Publication Date: May 2, 2014

DCL ID:  GEN-14-10

Subject: FY 2015 Sequester Required Changes to the Title IV Student Aid Programs

Summary: This letter provides information regarding sequester required increases to loan fees in the Direct Loan Program where the first disbursement is on or after October 1, 2014. It also provides information on sequester required reductions to Iraq-Afghanistan Service Grant and TEACH Grants awards where the first disbursement is on or after October 1, 2014.

Dear Colleague:

In previous guidance we 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. The information below provides direction on the implementation of sequester required increases to Direct Loan fees and sequester required changes in the percentage reduction that institutions must apply to awards in the Iraq Afghanistan Service Grant and TEACH Grant programs.

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 sequester required loan fees for both the FY 2014 and FY 2015.

Direct Loan Fees
for FY 2014 and FY 2015

Loan Type

Impacted Loans

Loan Fee Percent

Fee Example

Direct Subsidized Loans and Direct Unsubsidized Loans

FY 2014
First disbursed on or after
December 1, 2013 and
before October 1, 2014

1.072

$58.96 on a
$5,500 loan

FY 2015
First disbursed on or after
October 1, 2014 and before
October 1, 2015

1.073

$59.01 on a
$5,500 loan

 

Direct PLUS Loans (Parent and Grad/Prof Student

FY 2014
First disbursed on or after
December 1, 2013 and
before October 1, 2014

4.288

$428.80 on a
$10,000 loan

FY 2015
First disbursed on or after
October 1, 2014 and
before October 1, 2015

4.292

$429.20 on a
$10,000 loan

Loan fee calculations that result in more than two decimal points must be truncated (not rounded) to two decimal points (cents).

IMPORTANT: In an Electronic Announcement posted to IFAP on April 24, 2014, we 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, this letter 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.

Iraq-Afghanistan Service Grant Awards

Award Year

Impacted Awards

Statutory Award Amount

Reduction from Statutory Award Amount

Dollar Reduction Amount

Adjusted Award Amount

 

2013-2014

First disbursed prior to
October 1, 2013
(FY 2013 Sequester)

$5,645

10.0%

$564.50

$5,080.50

First disbursed on or after
October 1, 2013 and
before October 1, 2014
(FY 2014 Sequester)

$5,645

7.2%

$406.44

$5,238.56

 

2014-2015

First disbursed on or after
October 1, 2013 and
before October 1, 2014
(FY 2014 Sequester)

$5,730

7.2%

$412.56

$5,317.44

First disbursed on or after
October 1, 2014 and
before October 1, 2015
(FY 2015 Sequester)

$5,730

7.3%

$418.29

$5,311.71

 

Schools with systems that require award amounts to be in whole dollars must ensure that overall award amounts round down to the next lowest dollar.

TEACH Grants

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 following chart displays the FY 2014 and FY 2015 sequester required TEACH Grant Program reductions as they apply to the 2013-2014 and 2014-2015 award years.

TEACH Grant Awards

Award Year

Impacted Awards

Statutory Maximum Scheduled Award Amount

Percentage Reduction from Statutory Award Amount

Dollar Reduction Amount

Adjusted Maximum Scheduled Award Amount

 

2013-2014

First Disbursed Prior to
October 1, 2013
(FY 2013 Sequester)

$4,000

6.00%

$240

$3,760.00

First Disbursed on or
after October 1, 2013 and
Before October 1, 2014
(FY 2014 Sequester)

$4,000

0.89%

$35.60

$3,964.40

 

2014-2015

First Disbursed on or
after October 1, 2013 and
Before October 1, 2014
(FY 2014 Sequester)

$4,000

0.89%

$35.60

$3,964.60

First Disbursed on or
after October 1, 2014 and
Before October 1, 2015
(FY 2015 Sequester)

$4,000

7.30%

$292

$3,708.00

 

Questions related to the implementation of the sequester required Direct Loan fees should be addressed to the COD School Relations Center at 800/848-0978 for Direct Loans. You may also e-mail CODSupport@ed.gov.

General questions about Title IV sequester issues should be addressed to Federal Student Aid’s Research and Customer Care Center (Care Center) staff. Staff is available Monday through Friday between the hours of 9:00 a.m. and 5:00 p.m. (Eastern Time) at 1-800-433-7327. After hours calls will be accepted by an automated voice response system. Callers leaving their names and phone numbers will receive a return call the next business day. Alternatively, you may e-mail the Care Center at fsa.customer.support@ed.gov.

We thank you for your continued patience and understanding as together we ensure that the terms of the sequester law are enforced.

Sincerely,

Jeff Baker
Federal Student Aid
U.S. Department of Education

   

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