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Sequestration and Financial Aid

Sequestration and Financial Aid
March 4, 2013

A few hours before President Obama signed an order officially instating across-the-board spending cuts Friday night, the U.S. Education Department issued guidance on what the automatic budget cuts would mean for federal financial aid programs. The Pell Grant is exempt from the mandatory cuts in 2013. But loan origination fees will 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. The first disbursements of some grants — the TEACH Grant and Iraq-Afghanistan Service Grant — are also subject to cuts.

Funding will be reduced for the federal work-study program and for the Supplemental Educational Opportunity Grant beginning in the fall if sequestration remains in effect.

 

 

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