Because the Budget Control Act of 2011 (the sequester law) remains in effect, this announcement provides information regarding sequester-required increases to Direct Loan fees and sequester-required reductions in TEACH Grant award amounts. The sequester requirements apply to loans and grant awards where the first disbursement is on or after Oct. 1, 2025, and before Oct. 1, 2026 (FY 26 Sequester). For FY 26, the sequester-required changes remain unchanged from FY 25.
The sequester increases the loan fees charged to Direct Loan borrowers for Direct Subsidized/Direct Unsubsidized and Direct PLUS Loans from their statutory rates of 1 percent and 4 percent, respectively.
The FY 26 sequester fees are the same as the FY 25 sequester fees. This means for all loans where the first disbursement is made on or after Oct. 1, 2020, and before Oct. 1, 2026, the loan fees are as follows:
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1.057% for Direct Subsidized Loans and for Direct Unsubsidized Loans. As an example, the loan fee on a $5,500 loan would be $58.13.
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4.228% for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers). As an example, the loan fee on a $10,000 loan would be $422.80.
Loan fee calculations resulting in more than two decimal places must be truncated (not rounded) to two digits after the decimal point (cents).
Note: Institutions may now begin submitting Direct Loan origination records to the COD System where the first disbursement will be on or after Oct. 1, 2025, using the loan fees provided in this announcement.
The terms of the sequester require a reduction in the statutory award amounts for TEACH Grants.
The FY 26 sequester percentage reduction is the same as the FY 25 sequester reduction. Therefore, the statutory award amount for all TEACH Grant awards where the first disbursement is on or after Oct. 1, 2020, and before Oct. 1, 2026, must be reduced by 5.70%, as shown below:
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5.70% reduction from the TEACH Grant statutory maximum award amount of $4,000. This is a dollar reduction of $228, resulting in an adjusted maximum award amount of $3,772.
If you have questions about this announcement, contact the FSA Partner and School Relations Center at 1-800-848-0978. Starting May 5, 2025, the contact center will be open from 10 a.m. to 6 p.m. Eastern time, Monday through Friday. You may also email CODSupport@ed.gov.