Posted Date: June 19, 2017

Author:  Jeff Baker, Director, Policy Liaison and Implementation, Federal Student Aid

Subject: FY 18 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, 2017.

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, 2017 and before October 1, 2018 –

  • The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.066%. For example, the fee on a $5,500 loan will be $58.63.

  • The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.264%. For example, the fee on a $10,000 PLUS Loan will be $426.40.

The following chart shows the sequester-required loan fees for FY 17 and FY 18.

Direct Loan Fees
for FY 17 and FY 18
Loan Type First Disbursed Loan Fee
Percent
Fee Example
Direct Subsidized
Loans and Direct
Unsubsidized
Loans
FY 17
    On or after
    October 1, 2016 and
    before
    October 1, 2017
1.069 $58.79 on a
$5,500 loan
FY 18
    On or after
    October 1, 2017 and
    before
    October 1, 2018
1.066 $58.63 on a
$5,500 loan
Direct PLUS
Loans (Parent
and Grad/Prof
Student)
FY 17
    On or after
    October 1, 2016 and
    before
    October 1, 2017
4.276 $427.60 on a
$10,000 loan
FY 18
    On or after
    October 1, 2017 and
    before
    October 1, 2018
4.264 $426.40 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: Institutions may immediately begin submitting Direct Loan origination records to the Common Origination and Disbursement (COD) system where the first disbursement will be on or after October 1, 2017. Of course, those origination records must have the correct loan fee amount as provided earlier in this letter. Loan origination records previously submitted with an anticipated first disbursement on or after October 1, 2017 have already been corrected by the COD system.

Iraq-Afghanistan Service Grants

An Iraq-Afghanistan Service Grant where the first disbursement is on or after October 1, 2017 and before October 1, 2018 requires a reduction of 6.6 percent from the award amount for which the student would otherwise have been eligible.

The following chart shows the FY 17 and FY 18 sequester-required Iraq-Afghanistan Service Grant Program reductions as they apply to the 2016-2017 and 2017-2018 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
2016-2017 First disbursed prior
to October 1, 2016
(FY 16 Sequester)
$5,815 6.80% $395.42 $5,419.58
First disbursed on
or after October 1,
2016 and before
October 1, 2017 (FY
17 Sequester)
$5,815 6.90% $401.23 $5,413.77
2017-2018 First disbursed on
or after October 1,
2016 and before
October 1, 2017 (FY
17 Sequester)
$5,920 6.90% $408.48 $5,511.52
First disbursed
on or after
October 1, 2017
and before
October 1, 2018
(FY 18 Sequester)
$5,920 6.60% $390.72 $5,529.28
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.

TEACH Grants

A TEACH Grant where the first disbursement is on or after October 1, 2017 and before October 1, 2018 requires a reduction of 6.6 percent from the award amount for which the student would otherwise have been eligible.

The following chart shows the FY 17 and FY 18 sequester-required TEACH Grant Program reductions as they apply to the 2016-2017 and 2017-2018 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
2016-2017 First
disbursed
prior to
October 1,
2016 (FY 16
Sequester)
$4,000 6.80% $272.00 $3,728.00
First
disbursed on
or after
October 1,
2016 and
before
October 1,
2017 (FY 17
Sequester)
$4,000 6.90% $276.00 $3,724.00
2017-2018 First
disbursed on
or after
October 1,
2016 and
before
October 1,
2017 (FY 17
Sequester)
$4,000 6.90% $276.00 $3,724.00
First
disbursed on
or after
October 1,
2017 and
before
October 1,
2018 (FY 18
Sequester)
$4,000 6.60% $264.00 $3,736.00

COD 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 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

   

End of Page