TEACH Grants: A Misnomer

President Bush’s 2009 budget includes $14 million for a new program established by Congress (introduced by Kennedy and Miller) last year—the TEACH Grants program. The program calls for grants of up to $4,000 to be awarded to approximately 41,000 students each year starting in the 2008-09 school year, and is intended to encourage students to pursue teaching in high-need schools and subjects. According to the budget, the TEACH Grant program,

...awards annual grants of up to $4,000 to eligible undergraduate and graduate students who agree to serve as a full-time mathematics, science, foreign language, bilingual education or other English language program, special education, or reading teacher at a high-need school for not less than 4 years within 8 years of graduation.

Sounds good, right? But these ‘grants’ are mislabeled—if you keep reading the budget description, it becomes clear that these aren’t grants at all. And calling them grants could lead some students into much more debt than they expected:

For students who fail to fulfill this service requirement, grants are converted to Direct Unsubsidized Stafford Loans, with interest accrued from the date the grants were awarded. (Italics are mine)

This means that students who don’t meet any one of the requirements—teaching within 8 years of graduation, teaching in a high-need school for at least 4 years, or teaching in one of the subjects listed—will suddenly have as much as $16,000 in loans, and that’s not including the accrued interest. That would certainly be a rude awakening to a student who thought they were receiving a grant. In fact, these aren’t even considered grants in the budget; they’re just, for some reason, called grants:

For budget and financial management purposes, this program will be operated as a loan program with 100 percent forgiveness of outstanding principal and interest upon completion of a student’s service requirement. The Administration currently estimates approximately 80 percent of participating students will not complete the required service and thus will have their grants converted to Direct Unsubsidized Stafford Loans. (Italics, again, are mine)

According to the government’s own calculations, only 20 percent of students who sign-up for this program will actually receive the promised benefit. The rest will end up with much higher debt loads than originally expected.

If the government is considering this as a loan program for budget purposes, it should label it as a loan program for clarity and for students’ own budgeting purposes. While 'TEACH Loans' might not sound as generous, the proper labeling will save many students a lot of confusion and also save some students from a potentially distressful financial situation when an unexpected bill comes due at graduation.

Note: Thanks to Sara Goldrick-Rab at the University of Wisconsin - Madison for the tip. And as she points out, "It's not a loan forgiveness program though-- it's a loan, not a grant-- and there's no forgiveness if it turns into a loan."