Failure to complete the teaching obligation, respond to requests for information, or properly document your teaching service will cause your TEACH Grant to be permanently converted to a loan with interest. Once a grant is converted to a loan, it cannot be converted back to a grant.
Additionally, students who change majors from a TEACH-eligible program are likely not to be able to meet the teaching obligation.
Federal Direct Unsubsidized Loan
TEACH Grants that become a loan become part of the Federal Direct Unsubsidized Loan program. Like any educational loan, it will add to your overall debt and monthly payments.
Unsubsidized loans are not interest-free while the student is enrolled in college. They are earning interest that a student can pay while enrolled or it will capitalize into the principal, resulting in some interest-on-interest accumulation.
Conversion of TEACH Grant funds to a loan is retroactive to the disbursement of monies. Therefore, at any point the funds are converted to a loan, interest will be calculated back to the point each payment of TEACH Grant funds were given to the student. The result is a much larger total loan amount repaid than the grant funding itself.
To illustrate, assume a student receives $4,000 in TEACH Grant funding for four years, totaling $16,000 in grant monies. Remember, if the teaching service obligation is not met, the grant in its entirety is converted to a loan. There is no proration for having met part of your teaching obligation. Federal regulations for this program and your signed Agreement to Serve detail an all-or-nothing approach to completing the service to avoid loan conversion.
The following chart shows how the loan conversion would operationalize assuming the original $16,000 grant converted to a 6.8% loan repaid over the standard 10-year loan period.
|Point of Conversion in Years after First TEACH Disbursement||Accrued Interest Added at Point of Conversion to Loan||Approximate Monthly Payment||Total Amount Repaid on $16,000 Grant|
(approx. at graduation)
(approx. at end of standard 8-year requirement limit)
This chart only refers to the TEACH Grant converted to a loan. Any monthly payment and total amount repaid would be in addition to any other loan borrowing a student may have done while enrolled in college.