On May 17, Federal Student Aid (FSA) published guidance on how required fiscal year 2022 sequester-required changes will impact Title IV financial aid. Since they are the same changes to the statutory amounts as fiscal year 2021 there should be little disruption to your processes. The programs that are impacted are: Federal Direct Loans (origination fees), Iraq and Afghanistan Service Grants, and TEACH Grants.
Under the original law the Federal Direct Stafford and Federal Direct PLUS origination fees are 1% and 4%, respectively. Since October 1, 2020, the fees have increased to 1.057% and 4.228%. If the disbursement amount results in a number with more than two decimal points, it needs to be truncated (not rounded).
The statutory maximum annual Iraq and Afghanistan Service Grant for the 2021 – 2022 award year was $6,495 but has been reduced to $6,124.79, a reduction of 5.7%.
The statutory maximum annual TEACH Grant is $4,000, but for the 2021-2022 award year will be $3,772, also a reduction of 5.7%.
These changes are a result of the Budget Control Act of 2011, known as the Sequester Law, which amended the Balanced Budget and Emergency Deficit Control Act of 1985 making it permanent. In a nutshell, it allowed the government to operate at a deficit with the expectation that the President and Congress would find ways to trim the deficit by $1.5 trillion between fiscal years 2012 and 2021. But they did not, so now automatic cost reductions have kicked in as a result – cost reductions that will be in place until 2030!
What About Student Loan Interest Rates?
In other student loan news, as a result of the May 12th 10-Year Treasury Note auction, federal student loan interest rates will be higher for loans made on or after July 1, 2021 but before July 1, 2022. The new rates are as follows:
Undergraduate Direct Loans (subsidized and unsubsidized) 3.73%
Graduate Direct Loans 5.28%
Direct PLUS (Graduate and Parent) 6.28%