On August 2, 2011, Congress passed the Budget Control Act (BCA) of 2011, which put into place an automatic process of “across-the-board” Federal budget cuts, known as the sequester, to take effect if Congress failed to enact legislation to reduce the Federal deficit.
The sequester does not change the annual or aggregate loan limits for Direct Loan Program loans, or the rules governing a student’s Direct Loan eligibility. However, the Balanced Budget and Emergency Deficit
Control Act (BBEDCA) did specify that certain loan fees paid by borrowers be increased during the time the sequester is in effect, as follows:
For Direct Unsubsidized Loans where the first disbursement of the loan is after the sequester takes effect, the current loan fee of 1 percent of the principal amount of a loan will increase to 1.051 percent. With such an increase, for example, the fee on a loan for $10,000 would increase from $100.00 to $105.10, an increase of $5.10.
For Direct Graduate PLUS Loans for graduate and professional student borrowers where the first disbursement of the loan is after the sequester takes effect, the current loan fee of 4 percent will increase to 4.204 percent. With such an increase, for example, the fee on a $10,000 Direct PLUS loan would increase from $400.00 to $420.40, an increase of $20.40.
The Department of Education (DOE) began sending email (and where necessary, paper) notifications on March 9, 2013 to student borrowers who have loans with a first disbursement after March 1, 2013 explaining the fee increase and reminding students of their option to cancel all or part of the loan.
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