At Student Loan Hero, we regularly advise people to apply for grants before turning to federal or private student loans. That’s because you usually don’t have to pay back grants.
For educators, one of the most valuable aid options out there is the Teacher Education Assistance for College and Higher Education (TEACH) Grant. However, a new study obtained by NPR and later posted by the Department of Education shows a significant problem: The government converted thousands of grants into student loans, often due to minor issues.
Here’s what you need to know about the TEACH Grant, the study results, and how to protect yourself.
What is a TEACH Grant?
The TEACH Grant provides up to $4,000 per year to students who agree to teach for at least four years at an elementary school, secondary school, or educational service agency that serves low-income families.
The four years don’t have to be consecutive. TEACH Grant recipients have up to eight years to complete the service requirement. Each year, recipients must submit a certification form that notes their service to date and their intention to complete the service requirement.
How a TEACH Grant turns into a student loan
The Department of Education reports that a shocking number of awardees lose their grants. Of the TEACH Grant recipients who started their service term before July 2014, 63 percent saw their grants converted to Direct Unsubsidized Loans because they failed to meet the service requirements or because of problems with the annual certification.
In some cases, teachers lost their status for issues that weren’t their fault.
Maggie Webb, a Massachusetts teacher, told NPR that she was on track to complete her service requirement. However, when it came time to submit the annual certification, her loan servicer never sent her the required forms. She reached out to them for help, but when she finally got the form and mailed it in, the servicer claimed they never received it. By the time she had resubmitted the form, the deadline had passed.
FedLoan converted her grant into a student loan. Thanks to interest charges, she now has over $5,000 in student loans instead of a $4,000 grant.
“I knew I hadn’t done anything wrong,” Webb said in an interview with NPR. “I knew I had done it right. And it was just so hurtful that they would do that.”
Webb isn’t alone. A 2015 report from the Government Accountability Office (GOA) found that at least 2,252 grants were converted to loans erroneously. Worse, the GOA reported that more than half were turned into loans because the servicer didn’t give the recipients the required 30 days to submit the forms.
How to protect your grant status
Once you complete the TEACH Grant application — also known as the agreement to serve (ATS)— it’s on you to ensure you stay on track. To keep your grant status, you must do the following:
Complete TEACH Grant initial and subsequent counseling: Each year, you’ll have to complete TEACH Grant counseling online. It takes about 20 minutes, and you’ll need to have references from at least two people at different addresses who have known you for at least three years.
Complete a new ATS: The ATS form also has to be completed and submitted each year.
Keep copies of all documentation: Every time you complete counseling, submit the ATS form, or have any interaction with your loan servicer, it’s important to take diligent notes and make copies of forms for your records.
What to do if your grants were turned into loans
If you believe your loan servicer wrongfully converted your grants to student loans, your first step is to gather all your documentation and contact your servicer to report the error. In some cases, the loan servicer can correct the problem and return your grant status.
If you’re unable to come to a resolution with your loan servicer, the Department of Education recommends that you contact the Federal Student Aid Ombudsman Group. The group is a neutral third party that will work with you and your loan servicer to resolve the problem.
You can contact the group online or by phone at 877-557-2575. You can also mail them:
Office of the Ombudsman
U.S. Department of Education
830 First Street NE
4th Floor UCP-3/MS 5144
Washington, D.C. 20201-5144
For more information on how to manage your loans as a teacher, check out this article on forgiveness options.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.50% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.49% APR (with Auto Pay) to 7.27% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.48% effective April 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.49% – 7.27%1||Undergrad & Graduate|
|2.49% – 6.65%3||Undergrad & Graduate|
|2.49% – 7.41%4||Undergrad & Graduate|
|2.50% – 6.65%2||Undergrad & Graduate|
|2.49% – 7.11%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|