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Financial Assistance Programs

Impact of Sequestration on Title IV Student Financial Assistance Programs

Federal Work-Study and Federal Supplemental Educational Opportunity Grant Programs

The campus-based programs are fully funded at the start of the award year. Therefore, the Federal Work-Study (FWS) and Federal Supplemental Educational Opportunity Grant (FSEOG) programs for Award Year 2012-2013 were fully funded in Federal fiscal year 2012 and are unaffected by the sequester. However, under the sequester, Award Year 2013-2014 funding for FWS and FSEOG would be reduced by a total of approximately $86 million. The Department will include the reduction when it uses the expected reduced final full-year appropriation in the institutional allocation formula, which will result in final FWS and FSEOG institutional allocations that are expected to be released later this Spring.

Federal Direct Loan Programs

The sequester does not change the annual or aggregate loan limits for Direct Loan Program loans, or the rules governing a student's (or parent's) Direct Loan eligibility. However, the BBEDCA did specify that certain loan fees paid by borrowers be increased during the time the sequester is in effect, as follows:

  • For Direct Subsidized and Direct Unsubsidized Loans where the first disbursement of the loan is after the sequester takes effect, the current loan fee of 1 percent of the principal amount of a loan will increase. We presently anticipate that the rate will increase to approximately 1.05 percent. With such an increase, for example, the fee on a loan for $5,500 would increase from $55.00 to $57.75, an increase of $2.75. We will provide the actual increased percentage when it becomes available.
  • For Direct PLUS Loans for both parent and graduate and professional student borrowers where the first disbursement of the loan is after the sequester takes effect, the current loan fee of 4 percent will increase. We presently anticipate that the rate will increase to approximately 4.20 percent. With such an increase, for example, the fee on a $10,000 Direct PLUS loan would increase from $400.00 to $420.00, an increase of $20.00. We will provide the actual increased percentage when it becomes available.

Updated 10/2/14

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