News Release

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Miami University
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Federal sequestration impact at Miami

03/19/2013

The sequestration (mandatory spending cuts) brought on by a budget impasse in Washington, D.C., has several potential impacts for faculty, staff and students at Miami, all of which hinge on when a federal budget will be passed.

The potential impacts affect the areas of interest paid on construction project bonds, student loans and work-study, and scientific research grants.

1. Bond interest. Miami issued $105 million in Build America Bonds in 2010, which offer a 35 percent interest subsidy from the federal government. Miami receives the interest payments twice per year, and already had received the first payment before March 1. Only if the budget is not resolved by late August might we lose 8.7 percent of the interest subsidy for the second half of the year. Estimated reduction: about $90,000 this year.

2. Student grants, loans and work study.

  • Pell Grants are not impacted for the current school year, nor for the 2013-2014 year. Anything beyond 2013-2014 will likely be impacted.
  • There are no cuts to the Supplemental Education Opportunity Grant (SEOG) and the College Work-Study Program (CWSP) for 2012-2013. In the next fiscal year, nationwide, about $86 million will be cut from these programs. Following are estimates of the impact on Miami for its allocation.
    o SEOG: It’s estimated Miami will lose just over $24,000 off of our allocation; the effect is that 42 fewer students may receive SEOG for 2013-2014.
    o CWSP: It’s estimated Miami will lose just under $30,000 of our CWSP allocation. That may translate to 15 fewer students receiving CWSP.
  • Loan origination costs for subsidized and unsubsidized loans (student-borrowed) will increase by .05 percent to approximately 1.05 percent. The average increase in cost for origination fees will be about $2.50.
  • PLUS loans (parents borrow for educational costs for their students) will increase from 4% to 4.20 percent, and it is estimated that this will cost the typical PLUS borrower about $51 in additional origination fees.
  • New grants made on or after March 1 in the Federal TEACH grant program will face a reduction. The Department of Education has asked schools to temporarily suspend making new awards in this program until it can assess the impact on the cuts.

3. Research funding. Miami receives most of its external research funding from the National Science Foundation (NSF) and National Institutes of Health (NIH), both of which are set to receive large cuts in federal appropriations under the sequestration. The NSF does not plan to reduce any current grants, and the NIH has announced budget cuts do not affect grant or cooperative agreement awards made with fiscal year 2012 resources. Reductions are anticipated in 2013-2014 funding.

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