What to Do if Your TEACH Grant Becomes a Loan

The federal Teacher Education Assistance for College and Higher Education grant, or TEACH grant, can be a great way for prospective teachers to fund part of the cost of college, but it comes with a few strings attached. Unlike other federal grants, you must complete a teaching service obligation and certify your progress or the TEACH grant will turn into a loan.

The best kind of money for college is “free money,” perhaps better described as money you don’t have to repay. This is why taking advantage of scholarships and grants is usually a great way to fund your education and save on college costs. These resources can be used to decrease the amount you will have to pay using savings or student loans.

However, you should carefully read and understand the terms and conditions of any award you accept to pay for college, and the TEACH grant is a great example of why that’s important. Here is information about the TEACH grant and advice about what you can do if you have one that becomes a loan.

What Is the TEACH Grant Program?

Congress authorized the TEACH grant program in 2007, and individuals who are studying to begin a career in teaching are eligible to receive grants in exchange for meeting certain qualifications both during and after school. Submitting the Free Application for Federal Student Aid, known as the FAFSA, is the first step in applying for a TEACH grant.

[Read: Completing the FAFSA: Everything You Should Know.]

The federal government awards TEACH grants in exchange for a service agreement that requires recipients to work as a highly qualified teacher in a high-need field at an elementary or secondary school or qualified educational service agency in a low-income area.

The work commitment is for at least four full academic years within eight years of finishing or leaving the course of study for which the grant was received. Examples of high-need fields, as defined by the U.S. Department of Education, are English language acquisition, math, science and special education.

If a recipient fails to meet all the work and certification requirements and other conditions of the TEACH grant, it will be converted into a federal direct unsubsidized student loan that must be paid back in full with interest.

The grant, which must be applied for each year, provides a maximum of $4,000 annually for a bachelor’s or master’s degree. The maximum amount could be doubled to $8,000 for juniors, seniors and graduate students if Congress passes the Biden administration’s American Families Plan, and this would be in addition to the $4,000 freshmen and sophomores would receive.

But students should not expect to receive the maximum amounts because of the federal Budget Control Act of 2011, also known as the sequester law. TEACH grants disbursed on or after Oct. 1, 2021, and before Oct. 1, 2022, must be reduced by 5.7% from the award amount that the student would otherwise have received. For example, an award of $4,000 reduced by 5.7%, which is $228, would result in an actual award of $3,772.

Grant recipients must be enrolled in a qualifying undergraduate, graduate or postbaccalaureate program at a school that participates in the TEACH grant program and must satisfy certain academic achievement requirements. They also must sign a TEACH Grant Agreement to Serve or Repay, which outlines all the terms and conditions.

[READ: What You Need to Know About Becoming an Education Major.]

The service obligation can be temporarily suspended in some cases, such as if your state requires you to obtain a teaching license or certification to teach in that state’s elementary or secondary schools; if you have a condition that qualifies you for leave under the federal Family and Medical Leave Act, commonly known as FMLA; or a qualifying case where you are ordered to active duty military status. According to changes to the TEACH grant program announced by the Department of Education on July 1, grant recipients can suspend their service obligation for additional reasons.

TEACH grant recipients have been required to submit documentation showing they have completed a year of qualifying teaching service — or their intent to satisfy the requirement — to the Department of Education each year. There also has been an initial certification required within 120 days of graduating or leaving school, and failure to complete a certification resulted in the grant being converted to a loan.

But under the new regulations, recipients will no longer have their TEACH grants automatically converted to loans for failing to certify within 120 days of graduating from or leaving school; in fact, now, there is no longer a requirement for recipients to certify that they have begun teaching or intend to within 120 days. Plus, now if they fail to certify at the end of each year of teaching, conversion to loans will not happen until they have run out of time to complete the four required years of service within the eight-year window.

As a result of these program changes, TEACH grant recipients now only have to submit four completed teaching certifications within the eight-year service obligation period.

Also, in addition to receiving counseling each year a grant is received, students now are required to take exit counseling. That will include information about how the grant’s servicer will annually send detailed notifications about service obligation timelines and requirements; estimates of accrued interest; documentation reminders; and explanations about the reconversion process, meaning when loans are converted back to grants. The goal is to ensure that grant recipients are informed and prepared to comply with program requirements.

Other program changes announced by the Department of Education are an expansion of the reasons why a TEACH grant recipient may receive a full year’s credit for teaching less than a full academic year; grouping of undergraduate and graduate service obligations together, when possible; updates to the agreement form and original counseling features; addition of a new online counseling feature that provides information about the conversion of a grant to a loan; and new and improved online forms and resources.

How a TEACH Grant Can Become a Loan

A TEACH grant can be converted into a direct unsubsidized loan when a recipient fails to meet the work requirements or doesn’t certify his or her qualifying employment and has run out of time to complete the required years of service.

When a TEACH grant becomes a loan, the recipient owes the full amount disbursed, as well as any interest that would have accrued from the date the grant was paid out.

In the past, TEACH grants have been commonly converted into loans due to small paperwork issues, such as failing to certify employment within a certain number of days after leaving a program or submitting annual certification of teaching status one day late. In fact, per the Office of Management and Budget, the majority of TEACH grants — 66% — were turned into loans under the prior rules.

The new program changes are aimed at addressing administrative hurdles, adding flexibility for grant recipients and hopefully reducing the frequency with which the grants are converted to loans.

What to Do if Your TEACH Grant Is Converted

If the Education Department contacts you and says you are eligible to request reconsideration, you could get the loan converted back to grants if you can demonstrate that either you completed the required four years of qualified service during the eight-year service obligation period or you intend to and will be able to do so.

You can still request a reconsideration even if the Education Department doesn’t contact you — for example, if you were on track but missed the annual certification requirement or made an error. Also, as a result of the new regulations, the possibility of reconsideration is now open to all recipients whose grants were converted to loans for any reason.

[READ: Student Loan Forgiveness Programs for Teachers.]

But remember that whatever the reason, you must show that either you met or will be able to meet the service requirement within the required time frame.

To request a reconsideration, contact FedLoan Servicing, the TEACH grant servicer, by phone at 855-499-9543 or by email at TEACHgrantconversions@myfedloan.org. Be ready to answer questions and provide information as needed for the company to determine your eligibility status.

If you fail to win reconsideration and therefore can’t get the loan reconverted back to a TEACH grant, be sure to read and understand all the terms and conditions of your new loan. Fortunately, it is eligible for all the benefits and borrower protections of the federal student loan program, including the ability to lower your monthly payment if needed and to place your loans in deferment if you cannot make a payment.

At the same time, however, there are consequences if you miss loan payments and fall into delinquency or default.

If your TEACH grant hasn’t been converted into a loan but you have questions about the annual certification date, contact FedLoan Servicing at 800-699-2908.

More from U.S. News

Understanding the Types of Federal Student Loans Available

What Happens to Student Loans When You Drop Out of College

What Kinds of Financial Aid Do Students Have to Pay Back?

What to Do if Your TEACH Grant Becomes a Loan originally appeared on usnews.com

Update 07/14/21: This article has been updated with new information.

Related Categories:

Latest News

This content was republished with permission from CNN.

More from WTOP

Log in to your WTOP account for notifications and alerts customized for you.

Sign up