TEACH grant: A Trojan horse of debt

The data is in, and lest there be any doubt, the federal government is pulling a bait-and-switch on aspiring teachers, the likes of which might make even the most unscrupulous lender blush.

For future teachers with good grades who commit to instructing high-need subjects in low-income schools, the federal government offers up to $4,000 a year, for up to four years (two years for master’s degree students), through the Teacher Education Assistance for College and Higher Education (TEACH) grant program.

{mosads}That is, unless they fail to teach as a full-time teacher for a total of four years after finishing their program.

When a recipient doesn’t meet the teaching service requirement the funding immediately converts to an unsubsidized loan, with interest calculated from the time the award was issued.

Sudden, unplanned-for debt is the likely outcome for as many as 75 percent of current TEACH recipients, according to data released by the U.S. Department of Education. Since the TEACH program’s inception in 2007, nearly 36,000 students (40 percent of all recipients) have already failed to meet the requirements needed for the funds to remain a grant rather than an interest-bearing loan, according to a report from the think tank Third Way.

To students who don’t fully understand the service requirements, these conversions surely come as a shock – with a damaging impact on their finances. But to some members of the financial aid community, these outcomes are all too familiar. The program is even known colloquially as a “groan” (i.e., grant+loan) in higher education circles, for its frequent, frustrating grant-to-loan conversion.

The Obama administration has suggested changes to TEACH for the past several years as part of the president’s annual budget request. We expect the president to again propose program changes – perhaps by limiting recipients to only those in their junior and senior years, for instance, when a switch in career intentions (and thus, an unanticipated loan conversion) is unlikely.

That would be a step in the right direction. But without a major overhaul, the overly restrictive program remains a wolf in sheep’s clothing for far too many students.

Far better options would be to simply provide needy students with gift aid, period, without punitive grant-to-loan conversions. In addition, more study is needed to understand the effects of other incentive programs like Public Service Loan Forgiveness that help borrowers in public-sector jobs.

Barring major changes, Congress, at the very least, should restructure the program to call it what it is: a loan that, under a robust combination of aptitude, foresight, dedication, and luck, may be forgiven by the federal government.

Draeger is the president and CEO of the National Association of Student Financial Aid Administrators (NASFAA).