Guidance on Sequester’s Impact on Federal Financial Aid Programs
March 04, 2013
On Friday, the U.S. Department of Education issued preliminary guidance on the impact of sequestration on Title IV financial aid programs.
Congress failed to enact legislation on Thursday to reduce the federal deficit. As a result, President Obama signed orders on March 1 to begin processing the mandatory across-the-board cuts. The Office of Management and Budget issued its required report to Congress on the details of the cuts. Specifics on how and when the cuts are to be carried out have yet to be released.
The Education Department’s guidance provides general information about how federal financial aid programs would be affected by the sequester. Agency officials signaled that the department is working to prepare additional updates for students and institutions as more information becomes available.
Under the sequester, funding for the Federal Work-Study and Federal Supplemental Educational Opportunity Grant programs would be reduced by $86 million for the 2013-2014 award year. Loan origination fees would increase immediately for new loans, by about 0.05 percentage points on subsidized and unsubsidized Stafford loans, from 1 percent to 1.05 percent, and by about 0.2 percentage points, from 4 percent to 4.2 percent, on Parent PLUS and Grad PLUS loans.
Additionally, the Iraq – Afghanistan Service Grant (IASG) and Teacher Education Assistance for College and Higher Education (TEACH) Grant programs would face reduced award amounts for any grant that is first disbursed during the time the sequester is in effect.
The White House also warned that sequester cuts would force research organizations like the National Institutes of Health and the National Science Foundation to make fewer research grant awards, which could result in the loss of thousands of jobs for scientists and students, reports the Chronicle of Higher Education.
The sequester would also cut more than $450 million from federal employment and training programs, which help the unemployed gain necessary skills to re-enter the work force. As a result, nearly two million fewer workers would have access to those services, which are often provided by community colleges, according to a statement from the National Skills Coalition.Financial aid programs for the neediest high school students would face deep cuts as well. College-preparatory programs like TRIO and Gear Up, which help prepare low-income and minority students for college, would be reduced by $42.8 million and $15.4 million, respectively, this year.
The Budget Control Act of 2011, which put into place the process of sequestration, specifically exempts the Pell Grant program from the mandatory cuts.
Related Links:
U.S. Department of Education Guidance on the Impact of Sequestration on the Title IV Student Financial Assistance Programs
https://ifap.ed.gov/eannouncements/030113ImpactofSequestrationonTitleIVFSAProg.html
The Chronicle of Higher Education
https://chronicle.com/article/Sequestration-Presents/137617/?cid=at&utm_source=at&utm_medium=en
Michelle Cormier Mott
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