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APSCU Update - Sequestration

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The major issue in Congress for the remainder of the year is the looming deadline of January 1, 2013, when $1.2 trillion in cuts to defense and domestic spending begin to go into effect unless a deal is reached by Congress and the White House. The sequestration process seeks to curb $1.2 trillion in federal spending cuts over the next 10 years by enacting across the board cuts to most programs and is an "automatic" form of spending cutback. Generally, the law requires a cut somewhere between 7.8% to 8.4%, but it does exempt certain programs like Veterans Affairs programs, including VA benefits.

The law exempts Pell Grants from sequestration, but other student aid programs will be impacted. Specifically, Federal Work-Study, Supplemental Educational Opportunity Grants (SEOG), and Workforce Investment (WIA) state grants would be cut by a combined amount of $330 million. The table below reflects the CBO sequestration estimate of 7.8%:

PROGRAM

FY 2012 Omnibus Estimated FY 2013 Funding Cuts Under Sequestration
SEOG $734,599,000 $734,599,000 $57,299,000
Federal Work Study $976,682,000 $976,682,000 $76,181,000
Career and Technical
Education State
Grants (Perkins)
$1,123,030,000 $1,123,030,000 $87,596,000
Adult Basic and
Literacy Education
$594,993,000 $594,993,000 $46,409,000
TRIO $839,932,000 $839,932,000 $65,515,000
GEAR UP $302,244,000 $302,244,000 $23,575,000
Title I Grants
to LEAs
$14,516,468,000 $14,516,468,000 $1,140,085,000
IDEA State Grants $11,577,855,000 $11,577,855,000 $903,073,000
WIA State Grants $2,603,300,000 $2,603,300,000 $203,057,000
Strengthening Institutions $80,623,000 $80,623,000 $6,289,000
Hispanic Serving Institutions $100,432,000 $100,432,000 $7,834,000
Asian American and
Native American Pacific
Islander Serving Institutions
$3,199,000 $3,199,000 $250,000
Tribally Controlled
Colleges and Universities
$25,713,000 $25,713,000 $2,006,000
Predominately Black
Institutions
$9,262,000 $9,262,000 $722,000

Sequestration would also affect student loan origination fees. The Department of Education does not currently charge an origination fee on Consolidation Loans. Under sequestration, origination fees on Direct Loan program loans made during the sequestration period would be required to be increased by a uniform percentage amount. For instance, if the uniform percentage was 10%, it appears that origination fees would be increased from 1% to 1.1% on Subsidized Stafford Loans and Unsubsidized Stafford Loans, and from 4% to 4.4% on PLUS Loans.

The sequestration will go into effect on January 2, 2013 unless Congress and the President address this issue in the lame duck Congress.