TEACH Grant: A Trojan Horse Of Debt

By Justin Draeger, NASFAA President & CEO

The data is in, and lest there be any doubt, the federal government is pulling a bait-and-switch on aspiring teachers, the likes of which might make even the most unscrupulous lender blush.

For future teachers with good grades who commit to instructing high-need subjects in low-income schools, the federal government offers up to $4,000 a year, for up to four years (two years for master’s degree students), through the Teacher Education Assistance for College and Higher Education (TEACH) grant program.

That is, unless they fail to teach as a full-time teacher for a total of four years after finishing their program.

When a recipient doesn’t meet the teaching service requirement the funding immediately converts to an unsubsidized loan, with interest calculated from the time the award was issued.

Sudden, unplanned-for debt is the likely outcome for as many as 75 percent of current TEACH recipients, according to data released by the U.S. Department of Education. Since the TEACH program’s inception in 2007, nearly 36,000 students (40 percent of all recipients) have already failed to meet the requirements needed for the funds to remain a grant rather than an interest-bearing loan, according to a report from the think tank Third Way.

To students who don’t fully understand the service requirements, these conversions surely come as a shock – with a damaging impact on their finances. But to some members of the financial aid community, these outcomes are all too familiar. The program is even known colloquially as a “groan” (i.e., grant+loan) in higher education circles, for its frequent, frustrating grant-to-loan conversion.

The Obama administration has suggested changes to TEACH for the past several years as part of the president’s annual budget request. We expect the president to again propose program changes – perhaps by limiting recipients to only those in their junior and senior years, for instance, when a switch in career intentions (and thus, an unanticipated loan conversion) is unlikely.

That would be a step in the right direction. But without a major overhaul, the overly restrictive program remains a wolf in sheep’s clothing for far too many students.

Far better options would be to simply provide needy students with gift aid, period, without punitive grant-to-loan conversions. In addition, more study is needed to understand the effects of other incentive programs like Public Service Loan Forgiveness that help borrowers in public-sector jobs.

Barring major changes, Congress, at the very least, should restructure the program to call it what it is: a loan that, under a robust combination of aptitude, foresight, dedication, and luck, may be forgiven by the federal government.

Originally published on 02/03/2015 by The Hill.

 

Publication Date: 2/4/2015


Susan B | 2/7/2015 10:19:30 AM

I was given very good advice from a FA Counselor when my daughter started school - and that was not to take the loan...I'm very glad we followed his advice as you never know what the future holds - all good intentions still don't pay the bills if she doesn't end up with a job that meets the requirements.

Janet N | 2/6/2015 1:37:06 PM

I'm really glad that our school decided not to even participate in the TEACH grant from the beginning. Thank you Justin! for vindicating our decision with this research.

Stephen A | 2/6/2015 12:39:57 PM

The GR-OAN!!!

William M | 2/5/2015 3:10:57 PM

If I had created such a program, and I gave it the name this program has been given, I would have been sued by the attorney generals of all 50 states, as well as the FTC and the Consumer Protection Board.

Ted M | 2/4/2015 6:17:53 PM

Students do NOT read. Here lies the problem. Limit the grant to those in the STEM focused programs.

Christopher F | 2/4/2015 3:18:30 PM

In the same vein, borrowers who took out Perkins loans and are seeking teacher forgiveness of those loans need to know that all progress gets erased if they consolidate.

Anthony M | 2/4/2015 2:21:35 PM

This is the data I've been requesting from ED for some time now. Even without it, I was able to sway two institutions away from participating in this program due to its insidious nature. Would love to see this program eliminated and reforms enacted for current participants (victims) before it saddles more students with unmanageable debt.

Diane F | 2/4/2015 2:12:48 PM

When the TEACH Grant program was first introduced, I met with the Dean of the College of Education, as well as other ED administrators. I explained the program, it's ramifications and benefits, and recommended that we limit the program to juniors and seniors. It didn't take long for the Dean to determine that restricting the program to juniors and seniors who had been admitted to the Teacher Education degree was the most prudent decision we could make. I had numerous "conversations" with the parents of freshmen trying to explain the wisdom of our decision - usually to no avail. However, I sleep much better at night knowing that our decision has kept many, many students from the nightmare of this grant converting to a loan.

Sheree B | 2/4/2015 1:7:01 PM

As much as I like the closing statement, I disagree that this is a surprise or unplanned. From the beginning, the Congressional Budget Office estimated that 80% would fail to complete the teaching requirement. If anything, the 40% failure rate is a huge and surprising improvement on that. I found it strange that a program with an expected failure rate so high would even be called a grant. It is really a forgivable loan, as you stated.

Just a quick correction: The TEACH Grant was a part of 2007 legislation, but the first year it was available to students was 2008-2009.

Daniel S | 2/4/2015 11:58:18 AM

THANK YOU JUSTIN!! ..Let the facts speak for themselves. Putting more money into Perkins Loan and ending TEACH is the way to go.

Linda W | 2/4/2015 10:34:30 AM

I saw this coming and intentionally decided not to have my school participate in this program. Thank you Justin for the write up.

Judith C | 2/4/2015 10:13:48 AM

Not news. The original proposal for this program is printed in the Federal Register and it clearly states that there was an 80% conversion expectation. It was designed for windfall profits.

Kenneth F | 2/4/2015 9:37:18 AM

Bravo, Justin. This is spot-on. Missing from this piece is that such "Sudden, un-planned for debt..." inherent of this loan program (it is not a grant program, after all) is that the debt is thrust upon some of the most underpaid professionals in our society, which is rather unconscionable in my opinion. Thank you for shining a light on this problem.

Lauren G | 2/4/2015 9:18:26 AM

Sorry but- so unfair to refer to the program as "a wolf in sheep's clothing," as if it's intentionally deceptive. The 4-yr expectation/stipulation is very clear on the front end. I've had three friends go through this program successfully and all three were very appreciative, and all are still teaching at the same schools.

Matthew S | 2/4/2015 9:14:22 AM

For anyone with experience in financial aid, these results come as no surprise. It is for this very reason that I am happy that I was able to convince my superiors to opt out of the program.

Ralph B | 2/4/2015 8:38:41 AM

Justin, Well said, especially your closing statement!

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