A	dependent	student	enrolls	in	a	900	clock-hour	program,	with	the	academic	year	defined	as	900	clock	hours	and
26	weeks	of	instructional	time.	The	school	assumes	that	the	student	will	complete	900	clock	hours.
The	combined	subsidized	and	unsubsidized	annual	loan	limit	for	a	dependent	first-year	undergraduate	is	$5,500,
not	more	than	$3,500	of	which	may	be	subsidized.	The	student	qualifies	to	receive	the	maximum	annual
combined	loan	limit	in	the	form	of	a	$3,500	Direct	Unsubsidized	Loan	and	a	$2,000	Direct	Unsubsidized	Loan.
Each	loan	is	paid	in	two	equal	disbursements,	as	shown	below.
Original	Direct	Subsidized
Loan	Amount
$3,500
Direct	Subsidized	Loan	First
Disbursement
$1,750
Direct	Subsidized	Loan	Second
Disbursement
$1,750
Original	Direct	Unsubsidized
Loan	Amount
$2,000
Direct	Unsubsidized	Loan	First
Disbursement
$1,000
Direct	Unsubsidized	Loan	Second
Disbursement
$1,000
The	school	considers	the	student	to	have	met	the	requirements	for	graduation	from	the	program	after	the	student
has	completed	only	750	of	the	originally	scheduled	900	clock	hours.	As	soon	as	practicable	after	determining	that
the	student	will	meet	the	graduation	requirements	after	completing	only	750	clock	hours,	the	school	must	prorate
the	student9s	Direct	Loan	annual	loan	limit	because	the	student	is	now	treated	as	having	been	enrolled	in	a
program	shorter	than	an	academic	year	in	length	(i.e.,	as	though	the	student	had	originally	enrolled	in	a	750
clock-hour	program).	However,	in	this	circumstance,	only	the	number	of	clock	hours	that	the	student	completed
are	used	to	determine	the	prorated	loan	limit.	There	is	no	comparison	of	hours	and	weeks	fractions,	as	is	normally
required	when	prorating	the	Direct	Loan	annual	loan	limit	for	students	who	are	enrolled	in	programs	shorter	than
an	academic	year.
The	school	determines	the	prorated	annual	loan	limit	by	multiplying	the	applicable	annual	loan	limit	by	the
number	of	clock	hours	the	student	completed,	then	dividing	the	result	by	the	number	of	clock	hours	in	the
program's	academic	year	definition:
($5,500	x	750)	÷	900	=	$4,583	prorated	combined	subsidized	and	unsubsidized	annual	loan	limit
($3,500	x	750)	÷	900	=	$2,917	prorated	subsidized	annual	loan	limit
(As	noted	earlier	in	this	chapter,	the	prorated	loan	limit	may	also	be	determined	by	converting	the	fraction
consisting	of	the	number	of	clock	hours	the	student	completed	in	the	program	over	the	number	of	clock	hours	in
the	program's	academic	year	to	a	decimal,	and	then	multiplying	the	decimal	by	the	applicable	annual	loan	limit.
Whatever	approach	a	school	chooses	should	be	applied	consistently,	as	the	fraction	method	shown	above	and	the
decimal	method	may	produce	slightly	different	results.)
The	total	prorated	loan	limit	is	$4,583,	not	more	than	$2,917	of	which	may	be	subsidized.	Because	the	student
received	more	than	the	prorated	maximums,	the	school	reduces	each	disbursement	of	the	student9s	Direct
Subsidized	Loan	and	Direct	Unsubsidized	Loan	as	shown	below	and	returns	the	excess	loan	funds	to	the
Department.	Note	that	the	school	3	not	the	student	3	is	responsible	for	returning	the	excess	Direct	Loan	funds	in
this	situation.
Reduced	Direct
Subsidized	Loan
Amount
$2,917
($583	reduction	from
original	amount
Direct	Subsidized	Loan
Adjusted	First
Disbursement
$1,458
(original	disbursement
reduced	by	$292)
Direct	Subsidized	Loan
Adjusted	Second
Disbursement
$1,459
(original	disbursement
reduced	by	$291)
Direct	Subsidized	Loan
Funds	Returned	to
Department
$583
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