Did you update your loan origination fees yet?
Before you send your next batch of disbursements, make sure your financial aid management system is up to date with the new loan origination fees that went into effect on October 1st or they’ll bomb out on the Common Origination and Disbursement website. If your fees still need to be adjusted, go ahead and check out this guidance in this Electronic Announcement to learn how to fix it.
Because of the Budget Control Act of 2011, which was enacted to prevent the United States from breaching the “debt-ceiling” sequestered funds from federal agencies to keep the budget in balance. When the federal government begins their federal fiscal year each October 1st, origination fees on direct loans change as a result. The sequestration law isn’t set to expire until 2021. Hey wait, that’s next year! OMG can’t WAIT for this to be over.
Beginning on October 1, 2020 the loan origination fees have gone down slightly. For Federal Direct Loans where the first disbursement is made on or after October 1, 2020, and before October 1, 2021 the origination fees are as follows:
The loan fee for Direct Subsidized Loans and for Direct Unsubsidized Loans is 1.057%. For example, the fee on a $5,500 loan will be $58.13.
The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is 4.228%. For example, the fee on a $10,000 PLUS Loan will be $422.80.
Sequestration doesn’t just impact Federal Direct Loans, it impacts other aid programs such as the Iraq – Afghanistan Service Grant Program and TEACH Grant Program.
Sequestration requires aid in both programs to be reduce by a pre-determined percentage from the amount authorized in the statutes. Fortunately, the reductions in the current year are slightly less than in prior years. The Iraq-Afghanistan Service Grant Program Award was reduced by 5.7% for FY 21 resulting in an award of 5983.34. The TEACH Grant was also reduced by 5.7% resulting in a maximum award of $3772.00.
For more information about these programs, check out this Electronic Announcement from Federal Student Aid.