FY 21 SEQUESTER-REQUIRED CHANGES TO THE TITLE IV STUDENT AID PROGRAMS

Beginning on October 1, 2020 origination fees on Direct Loans including Direct PLUS Loans, are changing. Iraq-Afghanistan Service Grants (IASG) and TEACH Grant awards are also changing. These changes will apply to all loans, IASG and TEACH Grants where a first disbursement is made on or after October 1, 2020, so be sure to update your financial aid system to account for them.

The origination fees have been changing every October 1st because of the Budget Control Act of 2011, known as the sequester law. For Federal Fiscal Year 21 (October 1, 2020 – September 30, 2021):
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.

An Iraq-Afghanistan Service Grant where the first disbursement is on or after October 1, 2020 and before October 1, 2021 requires a reduction of 5.7 percent from the award amount for which the student would otherwise have been eligible.

A TEACH Grant where the first disbursement is on or after October 1, 2020 and before October 1, 2021 requires a reduction of 5.7 percent from the award amount for which the student would otherwise have been eligible.

For more information about the sequester changes see this electronic announcement from FSA.

NEW INTEREST RATES

Interest rates are going down for new Federal Direct Student Loans beginning on July 1, 2020.
Interest rates for Direct Loans are based on a formula whereby the rates are indexed to the 10-Year Treasury Note plus an “add-on” percentage. This year’s auction of the 10-year Treasury note resulted in a “high yield” of 0.700%, a huge decrease over last year’s high yield of 2.479%. As a result, borrowers with new loans for the 2020-2021 award year will be paying much less in finance charges over the life of their loan. You can read all about it here in a recent electronic announcement from FSA. Don’t forget to update your borrower communications and consumer information!

Interest Rates for Direct Loans First Disbursed Between July 1, 2020, and June 30, 2021

Undergraduate Students

  • Direct Subsidized Loan 2.75%
  • Direct Unsubsidized Loans 2.75%
  • Direct PLUS Loans 5.30%

Graduate & Professional Students

  • Direct Unsubsidized Loans 4.30%
  • Direct PLUS Loans 5.30%

 

2018-2019 DIRECT LOAN INTEREST RATES GOING UP

Interest rates are going up again for new Federal Direct Student Loans beginning on July 1, 2018.

Interest rates for Direct Loans are based on a formula whereby the rates are indexed to the 10-Year Treasury Note plus an “add-on” percentage. This year’s auction of the 10-year Treasury note resulted in a “high yield” of 2.995%, an increase over last year’s high yield of 2.400%. As a result, borrowers with new loans for the 2018-2019 award year will be paying more in finance charges over the life of their loan. You can read all about it here in a recent electronic announcement from FSA. Don’t forget to update your borrower communications and consumer information!

Interest Rates for Direct Loans First Disbursed Between July 1, 2018 and June 30, 2019

Undergraduate Students
Direct Subsidized Loan                5.05%
Direct Unsubsidized Loans           5.05%
Direct PLUS Loans                      7.60%

Graduate & Professional Students
Direct Unsubsidized Loans           6.60%
Direct PLUS Loans                      7.60%

For each loan type, the calculated interest rate may not exceed a maximum rate specified in the HEA. The maximum interest rates are 8.25% for Direct Subsidized Loans and Direct Unsubsidized Loans made to undergraduate students, 9.50% for Direct Unsubsidized Loans made to graduate and professional students, and 10.50% for Direct PLUS Loans made to parents of dependent undergraduate students or to graduate or professional students.