Earlier this month, President Donald Trump signed a two-year, $2.7 trillion budget deal to suspend the debt ceiling until July 2021, and increase defense and non-defense discretionary spending caps for fiscal years (FY) 2020 and 2021, which would impact funding for Title IV programs for award years 2020-21 and 2021-22. The Bipartisan Budget Act of 2019, negotiated by party leadership in the weeks leading up to the August congressional recess, passed in the House on July 25 and in the Senate on August 1, before being signed into law by the President.
The bipartisan agreement increases defense and non-defense discretionary spending by $320 billion above the spending caps that would have otherwise been enacted due to sequestration under the Budget Control Act of 2011 (BCA). The bill’s passage ends the threat of discretionary sequestration by increasing spending limits through FY 2021, when the discretionary sequester is set to expire indefinitely.
While the budget deal brings an end to sequestration caps on discretionary spending, it extends the sequester on mandatory spending through FY 2029. With the mandatory sequester still in place, student loan origination fees, the Iraq-Afghanistan Service Grant (IASG), and TEACH Grants will continue to be impacted as in previous years. Loan origination fees will increase by the sequestration percentage determined annually by the Office of Management and Budget (OMB), resulting in origination fees of 1.059% for Direct Subsidized and Unsubsidized Loans, and 4.236% for Direct PLUS loans disbursed on or after Oct. 1, 2019.