Your TEACH Grant Could Wrongfully Become a Student Loan

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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.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.