Student Loans and Sequestration: More Devastation?

    The White House has been trumpeting the devastating effects of sequestration for weeks.  Everything from the military to Head Start to White House tours have been cited as victims.  However, some effects are less than disastrous.  For instance, student loans.  Here's a sample letter to prospective recipients of direct student loans from the Department of Education:

Dear <first name of borrower>:

Our records indicate that you either recently received or are scheduled to receive a Direct Loan from the U.S. Department of Education to help meet your educational expenses.  We want to bring to your attention some recent changes in the law that will affect your Direct Subsidized and/or Direct Unsubsidized Loan.  

On August 2, 2011, Congress passed the Budget Control Act of 2011, which put into place automatic federal budget cuts, known as the “sequester.”  While this law does not otherwise change the amount or terms or conditions of your Direct Loan, it does increase loan fees on Direct Subsidized and Direct Unsubsidized Loans first disbursed after March 1, 2013.  Specifically, the fee on your loan will increase from 1.0 percent of your loan amount to 1.051 percent.  For example, the fee on a $5,500 loan will increase by $2.80 from $55.00 to $57.80. 

If you accept the loan that has been or will be disbursed for you, you will be agreeing to this higher fee and there is nothing you need to do at this time.  However, if you wish to cancel or reduce your loan, you may do so by contacting your school’s financial aid office.  Requests for cancellation should be made as soon as possible.  If you have additional questions about your loan, please do not hesitate to contact your school’s financial aid office. 

We wish you good luck in your educational pursuits.

    While $2.80 might not seem like much, the Obama administration made quite a big deal back in the summer of 2012 over saving student loan recipients 25¢ a day, so perhaps the president can spin this as yet another tragic result of the heartless intransigence of Congress.