be going with the idea that only my D's subsidized loans are part of the "need-based" loans. One problem with that explanation: UVA says in the passage quoted above that they limit "need-based loans" to OOS students to an average of $7000 a year. As no one can get a subsidized loan for more than $5500 a year, then clearly OOS students are having their non-subsidized loans count as "need-based." (As in, a loan included in a package to make up part of your need after expected contribution and scholarship.) I guess UVA could count only subsidized loans as need-based for in-state, and both subsidized and non-subsidized as need-based for OOS, but that seems pretty odd. Especially with no explanation that they are doing that.
    Using approximate numbers from my daughter, here is the question to me. UVA says they meet full demonstrated need. Her package says it is based on a total cost of attendance of $33K. They give her a scholarship of $13.5K and a loan of $7.5K total. That leaves a balance of $12K to pay. They don't specifically say that $12K is her total expected family contribution and that the $21K of scholarship and loan is the remaining need, but it seems a logical assumption. But if that's true, then she has to borrow the full $7.5K to afford to go there after paying the expected contribution. And if $7.5K is the standard loan for in-state packages, then they are doing nothing to reduce loans for her to more like $4.5K. To do that, they would have to increase the scholarship part of the need amount in order to lower the loan, which they could do. The two explanations for how they might be keeping to their policy seem to be (1) that her expected contribution is actually higher (more like $14K) and they are using the unsubsidized loan to cover part of her contribution (without telling her) so that $2000 is not really need-based. Or (2) that the $4500 a year is just an average for students across the state, where all the students with a very high need borrow little and those with some need (like my daughter) borrow the full $7000 a year. Neither seems to make sense to me, but I guess I won't know until I ask someone at financial aid what they are actually doing.
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  • cptofthehousecptofthehouse 28772 replies56 postsRegistered User Senior Member
    edited July 20
    There are other student loans out there. Some states offer them—I don’t know if Virginia does , and some schools do as well. They may even subsidize the loans while the student is in school.

    Edited to add that I checked , and yes , UVA does give out Institutionsl loans to undergraduates. And they are subsidized
    edited July 20
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  • Wilson98Wilson98 397 replies3 postsRegistered User Member
    @cptofthehouse It's all pretty much speculation at this point as to what UVA actually does, so I'll just wait until I ask them and they tell me before posting any more speculations!
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  • brantlybrantly 3868 replies67 postsRegistered User Senior Member
    As no one can get a subsidized loan for more than $5500 a year, then clearly OOS students are having their non-subsidized loans count as "need-based."
    There are need-based loans that are not the Federal direct subsidized loans. There's the Perkins loan (this program ended last year). And schools can have their own loan programs.
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  • cptofthehousecptofthehouse 28772 replies56 postsRegistered User Senior Member
    Just substantiating that UVA does have subsidized Institutional loans that it offers to students as part of the aid package. It’s on their Financial Aid web page.
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  • Wilson98Wilson98 397 replies3 postsRegistered User Member
    Yes, my statement that OOS students definitely need to have some unsubsidized loans in order to get up to $7000 a year in loans was wrong. It is theoretically possible that UVA gives OOS students federal subsidized loans up to the max and then gives them institutional subsidized loans to get up to $7000, instead of simply giving OOS students the available federal unsubsidized amount of $2000. Why they would do this for every single OOS student I can't imagine, as just giving the federal unsubsidized amount is easier and cheaper. But yes, if they did, they could say "need-based" loans refers only to subsidized loans, and then claim my D's loans that are not subsidized are therefore not "need-based." I really doubt that is what's happening, but as I said, it's all speculation.
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  • Wilson98Wilson98 397 replies3 postsRegistered User Member
    OK, for anyone in-state who has a financial aid package from UVA with loans (or who cares about such things and has made it this far!) this is what seems to be happening (I found some further info):

    1. For in-state, UVA does indeed promise to limit individual FA packages to an average of $4500 per year ($18000 total) of need-based loans. (Very low-income has a $1000 limit.) They say they do this by subtracting the expected family contribution (EFC) from the cost of attendance (COA) to come up with "need." Then they subtract that year's loan amount (presumably $4500) from the "need" figure and make up the rest with a scholarship.
    2. In practice, the "need-based" loan amounts they subtract each year are based (in general) on the parts of federal loans that are subsidized. These are maxed at 3500, 4500, 5500, and 5500 for the four years. (People can borrow another $2000 a year unsubsidized.) The subsidized amounts add up to 19000 and not 18000, but they don't seem (in my D's case) to be using those figures very consistently anyway.
    3. Even though only 4500 (let's say) of loan might be needed in a year to meet need, UVA offers the full maximum federal subsidized and unsubsidized loan, or 7500 each for third and fourth years. They don't mention in the award letter (or, I think, anywhere) that 2000 or more of their loan offer is not needed to meet need, but could be used to cover part of the EFC (or not taken at all if you can cover your EFC without loans).
    4. To figure out how much of your loan is required to meet need, and how much is not required for need, you need to know your EFC. The EFC is not included in the award letter or on the student page summary of financial aid. It is only (I think) in the "Shopping Sheet" form you can click on to open at the student's page. This Shopping Sheet is a standard federal form that is required to have the EFC number.
    5. So the only way (as far as I can tell) for an in-state student to determine that UVA is giving additional scholarship so that he or she doesn't need to take out more than a 4500 loan to meet need is (a) find the EFC on the Shopping Sheet, and (b) do the calculations of "COA minus EFC = Need" and then "Need minus Scholarship = Remaining need that must be covered by loan." That last figure will be the amount someone has to borrow to cover their full COA if they contribute just their full EFC. Usually it will be less than the full loan amounts they are being offered.

    Basically: UVA explains their "lower loans" program on their website but doesn't explain this in their communication to individual students. Most likely, few students figure out on their own that their scholarship amount is large enough that they could possibly borrow less than the total offered loan amounts. The calculations are not at all obvious, and the EFC number is not that easy to find. When offered a 7500 total in loans for the year with no explanation that it will cover more than their demonstrated need, I think most people (like our family) will just accept all the loans, assuming they are needed. (Also, most people--like us!--probably have trouble meeting their full EFC, so the additional loan will be seen as necessary.)

    It is great that UVA is providing more money to in-state students through this policy, but I really don't think it is as effective as it could be. They don't explain to individual students clearly enough (or really at all, as far as I can see) exactly how they are getting a benefit. Many, if not most, probably don't know that they are, as in-state students' packages with 7500 in loans third and fourth year will appear to be just like any other students' financial aid. And offering students 27,000 total in loans without explaining they may need to borrow less is not an effective way to lower total debt burdens. A paragraph in the award letter explaining some of this info would make a difference.

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