Impact of Sequestration
Impact of Sequestration on Financial Aid 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 act by the March 1, 2013 deadline, these budget cuts are now in effect.
The Department has provided guidance for students and institutions about how the sequester will affect the Federal Financial Aid. They will be impacted as follows:
Pell Grant: No impact.
Federal Work Study & SEOG: Funding reduced for 2013-2014 school year
Federal Direct Loan Program:
- Subsidized and Unsubsidized Loans: Origination fee increase from 1 percent to 1.05 percent for loans with a first disbursement date of March 1, 2013 or later.
- PLUS Loans: Origination fee increase from 4 percent to 4.20 percent for loans with a first disbursement date of March 1, 2013 or later.
TEACH Grants: Reduced award amounts for all TEACH Grants with a first disbursement date of March 1, 2013 or later.
The Department of Education has instructed institutions to continue to disburse Direct Subsidized and Unsubsidized Loans with the original origination fees until further guidance is provided.