September 18, 2008
According to a Department of Education memo cited by the New York Times, the Federal Pell Grant program could face a budget shortfall of up to $6 billion in 2009 due to increases in grant amounts and numbers of applicants. The cap on Pell awards has risen from $4050 to $4731 between 2006 and now, and will increase to $6000 for the 2009-2010 academic year (if funding is available) according to the recently reauthorized Higher Education Act. Meanwhile, the number of FAFSA applications has risen by nearly 17 percent in the last year alone, driven by a worsening economic situation.
While data has not yet been released on whether more students are qualifying for Pell Grants or other need-based federal student financial aid this year, increasing college enrollment and unemployment rates, coupled with an overall economic downturn and increased cost of living for Americans, certainly suggest the possibility exists. According to the Department of Education memo to Congress, tough choices or an unpopular announcement regarding Pell Grant funding may have to be made shortly after the next President's inauguration. While it's speculated that Congress will ultimately find the money to fully fund the popular grant program, the federal government is by no means exempt from economic strain.
This announcement comes at the same time as the release of the results of an audit of 14 student loan guaranty agencies, which suggests the government may have lost over $1 billion to FFELP student loan companies taking advantage of a now-closed federal funding loophole. Lenders had been recycling new student loans through a loan program that guaranteed a 9.5 percent return from the government on student loans made before 1993. Lenders had been taking advantage of this loophole as late as 2006, claiming in some cases hundreds of millions of federal dollars for which they should have been ineligible.
When these loan recycling programs came to light, the Department of Education settled with lenders, allowing them to keep the money they had gained up to that point in the 9.5 percent program, but requiring them to immediately cease using the program or submit to an audit in order to continue receiving the subsidies on loans actually eligible. So far, 14 lenders have agreed to these audits. Based on the results, if the loan agencies audited are representative of all lenders that participated in the 9.5 percent program, federal losses could total $1.2 billion. Several of the lenders involved in this settlement, including Nelnet, a company that also recently settled with New York Attorney General Andrew Cuomo over other questionable business practices, have also announced that they are unable to completely fund their student loan programs for the 2008-2009 school year.
September 17, 2008
The House of Representatives voted Monday to extend the Ensuring Continued Access to Student Loans Act (ECASLA) into the 2009-2010 school year. The act also has broad support from lenders and financial aid administrators. The ECASLA was signed into law this May in response to concerns that the credit crunch would have a serious impact on the availability of student loans.
While it appears that students have had few problems finding adequate funding for school this fall, many lenders and financial aid administrators remain concerned about the potential for trouble in the next academic year based on the present economic situation. Many financial institutions continue to struggle with fallout from the subprime lending situation, and several major lenders have been forced to temporarily suspend student loan programs due to lack of financial backing.
The act still needs to be approved by the Senate and signed by the President. If this happens, the continued federal support will likely make it easier for families to figure out where they'll find money for college in the 2009-2010 academic year without worrying about student loan availability. The provisions of ECASLA help the federal government keep major student loan lenders and guaranty agencies in business and in a position to continue to serve students, which is good news, at least in the short term, for families who need to borrow to pay for school.
September 16, 2008
As many as 29 percent of state university students and 43 percent of community college students require some amount of remedial education upon enrolling in college, according to the results of a study by the group Strong American Schools. The report, entitled "Diploma to Nowhere" was released Monday, and addresses the financial costs of remedial education (as high as $2000-2500 per student), as well as the psychological impact on students.
The study stresses the necessity of appropriate college preparation for students, which includes taking challenging courses and learning study skills in high school. The results clearly indicate that good grades and the basic college preparatory high school curriculum are not always an indicator that students are ready to tackle the challenges of attending college. As many as four out of five students in remedial courses maintained a high school GPA of 3.0 or higher, showing that even those who did well in high school weren't prepared for the kind of work students should expect in college.
While the report encourages educational reform and high school curricula that more closely match college standards, change can be slow in coming. High school students beginning the college search should be aware of the possibility of struggling in school or even having their stay in college prolonged by extra course requirements. The earlier you start the college planning process, the better, so start pushing yourself as early as your freshman year. Enroll in the most challenging courses possible, such as Advanced Placement or dual-credit classes, especially in areas like English and math, and avoid just coasting through your last year or two of high school.
More challenging coursework can lead to a lower GPA, but your impressive resume, your reputation as a hard worker, and your improved reading, writing, math, and study skills will likely make up for any difference in the long run. Being more adept at math, science, and writing can also increase your chances of winning scholarships, as your skills outshine those of your competitors who took the easy way out.
September 15, 2008
Let's be honest. Sometimes, the contest rules for scholarship opportunities can just be too limiting. Lengthy forms, essay prompts, and word counts can all suck the joy right out of scholarship applications. While specific requirements can be nice for some, others just need a little more flexibility to express themselves fully. For those free-spirited students, we have this week's Scholarship of the Week, the Frame My Future Scholarship Contest.
The Frame My Future Scholarship Contest, sponsored by Church Hill Classics and diplomaframe.com asks students to share their plans for their future after graduation, composing an original piece that shows, "how I frame my future." The only requirement for the entry is that it fit on an 8.5 x 11" piece of paper. Otherwise, the format is completely up to you. Submit a drawing, an essay, a photograph, a collage, or anything else you can think of, either online or by mail. The top 24 entries will be posted on Framemyfuture.com, where the public will be able to vote for their favorite, and the five most popular will be awarded $1,000 college scholarships.
Prize: Five winners will each receive a $1,000 scholarship award.
Eligibility: The contest is open to U.S. high school seniors and college students who will be working toward a degree in the 2009-2010 academic year.
Deadline: March 31, 2009.
Required Materials: An entry form, available on the contest website, and an 8.5 x 11 inch piece of paper with your original creation on it. Submissions are accepted online or via mail.
Further details about the application process can be found by conducting a free college scholarship search on Scholarships.com. Once the search is completed, students eligible for this scholarship award will find it in their search results.
September 11, 2008
Seven student loan lending agencies agreed to a settlement with New York Attorney General Andrew Cuomo Tuesday, following an investigation by Cuomo's office into potentially deceptive lending practices. This is the latest group of lenders to settle in an inquiry that's been going on for nearly a year, after accusations first came to public attention last October.
The seven lenders were Nelnet Inc., Campus Door Inc., GMAC Bank, NextStudent Inc., Xanthus Financial Services Inc., EduCap Inc. and Graduate Loan Associates LLC. The lenders agreed to abide by a code of conduct drafted by Cuomo's office, and also jointly donated $1.4 million to a fund established to educate students about financial aid processes.
A number of lenders were being investigated for deceptive marketing practices that included sending out mailings that looked like they came from the federal government or a student's current lender, offering gifts such as iPods or gift cards to entice students to sign up for their loan, and advertising loan rates for which the majority of borrowers would not qualify. Lenders agreed to cease deceptive lending practices and to include a disclaimer in all loan offers that will encourage students to exhaust all other options for federal student financial aid before borrowing a private loan.
September 10, 2008
Despite the student loan credit crunch that has been repeatedly making headlines this year, students and parents in several New England states had little to no trouble finding money for college this fall, according to a survey conducted by the New England Board of Higher Education.
The survey asked financial aid administrators at 214 colleges and universities to assess the level of difficulty students faced finding financial aid, as well as the effectiveness of the Ensuring Continued Access to Student Loans Act passed by Congress earlier this year to ensure continued availability of Federal Family Education Loan Program (FFELP) funds.
The survey found an increase in students borrowing unsubsidized Stafford Loans, as well as no major concerns over the availabilty of those funds through FFELP lenders. It also showed that more families have borrowed Federal PLUS Loans this year, possibly due to recent changes that allow families to defer payments until after students graduate. These changes seem to have mostly made up for the decreased availability of private student loans. However, some financial aid administrators are still concerned over continued availability of student loans, and caution that families may face difficulties making tuition payments in future semesters.
Based on this information, it appears there's little reason to put your college plans on hold, but you might still want to devote an increased amount of time to finding scholarships. While it looks like students are still able to pay for school, changes in the student loan landscape may still leave some students without a plan B for covering college costs if their initial plans fall through.
Really, though, financial aid advice hasn't changed much. Now, as always, planning ahead is key. As always, a good college financing strategy involves doing the following: conduct a scholarship search, take time to complete the FAFSA, learn about and take advantage of all possible federal student financial aid, apply for university scholarships and campus-based aid, and only then consider applying for a private student loan.
September 9, 2008
In a hearing yesterday, Senator Charles Grassley of Iowa suggested that he would back off from his proposal of mandating that colleges and universities spend five percent of their endowments on financial aid, provided schools continue to voluntarily increase grant and scholarship awards to students as many have been doing this year.
This is the latest development in a series of events that began unfolding when Congress began looking into the endowment spending of several of the country's wealthiest universities earlier this year. Legislation to mandate increased endowment spending has since been proposed and withdrawn, as several schools with large endowments began offering significantly larger financial aid packages to their students.
The panel, which was made up of representatives of several universities and the Senate Finance Committee also discussed the rising cost of college education, what schools and lawmakers can and should do in the face of the issue, and the importance of flexibility in endowment spending. Lawmakers and educators are both concerned about the increasing burden of student loan debt on American students, but colleges are also concerned about being forced to spend more than they can afford to assist students with their tuition payments.
Primary among their concerns, though, was an increase in transparency of university endowments and spending habits. Colleges were more willing to agree to making information about their endowments and spending available to the public, as opposed to accepting a mandate for how much they are required to spend on student financial aid each year. Grassley also introduced a plan to make colleges fill out a Form 990, the tax form all nonprofits file, using a version of the form similar to the one designed for hospitals.
While the Senate Finance Committee has moved away from requiring colleges to devote a substantial portion of endowment spending to helping students pay for school, Sen. Grassley's words seem to suggest that if schools don't keep up their efforts to make attending college more affordable for their students, Congress may yet decide to intervene.
Hopefully, what this will mean for students is a continued increase in campus-based aid programs, such as scholarship opportunities and grants and fellowships. At the very least, it looks like it may be getting even easier to compare information about spending habits of various schools in your college search, being able to ultimately arrive at a better determination of which schools are most likely to want to help you afford to attend.
Inside Higher Ed has more complete coverage of the hearing available here.
September 8, 2008
As a means of promoting diversity and developing talent, Scholarships.com has created a new set of scholarship awards for high school students and undergraduate students. The Scholarships.com “Fund Your Future” Area of Study College Scholarship consists of thirteen $1,000 prizes to be granted to students who pursue a postsecondary education in one of thirteen designated fields and 185 related majors.
Among them is the Scholarships.com College English Scholarship, an award for students who are pursuing or planning to pursue a degree in English or Literature. To ensure that current and future English majors receive the funds they need to afford a quality education, we have created a scholarship opportunity especially for them.
If you’re interested in applying for the Scholarships.com College English Scholarship, write a 250 to 350 word scholarship application essay in response to the following question (entries that fall outside of this word range will be disqualified): “What has influenced your decision to pursue a career in English?”
Deadline: October 31, 2008
Required Material: A 250 to 350 word response to the following question: “What has influenced your decision to pursue a career in English?”
Further details about the application process can be found by conducting a free college scholarship search. Once the search is completed, students eligible for the award will find it in their scholarship list.
September 5, 2008
New York Attorney General Andrew Cuomo is preparing a lawsuit against Goal Financial, the student loan company that also runs the website eStudentLoan.com. According to the New York Times, Goal Financial stands accused of misleading consumers about loans, and offering them gifts such as iPods to influence their choice in lenders. While other lenders accused of dishonest practices have repented and agreed to follow a code of conduct outlined by Cuomo, Goal Financial has not, hence the pending lawsuit.
Goal is accused of misrepresenting loan terms to promote private loans over low-interest federal Stafford loans, as well as failing to disclose their ownership of eStudentLoan on the latter's website. The company also allegedly failed to disclose that all lenders listed on the eStudentLoan loan rate comparison feature were companies that had paid a commission to Goal Financial.
While Cuomo's investigation of the student lending industry has undoubtedly made borrowing less risky, students should still proceed with caution and carefully vet the quality of the lender they choose to use. If you need to take out student loans to help fund your education, be sure to do your research. First and foremost, explore all federal student financial aid opportunities. Start by completing the FAFSA on the Web and visiting with your school's financial aid office. It would also be beneficial to conduct an extensive scholarship search at this point, as well, since you never know where you might find money for college.
If you do find you need to borrow a private loan, research several lenders, and if your college's financial aid office maintains a preferred lender list (which should consist of lenders that are actually preferable thanks to Cuomo's earlier investigations) take a copy. Begin evaluating your options, but be wary of anything that sounds gimmicky or too good to be true. Carefully research any loan before you apply.
Find out which banks have the best rates and repayment options, and whether you'll need a cosigner to get approved. Apply to one loan at a time and give yourself plenty of time for processing, since many student loans need to be approved by the bank and certified by your college before funds can be disbursed. Many lenders will let you know within a day or two whether your has been pre-approved or rejected so that you can move on to the next application if necessary.
September 4, 2008
For many students, the college experience can be a financial minefield. Even if they manage to avoid the lure of blowing their financial aid check on a plasma TV or a brand new car, there are thousands of other potential pitfalls. These include the credit card companies lining the main drag of campus offering free college t-shirts to anyone who signs up for their card; your first dorm or apartment to outfit and decorate; and then all of the opportunities for shopping, dining, and entertainment that a college town provides. And we haven't even gotten to the actual act of paying tuition yet! Even if your scholarship search was fruitful and you were able to find money for college, there's still the chance of overspending and winding up turning to less wise solutions to make it to the end of the term.
So how are students supposed to survive college without unnecessary credit card or student loan debt? Many schools are offering money management courses and one-on-one financial counseling services to help students be more judicious with their college funds. I can certainly think of some lessons I could've used as an undergrad, like "3 AM is not dinner time," its corollary, "espresso is not an adequate substitute for sleep," and of course, "you don't have to buy it just because it's on sale." Being forced to budget out just how much that 10-block drive to class (plus the 15 minutes of circling the "good" parking lot for a spot) actually cost me that last year of school would've also been helpful.
Now students at numerous colleges in several states can choose to educate themselves and avoid learning similar life lessons the hard way. Unfortunately, many of these programs go under-publicized and under-utilized, as budgeting honestly isn't fun, and many students may be afraid that setting a budget means giving up their college lifestyle, staying at home, and having to go on a budget diet. However, the Chronicle of Higher Education suggests that students can benefit immensely from financial literacy courses, and anecdotal evidence suggests these students take on less debt and have an easier time transitioning into the "real world" after graduation. Courses are often offered to incoming freshmen or graduating seniors, with counseling services typically being made available to any students currently attending college. If you're interested in finding out about how to stretch your college fund, student loans, or scholarship money further, check with your college to see if they offer any of these services.
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