Sequestration Could Deal Major Blow to Federal Student Aid

Though Federal Pell Grants remain safe from sequestration, the mandated across-the-board cuts would dramatically reduce the Department of Education (ED) budget and jeopardize access to federal student aid, according to a report by the Office of Management and Budget (OMB) released last week.

The OMB report details the impact of sequestration on all defense and nondefense discretionary programs, including federal student financial aid programs. Barring any congressional action to stop sequestration, the automatic cuts will go into effect beginning Jan. 2, 2013. 

The mandate would cut nondefense discretionary programs (where funding is determined annually by Congress) by 8.2 percent. Nondefense mandatory programs (where funding levels are determined by existing law) would see a 7.6 percent across-the-board cut. ED would receive a total fiscal year (FY) 2013 cut of $4.113 billion. 

Though the Budget Control Act of 2011 protects the Pell Grant program from any across-the-board cuts for FY 2013, sequestration is a multi-year process and does not protect Pell beyond the first year. 

Sequestration will also require a 7.6 percent increase to federal student loan origination fees. This would increase the current 1 percent origination fee for undergraduate Stafford loans to 1.076 percent. For PLUS loans, the current 4 percent fee would increase to 4.304 percent.

Other discretionary student aid programs, such as Federal Work Study, the Supplemental Educational Opportunity Grant and college access programs like TRIO and GEAR UP, would see an 8.2 percent cut.  Such deep cuts could affect millions of students.

The National Science Foundation, National Institutes of Health and National Endowment for Humanities would also see the 7.6 percent mandatory and 8.2 percent discretionary cuts.

As Congress prepares to adjourn for the fall campaign season, any action to prevent sequestration will have to wait until after the election. Much of what happens—and when it happens—will depend on election results. Still, members from both parties have expressed interest in at least delaying sequestration to give Congress additional time to consider alternatives. Congress has until Dec. 31 to eliminate, alter or delay sequestration cuts.

NASFAA is working within a broad coalition of education advocates to prevent sequestration. To advocate your lawmakers against sequestration and stop the education spending cuts, sign the Committee for Education Funding’s petition. 


Publication Date: 9/18/2012

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