Sequester will affect financial aid for the coming academic year

The across-the-board federal spending cuts known as the sequester come at a bad time for Maryland colleges.

Many usually send out financial award letters this month, but they still don't have all the details on how much federal funding they will receive for certain aid programs. And even if the Department of Education gives them firm numbers before letters go out, school officials say, Congress and the White House could reach a later deal that would involve further aid changes.

"For aid officers, it's extremely frustrating to have change at the last minute," said David Horne, director of financial aid at Towson University.

Incoming freshmen typically have until May 1 to decide where to attend college in the fall, and financial aid packages are often the deciding factor. Schools want to get letters out earlier rather than later to avoid seeing high school seniors select another college that made an aid offer first. Some schools say they will add caveats in award letters, warning students that aid is subject to federal funding and could change.

Towson's award letters usually contain such a disclaimer.

"We are going to make sure those disclosures are a little bit stronger than they were before," Horne said.

For families, the sequester is not expected to bring a significant difference in aid for the coming academic year.

"As things stand now, there is no drastic, painful thing to worry about," Horne said. "But that's today."

The Education Department continues to update schools on the sequester's impact. As of last week, here are the expected changes for the 2013-2014 academic year:

Loan origination fees The fee that students and parents pay to take out a federal loan went up as of March 1.

For students, the fee rose from 1 percent of the principal to 1.051 percent for a Stafford loan. Parents and graduate students taking out a PLUS loan now will pay 4.204 percent instead of 4 percent.

According to the Department of Education, these increases mean students will pay $2.80 more, or $57.80, on a Stafford loan of $5,500, the maximum for a freshman. PLUS borrowers will pay an extra $20.40, or $420.40, on a $10,000 loan.

"It's a small difference, but it's a small difference in the wrong direction," said Mark Kantrowitz, publisher of, an online provider of financial aid information.

Military tuition assistance Branches of the military had been paying up to $4,500 a year in tuition assistance to service members enrolled in college-level classes. The Army, Marine Corps and Air Force suspended the program this month for those filing new requests for tuition assistance. The Navy is still reviewing its program.

Grants Pell Grants go to the neediest students. The grants are protected from the sequester for the coming academic year, when the maximum grant will be $5,645. But cuts to Pell Grants could come in later years.

The Teacher Education Assistance For College and Higher Education Grant will be cut by 12.6 percent for a grant that has its first disbursement from March 1 through the end of September. Grants generally are disbursed multiple times during the school year.

The grant, worth up to $4,000 a year, goes to students who promise to teach certain needed subjects for at least four years in low-income areas. The sequester will reduce the maximum annual award by $504, according to the Education Department.

Iraq and Afghanistan Service Grants will be cut by 28 percent for students receiving their first disbursement from March through Sept. 30, the department said. The grants are given to students whose parents or guardians died while serving in the military in Iraq or Afghanistan.

The sequester will lower the maximum service grant by $1,581, to $4,064.

Campus-based aid This assistance is made up of the federal work-study program and the supplemental education opportunity grant that are awarded at the discretion of the school.

Last month, Education Secretary Arne Duncan told Congress the sequester would slash $49 million from work-study, eliminating 33,000 awards for campus-based student jobs. The sequester also would reduce supplemental grants for the neediest students by $37 million, affecting 71,000 students, Duncan said.

The Education Department hasn't told individual schools how much of this aid they stand to lose, if any. But the National Association of Student Financial Aid Administrators calculated the amount schools would have received for the coming academic year with and without the sequester. According to NASFAA, some Maryland schools will receive the same amount they would have without the sequester, while others stand to lose tens of thousands of dollars.

The University of Maryland, Baltimore, for instance, could see a drop of nearly $104,000 in federal work-study dollars, bringing its total for the coming academic year to $959,945, according to NASFAA.

That's a loss of about 17 positions, or 5 percent of the school's work-study jobs, said Patricia Scott, assistant vice president of student financial assistance and education at the graduate professional school.

That's a significant loss, Scott said, and the school is grappling with how to minimize the impact on student employees and the departments that rely on them. The school, though, is committed to maintaining staffing levels at its community service program in which postgraduate students provide dental care to Baltimore families, she said.

NASFAA estimated that the Johns Hopkins University would receive $1.68 million in federal work-study dollars, a reduction of $84,295.

Schools must partially match federal work-study dollars, so along with money from Hopkins, the sequester cuts affect about 50 student jobs at the university, where 13 percent of the undergraduates receive work-study, said Tom McDermott, director of student financial services.

"Our goal is to minimize the impact on the student," McDermott said.

For example, Hopkins likely will keep work-study awards at the same level and have university departments contribute more to the program, he said.

Supplemental education opportunity grants are awarded to Pell Grant recipients first. The University of Maryland, University College in Adelphi is projected to receive $728,011 in supplemental grant money, or $88,070 less than it would have without the sequester.

But Cheryl Storie, associate vice president of financial aid, said the reduction is not as bad as it seems. The school in recent years has seen its share of grant money go up as more Pell Grant-eligible students have enrolled. So, even with the sequester, she said, the school expects to receive about $173,550 more in grant aid than in the current school year.

The University of Maryland, College Park will see its federal grants and work-study funding reduced by a combined $44,903, NASFAA estimated.

Sarah Bauder, assistant vice president for financial aid and enrollment services, said the school reached out to former students once sequestration hit and hopes to make up the loss in aid through alumni donations.

Award letters from the College Park campus go out this month, and Bauder said students can count on whatever aid is offered — even if sequestration changes things.

"What you are awarded, you will get," she said.

Justin Draeger, president of NASFAA, advises parents and students to review award letters for language that suggests that aid might change. If aid might be reduced, families should contact the school to find out how any funding gap would be made up later if necessary, he said.

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