TEACH Grant Conversion Calculator

What Is a TEACH Grant?

The Teacher Education Assistance for College and Higher Education (TEACH) Grant provides up to $4,000 per year to students who agree to teach in a high-need field at a low-income school.

However, due to federal sequestration, the typical disbursement is closer to $3,772 per year.

To keep the grant from converting, you must:

• Teach full-time
• In a qualifying low-income school
• In a high-need subject
• For at least 4 years
• Within 8 years of finishing school
• Submit annual certification paperwork

If you fail to meet these requirements, the grant converts into a federal student loan.

And here is the part many borrowers do not expect.

Interest is added from the original disbursement date. Not from the conversion date.

What Happens When a TEACH Grant Converts?

When your TEACH Grant converts:

1. It becomes a Direct Unsubsidized Loan
2. Interest is applied retroactively
3. The interest capitalizes
4. You begin repayment

What Does “Retroactive Interest” Mean?

Retroactive interest means the government calculates interest as if your grant had been a loan from the very beginning.

Even if conversion happens years later.

That interest is added to your balance before repayment starts. From that point on, you pay interest on both:

• The original grant amount
• The accumulated interest

This is sometimes called the retroactive interest trap.

How the TEACH Grant Conversion Calculator Works

The TEACH Grant Conversion Estimator helps you understand three key numbers:

1. New total loan balance
2. Retroactive interest added
3. Estimated monthly payment

It uses a simple three-step method.

Step 1: Calculate Retroactive Simple Interest

Federal loans accrue simple interest daily. For estimation purposes, the calculator applies annual simple interest using this formula:

Retroactive Interest = Principal × Interest Rate × Years Elapsed

Example:

• Grant amount: $3,772
• Interest rate: 5.50%
• Years since disbursement: 4

Retroactive interest:

3,772 × 0.055 × 4 = $829.84

That interest gets added to your balance.

Step 2: Add Interest to Principal (Capitalization)

New total balance:

$3,772 + $829.84 = $4,601.84

This becomes your starting loan balance.

Step 3: Estimate Monthly Payment

The calculator assumes a standard 10-year repayment plan (120 months).

It uses the federal loan amortization formula:

M = P [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]

Where:

• P = Total loan balance
• r = Monthly interest rate
• n = Number of months (120)

If the interest rate is 0%, the calculator simply divides the balance by 120.

In the example above, the estimated monthly payment would be about $50 per month.

That may not sound large, but remember:

• This is for one year of TEACH funding.
• Many students receive multiple years.
• Conversion applies to each disbursed year separately.

Interest Rates by Academic Year

TEACH Grants convert at the federal loan interest rate for the academic year in which the grant was disbursed.

For example:

• 2024–2025: 6.53%
• 2023–2024: 5.50%
• 2022–2023: 4.99%
• 2021–2022: 3.73%
• 2020–2021: 2.75%
• 2019–2020: 4.53%
• 2018–2019: 5.05%

The calculator allows you to select the correct academic year or enter a custom rate if needed.

Using the correct rate matters. Even a 1% difference over several years can significantly increase your total balance.

Why the Calculator Matters

Many borrowers assume that if a $3,772 grant converts, they will owe $3,772.

That is rarely the case.

Here is what the calculator helps you see clearly:

1. Time Increases the Damage

The longer the time between disbursement and conversion, the more retroactive interest builds up.

A delay of even one extra year can add hundreds of dollars.

2. Multiple Grants Multiply the Effect

If you received four years of TEACH Grants, each year accrues its own interest timeline.

The total converted balance could easily exceed $18,000 depending on rates and time elapsed.

3. Monthly Payments Add Up

Even a modest $60 monthly payment over 10 years equals $7,200 total paid.

Understanding this early helps you plan better.

Who Should Use a TEACH Grant Conversion Calculator?

This tool is useful if you:

• Are unsure whether you will complete the teaching requirement
• Missed certification paperwork
• Switched careers
• Are close to your 8-year service deadline
• Want to compare teaching vs. non-teaching financial outcomes

It is also helpful for financial aid counselors advising students about TEACH eligibility.

Important TEACH Grant Rules to Remember

• You must complete 4 years of qualifying teaching
• You have 8 years to fulfill the service obligation
• Annual certification is required
• Once converted, the grant cannot revert back
• Interest accrues from the original disbursement date

Missing paperwork alone can trigger conversion.

That is why tracking deadlines is just as important as completing the service itself.

Practical Example: The Hidden Cost Over Time

Let’s compare two scenarios.

Scenario A: Conversion After 2 Years

Interest accrues for 2 years at 5.5%.

Scenario B: Conversion After 6 Years

Interest accrues for 6 years at 5.5%.

Scenario B could result in roughly triple the retroactive interest.

Same grant. Same rate. Different timeline.

Time is the most expensive factor.