Impact of Sequestration on the Federal Student Aid Programs

On August 2, 2011, Congress passed the Budget Control Act of 2011, which put into place automatic federal budget cuts, known as a “sequester.” Below is a summary of the impact of these budget cuts on certain federal student aid programs.

Pell Grant Program
Direct Loan Program
Iraq and Afghanistan Service Grants
Teacher Education Assistance for College and Higher Education (TEACH) Grants


Pell Grant Program

The law specifically exempts the Pell Grant Program from the effects of the sequester. Therefore, the maximum Pell Grant award for the current 2013–14 award year remains at $5,645. The sequester has no impact on the 2013–14 Pell Grant Program, but at this time, we do not have any information on what the Pell Grant award amounts will be for 2014–15.

 


Direct Loan Program

While the sequester does not otherwise change the amount or terms or conditions of Direct Loans, it does raise the loan fee paid by borrowers for Direct Loans disbursed after March 1, 2013. See the table below for more information about these loan fees.

 

Loans first disbursed on or after July 1, 2013, and before Dec. 1, 2013

Loans first disbursed on or after Dec. 1, 2013, and before Oct. 1, 2014

Direct Subsidized and Direct Unsubsidized Loans

1.051%

1.072%

Direct PLUS Loans (for parent and graduate student borrowers)

4.204%

4.288%

 

  • For a Direct Subsidized or Direct Unsubsidized Loan first disbursed on or after July 1, 2013, and before Dec. 1, 2013, the loan fee is 1.051 percent of the principal amount of a loan. For example, the fee on a loan for $5,500 is $57.80.
  • For a Direct Subsidized or Direct Unsubsidized Loan first disbursed on or after Dec. 1, 2013, and before Oct. 1, 2014, the loan fee is 1.072 percent of the principal amount of a loan. For example, the fee on a loan for $5,500 is $58.96.
  • For Direct PLUS Loans (for both parent and graduate student borrowers) first disbursed on or after July 1, 2013, and before Dec. 1, 2013, the loan fee is 4.204 percent. For example, the fee on a $10,000 Direct PLUS Loan is $420.40.
  • For Direct PLUS Loans (for both parent and graduate student borrowers) first disbursed on or after Dec. 1, 2013, and before Oct. 1, 2014, the loan fee is 4.288 percent. For example, the fee on a $10,000 Direct PLUS Loan is $428.80.

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Iraq and Afghanistan Service Grants

The Iraq and Afghanistan Service Grant is provided to certain students whose parent or guardian was a member of the U.S. armed forces and died as a result of military service performed in Iraq or Afghanistan after the events of 9/11. Award amounts for any Iraq and Afghanistan Service Grant that is first disbursed after March 1, 2013, will be reduced as described below:

  • For grants first disbursed after March 1, 2013, and before Oct. 1, 2013, the award amount must be reduced by 10 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2013–14 maximum award of $5,645 is reduced by $564.50, resulting in a maximum award of $5,080.50.
  • For grants first disbursed on or after Oct. 1, 2013, and before Oct. 1, 2014, the award amount must be reduced by 7.2 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2013–14 maximum award of $5,645 is reduced by $395.15, resulting in a maximum award amount of $5,249.85.

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Teacher Education Assistance for College and Higher Education (TEACH) Grants

The TEACH Grant program provides grants to students who are completing, or plan to complete, coursework needed to begin a career in teaching and agree to teach, for at least four complete academic years, in a high-need field at an elementary school, secondary school, or educational service agency that serves students from low-income families. Award amounts for any TEACH Grant that is first disbursed after March 1, 2013, will be reduced as described below:

  • For grants first disbursed after March 1, 2013, and before Oct. 1, 2013, the award amount must be reduced by 6 percent from the award amount for which a recipient would otherwise have been eligible. For example, the maximum award of $4,000 is reduced by $240, resulting in a maximum award amount of $3,760.
  • For grants first disbursed on or after Oct. 1, 2013, and before Oct. 1, 2014, the award amount must be reduced by .89 percent from the award amount for which a recipient would otherwise have been eligible. For example, the maximum award of $4,000 is reduced by $35.60, resulting in a maximum award amount of $3,964.40.

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