Posted Date: May 30, 2019

Author:  Federal Student Aid

Subject: FY 20 Sequester-Required Changes to the Title IV Student Aid Programs

Because the Budget Control Act of 2011 (the sequester law) remains in effect, this announcement provides information regarding sequester-required changes 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 where the first disbursement is on or after October 1, 2019.

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 from their statutory rates of 1 percent and 4 percent, respectively.

For loans where the first disbursement is made on or after October 1, 2019 and before October 1, 2020 –

  • The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.059%. For example, the fee on a $5,500 loan will be $58.24.

  • The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.236%. For example, the fee on a $10,000 PLUS Loan will be $423.60.

The following chart shows the sequester-required loan fees for FY 19 and FY 20.

Direct Loan Fees
for FY 19 and FY 20
Loan Type First Disbursed Loan Fee
Percent
Fee Example
Direct
Subsidized
Loans and Direct
Unsubsidized
Loans
FY 19
On or after
October 1, 2018 and
before
October 1, 2019
1.062 $58.41 on a
$5,500 loan
FY 20
On or after
October 1, 2019 and
before
October 1, 2020
1.059 $58.24 on a
$5,500 loan
Direct PLUS
Loans (Parent
and Grad/Prof
Student)
FY 19
On or after
October 1, 2018 and
before
October 1, 2019
4.248 $424.80 on a
$10,000 loan
FY 20
On or after
October 1, 2019 and
before
October 1, 2020
4.236 $423.60 on a
$10,000 loan
Loan fee calculations that result in more than two decimal places must be truncated (not rounded) to two digits after the decimal point (cents).

As a reminder, the loan fee percentage for a loan is determined by the date of the first disbursement of the loan. Any subsequent disbursements of that loan, even if made on or after the relevant October 1, have the same loan fee percentage that applied to the first disbursement of that loan.

IMPORTANT: Beginning on June 4, 2019, institutions may begin submitting Direct Loan origination records to COD where the first disbursement will be on or after October 1, 2019 using the loan fees provided in this letter. Loan origination records previously submitted with an anticipated first disbursement on or after October 1, 2019 will be corrected by the COD system beginning June 4, 2019.

Iraq-Afghanistan Service Grants

An Iraq-Afghanistan Service Grant where the first disbursement is on or after October 1, 2019 and before October 1, 2020 requires a reduction of 5.9 percent from the award amount for which the student would otherwise have been eligible.

The following chart shows the FY 19 and FY 20 sequester-required Iraq-Afghanistan Service Grant Program reductions as they apply to the 2018-2019 and 2019-2020 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
2018-2019 First disbursed prior to October 1, 2018 (FY 2018 Sequester) $6,095 6.60% $402.27 $5,692.73
First disbursed on or after October 1, 2018 and before October 1, 2019 (FY 2019 Sequester) $6,095 6.20% $377.89 $5,717.11
2019-2020 First disbursed on or after October 1, 2018 and before October 1, 2019 (FY 2019 Sequester) $6,195 6.20% $384.09 $5,810.91
First disbursed on or after October 1, 2019 and before October 1, 2020 (FY 20 Sequester) $6,195 5.90% $365.50 $5,829.50
Institutions with systems that require award amounts to be in whole dollars must ensure that a student’s total award amount is rounded down to the next lowest dollar.

IMPORTANT: Beginning on June 4, 2019, the COD system will display and process all Iraq and Afghanistan Service Grant origination records submitted to COD where the first disbursement will be on or after October 1, 2019 with the sequestration-limited maximums provided in this letter. Iraq and Afghanistan Service Grant origination records previously submitted with an anticipated first disbursement on or after October 1, 2019 will NOT be corrected by the COD system and schools will need to resubmit the correct award and disbursement amounts after June 4, 2019.

TEACH Grants

A TEACH Grant where the first disbursement is on or after October 1, 2019 and before October 1, 2020 requires a reduction of 5.9 percent from the award amount for which the student would otherwise have been eligible.

The following chart shows the FY 19 and FY 20 sequester-required TEACH Grant Program reductions as they apply to the 2018-2019 and 2019-2020 award years.

TEACH Grant Awards
Award Year Impacted Awards Statutory Maximum Scheduled Award Amount Percentage Reduction from Statutory Award Amount Dollar Reduction Amount from Maximum Award Amount Adjusted Maximum Award Amount
2018-2019 First disbursed prior to October 1, 2018 (FY 18 Sequester) $4,000 6.60% $264.00 $3,736.00
First disbursed on or after October 1, 2018 and before October 1, 2019 (FY 19 Sequester) $4,000 6.20% $248.00 $3,752.00
2019-2020 First disbursed on or after October 1, 2018 and before October 1, 2019 (FY 19 Sequester) $4,000 6.20% $248.00 $3,752.00
First disbursed on or after October 1, 2019 and before October 1, 2020 (FY 20 Sequester) $4,000 5.90% $236.00 $3,764.00

If you have questions about this announcement, contact the COD School Relations Center at 800-848-0978. You may also e-mail CODSupport@ed.gov.

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

   

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