Maybe your high school senior is planning to be a teacher, or your college student’s already an education major. Her 2018-19 financial aid offer may include a Federal TEACH Grant. If so, she needs to be extremely careful about that grant!
TEACH Grants aren’t grants at all. Financial aid pros call them “groans” — grants that all-too easily turns into loans.
TEACH Grant Basics
TEACH Grants provide up to $4,000 per academic year. Their eligibility requirements include financial need and:
- Having high admission test scores or GPAs;
- Attending colleges or universities offering TEACH Grants; and
- Enrolling in majors that prepare highly qualified teachers for high-need K-12 subjects.
Teachers must submit forms for each year they plan to fulfill TEACH Grant service requirements in low-income schools, then submit proof they completed those requirements — all to FedLoans, a private company hired to administer TEACH Grants.
The Risk
If your student fails to timely document four years of required service within eight years of leaving the major for which she got a TEACH Grant, her grant will turn into a Federal Direct Unsubsidized Loan. Interest then gets charged going back to the dates her TEACH Grant was disbursed. For example, if a $4,000 TEACH Grant received eight years ago converted to an unsubsidized loan today, your student could end up repaying $9,360 in principal and interest.
So it’ll be quite costly if your student receives a TEACH Grant but then moves to 
another major (80% of all students change majors), doesn’t teach, or teaches in a school or subject that doesn’t fulfill TEACH Grant service requirements. Small wonder a recent U.S. Department of Education study shows that 63% of TEACH Grants have been converted to unsubsidized loans.
Compounding the Risk
Some teachers also allege their TEACH Grants were falsely turned into loans due to minor paperwork errors or FedLoans losing their documents.
The situation’s so bad that at least one state’s Attorney General is trying to sue FedLoans for “callous disregard” of ex-students’ needs. But the current Secretary of Education is protecting FedLoans by asserting that it’s immune from state consumer protection lawsuits as a federal contractor. Ultimately, the courts will have to resolve this matter.
A Bad Deal!
If your student’s awarded a TEACH Grant, suggest she request other grants instead. If she must take the TEACH Grant, stress the importance of completing its service requirements and carefully documenting everything she does to provide FedLoans with proof that she fulfilled them. Even then, that TEACH Grant may still be a bad deal!
Need help deciphering financial aid offers? Contact College Affordability Solutions at (512) 366-5354 or collegeafford@gmail.com for a no-cost consultation!
