Impact of Sequestration on Title IV Student Aid Programs
March 12, 2013
IMPACT OF SEQUESTRATION ON TITLE IV STUDENT 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. On March 1, 2013, Congress failed to enact legislation to reduce the Federal deficit. As a result, certain loan fees paid by borrowers will be increased during the time the sequester is in effect which will affect the Net Amount of your disbursement as follows:
- For Direct Subsidized and Direct Unsubsidized Loans where the FIRST DISBURSEMENT of the loan is after the sequester takes effect, the current loan fee of 1 percent of the principal amount of a loan will increase. We presently anticipate that the rate will increase to approximately 1.051 percent.
- For Direct PLUS Loans for both parent and graduate and professional student borrowers where the FIRST DISBURSEMENT of the loan is after the sequester takes effect, the current loan fee of 4 percent will increase. We presently anticipate that the rate will increase to approximately 4.204 percent.
Please notes that all loans are currently being processed under the pre-sequester loan fees as advised by the Department of Education. As such, please be aware that this may impact the net amount of funds you receive where the FIRST DISBURSEMENT on your loan occurred after March 1, 2013 and you may be responsible for repaying the difference between the pre-March 1st and post-March 1st loan fees.
At this moment, we are awaiting further guidance from the Department of Education as to how to proceed with these changes and will provide more information as soon as it becomes available.
Students have the right to cancel all or part of their loan should they decide they no longer need to help pay for their educational costs. If you have any questions regarding canceling your loans, please contact the Office of Financial Aid at (805) 493-3115.