062320FY21SequesterRequiredChangesTitleIVStudentAidPrograms

Author
Federal Student Aid
Subject
FY 21 Sequester-Required Changes to the Title IV Student Aid Programs

Because the Budget Control Act of 2011 (the sequester law) remains in effect, with respect to the Title IV programs, 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, 2020.

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, 2020 and before October 1, 2021 –

  • The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.057%. For example, the fee on a $5,500 loan will be $58.13.

  • The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.228%. For example, the fee on a $10,000 PLUS Loan will be $422.80.

The following chart shows the sequester-required loan fees for FY 20 and FY 21.

Direct Loan Fees
for FY 20 and FY 21

Loan Type

First Disbursed

Loan Fee
Percent

Fee Example

Direct Subsidized
Loans and Direct
Unsubsidized
Loans

FY 20
On or after
October 1, 2019 and before
October 1, 2020

1.059

$58.24 on a
$5,500 loan

FY 21
On or after
October 1, 2020 and before
October 1, 2021

1.057

$58.13 on a
$5,500 loan

Direct PLUS
Loans (Parent
and Grad/Prof
Student)

FY 20
On or after
October 1, 2019 and before
October 1, 2020

4.236

$423.60 on a
$10,000 loan

FY 21
On or after
October 1, 2020 and before
October 1, 2021

4.228

$422.80 on a
$10,000 loan

Loan fee calculations that result in more than two decimal places must be
truncated 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 29, 2020, institutions may begin submitting Direct Loan origination records to COD where the first disbursement will be on or after October 1, 2020 using the loan fees provided in this letter. Loan origination records previously submitted with an anticipated first disbursement on or after October 1, 2020 will be corrected by the COD system beginning June 29, 2020.

Iraq-Afghanistan Service Grants

An Iraq-Afghanistan Service Grant where the first disbursement is on or after October 1, 2020 and before October 1, 2021 requires a reduction of 5.7 percent from the award amount for which the student would otherwise have been eligible.

The following chart shows the FY 20 and FY 21 sequester-required Iraq-Afghanistan Service Grant Program reductions as they apply to the 2019-2020 and 2020-2021 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

2019-2020

First disbursed prior to October 1, 2019 (FY 19 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

2020-2021

First disbursed on or after October 1, 2019 and before October 1, 2020 (FY 20 Sequester)

$6,345

5.90%

$374.35

$5,970.65

First disbursed on or after October 1, 2020 and before October 1, 2021 (FY 21 Sequester)

$6,345

5.70%

$361.66

$5,983.34

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 29, 2020, 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, 2020 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, 2020 will NOT be corrected by the COD system and schools will need to resubmit the correct award and disbursement amounts after June 29, 2020.

TEACH Grants

A TEACH Grant where the first disbursement is on or after October 1, 2020 and before October 1, 2021 requires a reduction of 5.7 percent from the award amount for which the student would otherwise have been eligible.

The following chart shows the FY 20 and FY 21 sequester-required TEACH Grant Program reductions as they apply to the 2019-2020 and 2020-2021 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

2019-2020

First disbursed prior to 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

2020-2021

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

First disbursed on or after October 1, 2020 and before October 1, 2021 (FY 21 Sequester)

$4,000

5.70%

$228.00

$3,772.00

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.