Effects of Sequestration on Financial Aid & Tuition Assistance
On Friday, March 1, 2013, President Obama signed an order to implement sequestration.
While many specific details remain unknown, sequestration will impact federal student
aid programs and Department of Defense (DOD) tuition programs.
The Office of Financial Aid will update information related to sequestration as it
What Is Sequestration?
Sequestration is an across-the-board cutting mechanism that will impact most federal
government programs. It is designed specifically as a deficit reduction measure and
is scheduled to occur over 10 years, in order to achieve roughly $1 trillion in cuts
during that time. Sequestration went into effect Friday, March 1, 2013, and is scheduled
to impose additional cuts over the next 10 years. Many higher education programs
will be impacted by the reductions in federal spending.
How Will Student Financial Aid Be Affected?
- Federal Pell Grant Program: The Balanced Budget and Emergency Deficit Control Act of 1985, as amended (BBEDCA),
specifically exempts the Pell Grant Program from the effects of the sequester. Therefore,
both the 2012-2013 and 2013-2014 award year payment schedules will be unchanged under
- Direct Loan Program: The sequester does not change the annual or aggregate loan limits for Direct Loan
Program loans, or the rules governing a studentâ€™s (or parentâ€™s) Direct Loan eligibility.
However, it specifies that certain loan fees paid by borrowers be increased during
the time the sequester is in effect (March 1, 2013), as follows:
- The loan fee for Direct Subsidized and Direct Unsubsidized Loans is increased from
1.0 percent to 1.051 percent. For example, the fee on a $5,500 loan will increase
by $2.80 - from $55.00 to $57.80.
- The loan fee for Direct PLUS Loans for parent borrowers is increased from 4.0 percent
to 4.204 percent. For example, the fee on a $10,000 PLUS Loan will increase by $20.40
- from $400.00 to $420.40.
How will DOD Tuition Assistance Be Affected?
- Tuition Assistance: DOD's Tuition Assistance program that helps active-duty service members pay for higher
education expenses have been suspended. This is due to deep cuts in defense spending
as a result of sequestration. The Army and Marine Corps, as well as the Air Force
and Coast Guard have suspended tuition assistance. Navy officials have not yet announced
whether its program will be suspended.
What About Veterans Benefits?
- Veteran Programs: All veteran programs, including the Post -9/11 GI Bill, are exempt from sequester
cuts in FY13.