2012-2013 Financial Aid Updates
This page contains information pertaining to changes made to the Title IV student aid programs by the recently enacted Consolidated Appropriations Act, 2012 and Budget Control Act of 2011. We've also included changes occurring in the verification process, all of which may affect your financial aid eligibility or application process for the 2012-2013 award year.
Consolidated Appropriations Act, 2012:
- Minimum Federal Pell Grant Award and Maximum EFC - Changed the minimum Federal Pell Grant award calculation. Specifically, the new law establishes the minimum Federal Pell Grant award for a student at ten percent of the maximum award amount for the award year. In addition, it eliminates the provision that permitted a student who would be eligible to receive a Federal Pell Grant of between five and ten percent of the award year's maximum award to receive an award of ten percent of the maximum award. Therefore, beginning with the 2012-2013 award year, students will not receive a Federal Pell Grant if they are not eligible for at least ten percent of the maximum award for the academic year. This change in the calculation of the minimum award amount results in 4995 being the maximum EFC enabling a student to be eligible to receive a 2012-2013 Federal Pell Grant.
- Federal Pell Grant Duration of Eligibility - Reduces the duration of a student's eligibility to receive a Federal Pell Grant from 18 semesters (or its equivalent) to 12 semesters (or its equivalent). This provision applies to all Federal Pell Grant eligible students effective with the 2012-13 award year. The calculation of the duration of a student's eligibility will include all years of the student's receipt of Federal Pell Grant funding. This change in the duration of students' Federal Pell Grant eligibility is not limited only to students who received their first Federal Pell Grant on or after the 2008-2009 award year, as the HEA previously provided when the duration of eligibility was 18 semesters. The equivalency will be calculated by adding together each of the annual percentages of a student's scheduled award that was actually disbursed to the student. For example, a student whose 2011-2012 Federal Pell Grant scheduled award was $5,550, but who only received $2,775 because she was only enrolled for one semester, will have used 50% of that award year's scheduled award. Similarly, a student who was enrolled three-quarter time for the entire award year would have used 75% of his scheduled award.
- Grace Period Interest Subsidy - Temporarily eliminates the interest subsidy provided on Direct Subsidized Loans during the six month grace period provided to students when they are no longer enrolled on at least a half-time basis. This change will be effective for new Direct Stafford Loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014.
Budget Control Act, 2011
- Interest Subsidy for Graduate Students: The Budget Control Act eliminates the in-school interest subsidy for graduate and professional students beginning July 1, 2012, a provision that would save $18.1 billion from FY 2012-21, $8.2 billion of which is from FY 2012-16, according to the Congressional Budget Office (CBO). The legislative language clarifies that the subsidy elimination does not apply to students taking preparatory coursework and those in programs leading to teacher certification where the credential is awarded by the state instead of the institution.
- Direct Loan Repayment Incentives – The Budget Control Act eliminates repayment incentives. The incentive for using automatic debit repayment provided borrowers with a 0.25 interest rate reduction and the up-front interest rebate incentive was equal to 0.5 percent of the loan amount and applied toward the 1 percent loan origination fee. For PLUS loans, the up-front interest rebate was 1.5 percent applied toward the 4 percent origination fee. Borrowers were able to keep the rebate if they made their first 12 payments on time. The language prohibits the Department of Education from authorizing or providing repayment incentives on new loans disbursed on or after July 1, 2012, except that an interest rate reduction may be provided to a borrower who agrees to automatically debited electronic payments. The CBO projects the elimination of the origination fee rebates would yield $3.6 billion from FY 2012-21.
Verification - Link It!
- The 2012-13 Free Application for Federal Student Aid (FAFSA) was revised to make the form easier to complete and to improve the accuracy of the information provided on the form.
We encourage applicants to choose the Link to IRS feature on the 2012-13 FAFSA. The IRS link is now available. Student and parent 2011 federal tax returns must be filed and available on the IRS website before using this feature. By selecting Link to IRS, tax-related information is automatically transferred to the FAFSA.
We highly recommend filing 2011 federal tax returns and 2012-13 FAFSA electronically. Electronically filed tax return information will be available online from the IRS site in 1-2 weeks after the return has been filed. Data from paper tax returns will be available in 6-8 weeks.
Before any personal information is displayed using the data retrieval tool, applicants will need to authenticate their identity. Tax data will be presented and the applicant will have the option to "Transfer" the tax information to the FAFSA. There is also an option to NOT transfer the data to the FAFSA. Successfully transferred data will have a notation - "Transferred from the IRS."
Applicants who estimated income on the FAFSA must go back to fafsa.gov, select "Make Corrections to a Processed FAFSA," and use the Link to IRS feature once the tax returns are filed.
Students selected for verification who do not choose the IRS Data Retrieval Process or are unable to utilize the process must submit a signed 2011 federal IRS tax return transcript. Additionally, changes made to IRS data transferred to the FAFSA will compromise the data and require submission of a 2011 federal IRS tax transcript if selected for verification.
Are You Eligible to Use the IRS Data Retrieval Tool? … For more information visit the Verification Requirements page.
This page will be updated as we receive updates from the Department of Education.
Page maintained by SSEM
Last updated or reviewed on 2/9/12