Sequester Will Affect Financial Aid For the Coming Academic Year

Tim Goral's picture

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.

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.

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