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A March government study found that about 12,000 recipients of the TEACH Grant, a grant for college students who agree to teach needed subjects at lower-income areas, had their grants converted into loans.
This happens sometimes because students didn’t fulfill their service obligations, and other times it was due to minor process errors, according to the U.S. Department Education’s study of the TEACH Grant program.
The report said 63 percent of TEACH Grant recipients who began their teaching service before July 2014 had their grants converted to a loan, either because they had not met the service requirements or the annual certification requirements. When TEACH Grant recipients first received their grants, the study says, 89 percent participants thought they were likely or very likely to meet the service requirements.
Ashley Norwood, consumer and regulatory adviser at American Student Assistance, a nonprofit organization dedicated to helping students complete the financing and repayment of higher education, told MagnifyMoney she has seen more grant recipients face the grant-loan-conversion issue as more students have signed up for the program, and it happened for various reasons.
“I don’t think anyone is all at fault. I think that it’s a combination of errors,” said Norwood.
The program is complicated — the amount of paperwork and procedures required to administer and participate in the TEACH Grant is onerous, she said. Oftentimes, schools don’t offer rigorous upfront counseling about the grant due to a lack of resources or personnel. And on the students’ part, they don’t always stay on top of the service obligations and other requirements they agreed to, Norwood said.
In this guide, we offer expert tips for getting the grant and avoiding the grant-loan conversion. We also provide actionable advice for grant recipients whose grants have been converted to loans.
What is a TEACH grant?
Since 2008, the federal government has been offering TEACH grants to college students who commit to teach in a needed field, like math and science, at a school that serves students from lower-income families.
A student can receive a Teacher Education Assistance for College and Higher Education (TEACH) Grant of up to $4,000 a year, but budget cuts reduced the maximum award in recent years:
- For any 2017–18 TEACH Grant first disbursed on or after Oct. 1, 2016, and before Oct. 1, 2017, the maximum award was $3,724.
- For any 2017–18 TEACH Grant first disbursed on or after Oct. 1, 2017, and before Oct. 1, 2018, the maximum award is $3,736.
Recipients must complete coursework needed to begin their career as a qualifying teacher, and must sign an agreement to teach at least four years in an eight-year time frame after graduation. After finishing their program, they must provide an annual certification that they are currently teaching in a high-need field and a low-income school or intend to do so. Those who do not meet the requirements will see their TEACH Grants be converted to unsubsidized loans.
How to get the TEACH grant
Step 1: Do the research
If you are interested in applying for TEACH Grant, you should contact the financial aid office at your school to find out whether your school participates in the TEACH Grant and which courses of study are TEACH Grant-eligible. The financial aid office staff should be able to walk you through the benefits and service requirements.
As of the first quarter of the 2017-18 academic year, 572 higher education institutions participated in the grant, according to the American Association of Colleges for Teacher Education. Schools determine which programs are TEACH Grant-eligible.
It’s not as simple as an English major hoping to teach English after graduation being eligible for the grant. A program of study that’s eligible for the TEACH Grant is a specific program designed to prepare students qualified to teach in a high-need subject. You want to make sure you are enrolled in the right program. It could be an undergraduate, graduate or post-baccalaureate program.
A post-baccalaureate program is not TEACH Grant-eligible if your school also offers a bachelor’s degree in education.
Step 2: Apply
Once you decide to participate in the program and are enrolled in the right program, you will need to apply for a TEACH Grant by completing a FAFSA form.
Step 3: Complete counseling
Then you will need to complete TEACH Grant Initial Counseling, which occurs online and explains the terms and conditions of the TEACH Grant service obligation.
This is an important task because you will learn what exactly you are signing up for during the process. It takes about 20 minutes to complete the counseling, and you will need a FSA ID and your school name for it. You must complete the counseling process every year you receive a TEACH Grant, and you can do so here.
Step 4: Sign the agreement
The last step in the grant application process is completing an Agreement to Serve, a legally binding document that explains the service obligations and conditions of the TEACH Grant, as well as your rights and responsibilities if the grant is converted to a loan. You commit to those terms when signing the Agreement to Serve.
Each year you receive a TEACH Grant, you must sign an Agreement to Serve. A read-only version of the agreement can be accessed here. You can sign the document here. Your school will be notified once you submit your Agreement to Serve.
An additional note
It is important to keep a copy of all of your TEACH Grant paperwork and correspondence with your grant servicer for your records.
What to do while you’re still in school
You only qualify for a grant if your score is in the top 25th percentile on college admissions tests, and you need to maintain a cumulative 3.25 GPA to maintain your eligibility for the funds, according to the American Association of Colleges for Teacher Education. Remember to complete the counseling and the Agreement to Serve each year that you receive a TEACH Grant.
When you’re looking for employment, make sure that you are going to teach full time in a high-need subject in a school serving low-income families.
Experts suggest grant recipients be cognizant that this grant can turn into a loan if you are not careful.
Norwood said if you decide that you are not going to teach or you are not going to serve in a low-income area, you may return the grant, but you have very little time to make that decision. You can cancel the full grant or a portion of it the first day of the school’s payment period or 14 days after your school sends you a notification stating your right to cancel. If you do so during the timeframe, your school will return to the Department of Education your awarded funds, which won’t be converted to a loan.
How to prevent the TEACH grant from turning into a loan
Meet all the service requirements
Once you complete your education, you have to meet all the requirements stated in your Agreement to Serve:
1. You must teach in high-need fields
They are identified by the federal government or a local education agency. Common high-need fields include bilingual education, science, reading specialist, math and foreign language. The subject you teach must be listed within the Teacher Shortage Area Nationwide Listing for the state in which you teach, either when you begin your service or when you sign the Agreement to Serve, according to the Department of Education. The most recent list is here.
Norwood said that it’s fine if teachers bounce around qualifying subjects, but if you teach any of the fields not considered a high-need one, then you’re not performing the required service.
2. You must work full time in qualified fields for at least 4 years
They don’t have to be four consecutive years, but you need to finish your teaching service within eight years of graduating. And more than half of the classes you teach each school year are in high-need fields.
3. You must teach in a school serving low-income families
You must perform the teaching service as a highly qualified teacher (defined by Title IX) at a low-income elementary school, secondary school (public or private) or educational service agency.
Qualified schools are listed in the department’s annual Teacher Cancellation Low-Income Directory. Schools operated by the U.S. Department of the Interior’s Bureau of Indian Education (BIE) or on Indian reservations by Indian tribal groups under contract or grant with the BIE qualify as low-income schools. That list is here.
4. You must provide your TEACH Grant servicer with documentation of service performance process
Within 120 days of completing the education for which you received a TEACH Grant, you must tell your TEACH Grant servicer in writing that you are working as a full-time teacher (or that you plan to do so), according to the terms and conditions of the TEACH Grant service obligation.
Complete the annual certification
Every year, you have to offer your grant servicer paperwork documenting your teaching service. You can obtain the required form from your servicer. The paperwork must be signed off by the chief administrative officer or an authorized official at the school where you taught for the year being certified. The official must confirm you performed qualified service in the right school and more than half of your classes were in high-need fields.
If you have completed your education but are not employed in a qualifying teaching position, you must notify your grant servicer at least once each year that you still intend to satisfy your service obligation.
Your TEACH Grant servicer is supposed to contact you periodically to confirm your intent to satisfy your obligation, but experts said you need to be on top of providing annual information. Take it upon yourself to make regular contact with your servicer, particularly if you don’t start your qualified service immediately after finishing your education.
At the latest, you should start your qualified teaching service four years after completing the program where you received the TEACH Grant, Norwood said.
Norwood said many people encountered issues because they didn’t get the right paperwork to keep the servicer updated of their progress, possibly because they didn’t keep their address up-to-date with their servicer. It could also be that they didn’t complete the form correctly or missed the deadline to submit their annual certification.
“If I had a piece of advice, I would say just to students to make sure they really pay attention to what they’re signing, and open mail from the Department of Education or a servicer as soon as it comes,” Norwood said. “Don’t ignore it.”
A staff member at the American Federation of Teachers spoke on background that sometimes the grant is converted to a loan because the recipient made a minor error in their paperwork, but there is no appeal process with the servicer, and so the teacher can’t correct it.
Because the servicer is very particular and exact about details, the American Federation of Teachers advises educators to carefully review all the forms they send to the servicer.
What to do if you feel you your grant is wrongly converted to a loan
The Department of Education contracts servicers to handle the TEACH Grant, and FedLoan Servicing currently services TEACH Grants. It monitors the process to make sure recipients do everything correctly and, after you complete the paperwork certifying that you’ve met all the qualifications, you send over the documentation. In the event that a grant must convert to a loan, FedLoan Servicing will execute it, apply interest retroactively and begin loan servicing.
If you think you have done everything correctly and met all the requirements but your grant is converted to a loan, experts suggest you engage with your grant servicer first.
Norwood advised grant recipients in this situation to reach out to the people whom you have been working with on the grant. If that doesn’t work, you can then seek help from the servicer’s ombudsman, an impartial mediator who will take a look at the situation, identify problems and help settle the issue, Norwood said.
If FedLoan Servicing’s ombudsman can’t help solve the problem, you can then file a dispute with the Federal Student Aid Ombudsman Group with the education department. The ombudsman is established as a neutral party to help fix problems that include grant-loan conversion.
You can reach the ombudsman online, by phone at (877) 557-2575, or at:
Office of the Ombudsman
U.S. Department of Education
830 First Street NE, Mail Stop 5144
Washington, D.C. 20201-5144
Depending on specific situations, Norwood said issues caused by recipients, such as missing a deadline, may not get much sympathy. But if processing errors occurred on either side, there may be some leeway there, and a loan may revert back to a grant, Norwood said.
How to repay a TEACH grant that converted to a loan
If the grant converts to a loan, you will be given the opportunity to pay the interest that accrued before it capitalizes.
“If you can make extra payments,” Norwood said, “I would make extra payments to help pay down that interest.”
But if you can’t, interest capitalizes when the loan enters repayment at the end of a 6-month grace period, which starts the day after your grant is converted to a loan.
Norwood advises you make sure to get on a repayment plan that works for you. If you have other federal loans in your name, you may consolidate them.
The loan servicer will retroactively apply interest, which accrues from the time you received your first grant, as if you signed a loan instead of received a grant.
For instance, if you signed the agreement in September 2013, it would be subject to the interest rate applied to unsubsidized direct loans disbursed in September 2013. The servicer will calculate your outstanding interest as if it had accrued over the last five years.
If the grant is wrongly converted to a loan, Norwood suggests the recipient still make payments, because you could always get refunded later.
You can also ask for the loan to be placed in forbearance while your case is being investigated by the Department of Education. This way, you can put off making payments until you’ve received a resolution. If the grant was indeed wrongly converted to a loan, Norwood said you won’t need to get a refund because you haven’t paid anything upfront. But if the loan doesn’t revert back to a grant, you at least paid the interest that accrued during the forbearance.
The repayment plans for a student loan converted from a TEACH Grant are the same for all other federal loans. You can go with the standard repayment plan, graduated plan or income-driven plan, among others. Your loan servicer will be FedLoan Servicing.
Consolidate and refinance
You can consolidate the loan with other eligible federal loans, but there’s no refinancing option in the federal loan program. However, you could refinance with a private lender, Norwood said. Just remember you will lose all of the federal benefits such as Public Service Loan Forgiveness, deferment, forbearance and income-driven repayment plans if you are out of the federal student loan system.
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