TEACH Grants Shrink and Loan Fees Increase as a Result of the Sequester

On October 11, the Department of Education announced changes in the student aid programs for FY 2014 that will result in small reductions in certain grant awards and higher loan fees for upcoming loans. These additional cuts are the result of the sequester agreement under the Budget Control Act of 2011. The sequester changes were effective October 1, 2013, but in the case of Direct Loans won’t be operational until December 1, 2013.

TEACH Grants have been reduced by 7.2 percent going from $4,000 prior to March 2, 2013 to $3,712 this fiscal year, a reduction of $288. The maximum Iraq-Afghanistan Service Grant also has been reduced—by $406.44 from the statutory maximum scheduled level of $5,645 to $5,238.56. Prior to March 2, 2013, the maximum award was $5.550.

The new loan fees will be 1.072 percent of a Direct Subsidized or Unsubsidized Loan. The current fee is 1.051 percent and was 1.00 percent the year before that. The additional repayment cost on a $5,500 loan has gone from $55.00 prior to July 1, 2013 to $58.90. The origination fee for PLUS loans has also risen, going from 4.00 percent prior to July 1, 2013 to 4.288 percent beginning in December 2013. The cost of the fee is deducted from the loan amount available to the borrower at the time of disbursement.

Pell Grants were exempted from the effects of the sequester. However, payment amounts for the 2014-15 award year will not be known until actual appropriations for the program are made. No information is available on the impact the sequester will have on campus-based allocations for award year 2014-2015.

For more information, please contact:
Maureen Budetti