Sequester will affect financial aid for the coming academic year

Many colleges will send out award letters this month

March 17, 2013|By Eileen Ambrose, The Baltimore Sun

The across-the-board federal spending cuts known as the sequester come at a bad time for Maryland colleges.

Many usually send out financial award letters this month, but they still don't have all the details on how much federal funding they will receive for certain aid programs. And even if the Department of Education gives them firm numbers before letters go out, school officials say, Congress and the White House could reach a later deal that would involve further aid changes.

"For aid officers, it's extremely frustrating to have change at the last minute," said David Horne, director of financial aid at Towson University.

Incoming freshmen typically have until May 1 to decide where to attend college in the fall, and financial aid packages are often the deciding factor. Schools want to get letters out earlier rather than later to avoid seeing high school seniors select another college that made an aid offer first. Some schools say they will add caveats in award letters, warning students that aid is subject to federal funding and could change.

Towson's award letters usually contain such a disclaimer.

"We are going to make sure those disclosures are a little bit stronger than they were before," Horne said.

For families, the sequester is not expected to bring a significant difference in aid for the coming academic year.

"As things stand now, there is no drastic, painful thing to worry about," Horne said. "But that's today."

The Education Department continues to update schools on the sequester's impact. As of last week, here are the expected changes for the 2013-2014 academic year:

Loan origination fees The fee that students and parents pay to take out a federal loan went up as of March 1.

For students, the fee rose from 1 percent of the principal to 1.051 percent for a Stafford loan. Parents and graduate students taking out a PLUS loan now will pay 4.204 percent instead of 4 percent.

According to the Department of Education, these increases mean students will pay $2.80 more, or $57.80, on a Stafford loan of $5,500, the maximum for a freshman. PLUS borrowers will pay an extra $20.40, or $420.40, on a $10,000 loan.

"It's a small difference, but it's a small difference in the wrong direction," said Mark Kantrowitz, publisher of, an online provider of financial aid information.

Military tuition assistance Branches of the military had been paying up to $4,500 a year in tuition assistance to service members enrolled in college-level classes. The Army, Marine Corps and Air Force suspended the program this month for those filing new requests for tuition assistance. The Navy is still reviewing its program.

Grants Pell Grants go to the neediest students. The grants are protected from the sequester for the coming academic year, when the maximum grant will be $5,645. But cuts to Pell Grants could come in later years.

The Teacher Education Assistance For College and Higher Education Grant will be cut by 12.6 percent for a grant that has its first disbursement from March 1 through the end of September. Grants generally are disbursed multiple times during the school year.

The grant, worth up to $4,000 a year, goes to students who promise to teach certain needed subjects for at least four years in low-income areas. The sequester will reduce the maximum annual award by $504, according to the Education Department.

Iraq and Afghanistan Service Grants will be cut by 28 percent for students receiving their first disbursement from March through Sept. 30, the department said. The grants are given to students whose parents or guardians died while serving in the military in Iraq or Afghanistan.

The sequester will lower the maximum service grant by $1,581, to $4,064.

Campus-based aid This assistance is made up of the federal work-study program and the supplemental education opportunity grant that are awarded at the discretion of the school.

Last month, Education Secretary Arne Duncan told Congress the sequester would slash $49 million from work-study, eliminating 33,000 awards for campus-based student jobs. The sequester also would reduce supplemental grants for the neediest students by $37 million, affecting 71,000 students, Duncan said.

The Education Department hasn't told individual schools how much of this aid they stand to lose, if any. But the National Association of Student Financial Aid Administrators calculated the amount schools would have received for the coming academic year with and without the sequester. According to NASFAA, some Maryland schools will receive the same amount they would have without the sequester, while others stand to lose tens of thousands of dollars.

The University of Maryland, Baltimore, for instance, could see a drop of nearly $104,000 in federal work-study dollars, bringing its total for the coming academic year to $959,945, according to NASFAA.

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