FY 26 Sequester-Required Changes to Title IV Programs: What Institutions Need to Know
On May 5, 2025, the U.S. Department of Education’s Federal Student Aid office issued an announcement (GENERAL-25-20) outlining the continued impact of the Budget Control Act of 2011 on Title IV programs for Fiscal Year 2026. As has been the case in recent years, the law requires specific changes to federal student aid disbursements—specifically, increased Direct Loan fees and reduced TEACH Grant award amounts.
What’s Staying the Same in FY 26?
The changes announced are consistent with those in FY 25, meaning there are no new increases or reductions. However, it remains critical for institutions to ensure compliance as these adjustments apply to all applicable disbursements made on or after October 1, 2025, and before October 1, 2026.
Direct Loan Fees
Under the sequester provisions:
Direct Subsidized and Unsubsidized Loans will carry a fee of 1.057%.
Example: A $5,500 loan will have a fee of $58.13.Direct PLUS Loans (for both parent and graduate/professional borrowers) will have a fee of 4.228%.
Example: A $10,000 loan will incur a fee of $422.80.
Important Note: Loan fees must be truncated to two decimal places—not rounded—when calculating the dollar amount.
Institutions may begin submitting Direct Loan origination records to the COD system for loans with first disbursements on or after October 1, 2025, using the above figures.
TEACH Grant Reductions
The statutory maximum award of $4,000 for TEACH Grants is subject to a 5.70% reduction, lowering the maximum award to $3,772. This applies to grants with first disbursements between October 1, 2025, and September 30, 2026.
Institutional Compliance and Support
These sequester adjustments are routine but require precise implementation in financial aid offices. Failure to apply the correct loan fees or grant reductions can lead to audit findings, compliance issues, and potential liabilities for institutions.
How JHSG Can Help
Navigating the complexities of Title IV programs—especially amid shifting regulatory landscapes—requires expertise and attention to detail. JHSG’s team of higher education consultants stands ready to support institutions with:
Financial aid compliance audits
Policy and procedure reviews
Title IV disbursement training and systems support
Strategic guidance on federal funding optimization
Whether it’s understanding the impact of sequester changes or ensuring smooth integration into your institution’s systems and workflows, JHSG is here to help.
Contact us today to learn more about how JHSG can assist your institution with all aspects of Title IV compliance and administration.
New in 2025: JHSG now offers a monthly retainer option for institutions that do not require a full-time engagement but still need reliable, ongoing support from experienced Title IV professionals.
