Impact of Sequestration on the Title IV
Student Financial Assistance Programs
On August 2, 2011, Congress passed the Budget Control Act (BCA) of 2011, which put into place an automatic process of “across-the-board” Federal budget cuts, known as the sequester, to take effect if Congress failed to enact legislation to reduce the Federal deficit. Since Congress did not change the law by March 1, 2013, these budget cuts will go into effect.
The sequestration will have an effect on student loans. Please see how it will affect you!
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.
If you have any questions concerning your loans and how it will affect you, please stop by the financial aid office for assistance.