Sequester Impacts on Financial Aid | 03.06.13

Posted in Federal Work-Study, Financial Aid, News, PLUS Loans, Stafford Loan By Student Loan Network Staff

As you may have heard by now, the recent sequestration has huge implications for education across the board, and Higher Ed. is no exception. The budget cuts that took effect on March 1, 2013 will affect most types of federal student aid, including Federal Work Study (FWS), Federal Supplemental Education Opportunity Grants (FSEOG), Service Grants, TEACH Grants, and the Direct Student Loan Program. Fortunately for many students, Pell Grants were specifically exempt from the budget cuts.

Here’s a brief overview of what to expect from student aid programs going forward:

Federal Work Study and FSEOG Programs

Budget cuts of $86 million do not only mean a reduction in the FSEOG program, it could also mean a loss of on-campus employment for as many as 33,000 students if colleges do not step in with funding. While these campus-based programs are funded through the remainder of this year, program cuts will take affect for the 2013-2014 academic year.

Iraq – Afghanistan Service and TEACH Grants

For both of these federal grants, funding has been reduced for any award first disbursed during the sequester. It should have no impact on grants first disbursed before the cuts took effect.

Direct Student Loans

The biggest impact of the sequester on Direct Loan borrowers is the fee increase. For federal loans first disbursed after the sequester takes effect, loan fees will increase fractions of a percent, depending on the type of loan.

Luckily, PLUS and Stafford Loan limits, and federal loan eligibility will not be affected by the budget cuts. Students and parents may still borrow the same amounts per year, and availability of the aid should remain consistent.

For more information on these cuts, read Federal Student Aid’s e-announcement on the Impact of the Sequestration.

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One Response to “Sequester Impacts on Financial Aid”

  1. Darrel Gordon says on March 19, 2013 at 11:25 am:

    The loans needs to be a reverse scholarship. For every A or B you earn you don’t have to pay it back.

    You will most certainly pay it back just by having a job/career, paying taxes, and using your degree to serve society.

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