Impact of Sequestration on the Federal Student Aid Programs | Federal Student Aid

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 2016–17 award year remains at $5,815.

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Direct Loan Program

In general, while the sequester did not otherwise change the amount, terms, or conditions of Direct Loans, the terms of the sequester slightly increased the loan fees charged to Direct Loan borrowers for Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans. The amount of the loan fee for a loan is determined by the date of the first disbursement of the loan. Any subsequent disbursements, even if made on or after the relevant Oct. 1, have the same loan fee percentage that applied to the first disbursement of that loan. See the table below for more information about loan fees.

Direct Loan Fees

Loan Type

Impacted Loans

Loan Fee Percent

Loan
Fee
Example

Direct Subsidized Loans and Direct Unsubsidized Loans

FY* 2016: First disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016

1.068

$58.74 on a $5,500 loan

FY 2017: First disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017

1.069

$58.79 on a $5,500 loan

Direct Plus Loans (Parent or Grad/Professional Student)

FY 2016: First disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016

4.272

$427.20 on a $10,000 loan

FY 2017: First disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017

4.276

$427.60 on a $10,000 loan

*FY = fiscal year. A fiscal year runs from Oct. 1 of one year to Sept. 30 of the following year.

  • For a Direct Subsidized or Direct Unsubsidized Loan first disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016, the loan fee is 1.068 percent of the principal amount of a loan. For example, the fee on a loan for $5,500 is $58.74.
  • For a Direct Subsidized or Direct Unsubsidized Loan first disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017, the loan fee is 1.069 percent of the principal amount of a loan. For example, the fee on a loan for $5,500 is $58.79.
  • For Direct PLUS Loans (for both parent and graduate or professional student borrowers) first disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016, the loan fee is 4.272 percent. For example, the fee on a $10,000 Direct PLUS Loan is $427.20.
  • For Direct PLUS Loans (for both parent and graduate student borrowers) first disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017, the loan fee is 4.276 percent. For example, the fee on a $10,000 Direct PLUS Loan is $427.60.

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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. The terms of the sequester required a reduction of the award amount for which the student would otherwise have been eligible (i.e., the maximum Federal Pell Grant award amount for the relevant year). See the table below for more information about sequester-required Iraq and Afghanistan Service Grant award reductions as they apply to specific award years.

Iraq and Afghanistan Service Grant Awards

Award Year*

Impacted Awards

Statutory Award Amount

Reduction from Statutory Award Amount

Dollar Reduction Amount

Adjusted Award Amount

2015–16

First disbursed prior to Oct. 1, 2015

$5,775

7.30%

$421.57

$5,353.43

First disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016

$5,775

6.80%

$392.70

$5,382.30

2016–17

First disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016

$5,815

6.80%

$395.42

$5,419.58

First disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017

$5,815

6.90%

$401.23

$5,413.77

*An award year is the school year for which financial aid is used to fund a student’s education. Generally, this is the 12-month period that begins on July 1 of one year and ends on June 30 of the following year.

For the 2015–16 award year:

  • For grants first disbursed prior to Oct. 1, 2015, the award amount must be reduced by 7.3 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2015–16 maximum award of $5,775 is reduced by $421.57, resulting in a maximum award of $5,353.43.
  • For grants first disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016, the award amount must be reduced by 6.8 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2015–16 maximum award of $5,775 is reduced by $392.70, resulting in a maximum award amount of $5,382.30.

For the 2016–17 award year:

  • For grants first disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016, the award amount must be reduced by 6.8 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2016–17 maximum award of $5,815 is reduced by $395.42, resulting in a maximum award amount of $5,419.58.
  • For grants first disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017, the award amount must be reduced by 6.9 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2016–17 maximum award of $5,815 is reduced by $401.23 resulting in a maximum award amount of $5,413.77.

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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, course work 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. See the table below for more information about sequester-required TEACH Grant award reductions as they apply to specific award years.

TEACH Grant Awards

Award Year*

Impacted Awards

Statutory Maximum Scheduled Award Amount

Percentage Reduction Amount from Maximum Award Amount

Dollar Reduction Amount from Maximum Award Amount

Adjusted Maximum Award Amount

2015–16

First disbursed prior to Oct. 1, 2015

$4,000

7.30%

$292.00

$3,708.00

First disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016

$4,000

6.80%

$272.00

$3,728.00

2016–17

First disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016

$4,000

6.80%

$272.00

$3,728.00

First disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017

$4,000

6.90%

$276.00

$3,724.00

*An award year is the school year for which financial aid is used to fund a student’s education. Generally, this is the 12-month period that begins on July 1 of one year and ends on June 30 of the following year.

For the 2015–16 award year:

  • For grants first disbursed prior to Oct. 1, 2015, the award amount must be reduced by 7.3 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2015–16 maximum award of $4,000 is reduced by $292.00, resulting in a maximum award of $3,708.00.
  • For grants first disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016, the award amount must be reduced by 6.8 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2015–16 maximum award of $4,000 is reduced by $272.00, resulting in a maximum award amount of $3,728.00.

For the 2016–17 award year:

  • For grants first disbursed on or after Oct. 1, 2015, and before Oct. 1, 2016, the award amount must be reduced by 6.8 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2016–17 maximum award of $4,000 is reduced by $272.00, resulting in a maximum award amount of $3,728.00
  • For grants first disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017, the award amount must be reduced by 6.9 percent from the award amount for which a recipient would otherwise have been entitled. For example, the 2016–17 maximum award of $4,000 is reduced by $276.00, resulting in a maximum award amount of $3,724.00.

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