Previous guidance from USDE provided institutions with information on the effect of the across-the-board budget cuts known as sequestration on the Title IV student financial aid programs. Because the Budget Control Act of 2011 (the sequester law) remains in effect, sequester required changes for Federal fiscal year 2015 (FY 2015) will be required effective October 1, 2014.
Direct Loan Program
The terms of the sequester increase the loan fees charged to Direct Loan borrowers for Direct Subsidized, Direct Unsubsidized and Direct PLUS loans. For loans where the first disbursement is made on or after October 1, 2014 and before October 1, 2015 –
- The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.073%. For example, the fee on a $5,500 loan will be $59.01 (truncated to nearest cent, not rounded).
- The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.292%. For example, the fee on a $10,000 PLUS Loan will be $429.20.
Loan fee calculations that result in more than two decimal points must be truncated (not rounded) to two decimal points (cents).
The following chart displays the required loan fees for both the FY 2014 and FY 2015.
IMPORTANT: In an Electronic Announcement posted to IFAP on April 24, 2014, USDE encouraged institutions to refrain from submitting origination records to the COD System for Direct Loans that will be first disbursed on or after October 1, 2014 until further guidance was provided. While additional operational guidance will be provided over the next couple of weeks, Dear Colleague Letter GEN-14-10 announces that institutions may immediately begin submitting to COD Direct Loan origination records where the first disbursement will be on or after October 1, 2014. Of course, those origination records must have the correct loan fees as provided in this letter.
Iraq-Afghanistan Service Grants
An Iraq-Afghanistan Service Grant where the first disbursement is on or after October 1, 2014 and before October 1, 2015 requires a reduction of 7.3 percent from the award amount for which the student would otherwise have been eligible (i.e., the maximum Federal Pell Grant award amount for the relevant award year).
The following chart displays the FY 2014 and FY 2015 sequester required Iraq-Afghanistan Service Grant Program reductions as they apply to the 2013-2014 and 2014-2015 award years.
A TEACH Grant where the first disbursement is on or after October 1, 2014 and before October 1, 2015 requires a reduction of 7.3 percent from the award amount for which the student would otherwise have been eligible. The chart that displays the required TEACH Grant Program reductions can be found at the following link.