NASFAA, Education Finance Council Write to ED Regarding TEACH Grants Being Converted Into Loans

By Joelle Fredman, NASFAA Staff Reporter

NASFAA, alongside the Education Finance Council (EFC), sent a letter to Education Secretary Betsy DeVos Thursday urging her to make changes to the process that has caused borrowers in the Teacher Education Assistance for College and Higher Education (TEACH) Grant program to have their grants converted into loans without the ability to prove they were meeting program requirements.  

An internal study by the Department of Education (ED) released earlier this year, first reported by NPR, revealed that almost two-thirds of TEACH Grant recipients (63 percent) who began their service requirement prior to July 2014 had these grants converted into unsubsidized loans.

According to the study, part of the reason for this was a lack of understanding of the service requirements tied to the program, as 32 percent of TEACH Grant recipients who had their grants converted into loans said they did not understand these requirements, and 35 percent said they were somewhat or not informed of the requirements when obtaining their first grant. Additionally, nearly another 1 in 5 said they did not know about the annual certification process, 13 percent said they faced challenges with the certification process, and 9 percent said they forgot about the annual certification requirement.

In the letter, NASFAA and EFC asked DeVos to initiate changes “without delay” and separately from the series of negotiated rulemaking sessions set to begin in January, which will address the TEACH Grant program, among many other higher education topics.   

“While we appreciate the Department’s efforts to review the program as part of its negotiated rulemaking process, there are immediate actions we urge you to take to improve the administration of the TEACH Grant program to benefit our nation’s educators,” NASFAA and EFC wrote.

The groups urged ED to implement a series of changes to current program processes to assist borrowers in danger of having their grants converted into loans, all of which are “within the Department’s current statutory authority to implement and should not impact or modify the existing standards for program qualification.”

NASFAA and EFC recommended that ED issue guidance that would allow for a grace period for recipients to complete any required paperwork or fix errors in their documents if their grant is set to be converted into a loan. Under this system, they wrote that a servicer should contact recipients to notify them that their grants are set to be converted into loans in 30 days if they take no action. For those who need to correct verification errors, the group suggested a grace period of 60 days.    

 “During this period, the grant would not yet convert to a loan and the individual would be provided guidance and information on how to resolve any paperwork or documentation issues,” the letter explained. “The Department should communicate the availability of this grace period to all program participants and ensure that sufficient resources are deployed to manage this process in an efficient and transparent manner.”

The groups added that if during this period a recipient is found to no longer meet TEACH Grant program requirements, he or she should receive counseling facilitated by ED to prepare for the conservation of the grant into a loan, including information on loan forgiveness programs such as Public Service Loan Forgiveness (PSLF).   

The groups also urged ED to establish an appeals process for those who believe their grants were wrongly converted into loans. If the recipient is found to be correct and the loan is converted back into a grant, the groups wrote that “it should be done in such a way as to prevent the recipient from being taxed on a ‘forgiven’ loan.”

In addition to assisting borrowers, NASFAA and the EFC also asked that ED, in order to “ease the administrative burden for those certifying an individual’s service,” allow for service certifications to be submitted electronically with an e-form signature, whereas currently servicers must submit forms on paper with a wet signature.  


Publication Date: 11/2/2018

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