January 11, 2008
This year has not been a good one for college financial aid officials. The problems began when New York’s Attorney General Andrew Cuomo spearheaded a seemingly endless number of investigations into whether student lenders and financial aid officials had been teaming up at the expense of students. Then there were the stories about study abroad advisors receiving trips by convincing students to travel, and then there were those of athletic departments allowing lenders to use their logos for profit. If the words “financial” and “college” were in the same sentence, the things in between weren’t good.
But a new year has arrived, and with it, hope for a better financial future in higher education-- which is exactly what’s expected. Based on new reports from Illinois State University’s Grapevine Project, state tax appropriations for higher education are expected to rise and give hope to students worried about high costs and low scruples.
North Dakota is expected to experience the greatest percentage change from last year, increasing their yearly state tax appropriations for higher education by 19.1 percent. Next on the list are Louisiana, Mississippi, Alabama and Arizona, each of which has raised their higher education appropriations by 14 to 15 percent. California, while not promising a particularly large percentage increase, is the one expected to appropriate most, over $11 million. With the exception of Rhode Island (which plans to lower appropriations), every state is creating this year's budgets with higher education in mind.
January 15, 2008
In the wake of a student loan scandal that has made families weary of financial aid officials, lenders and the National Association of Financial Aid Administrators (NASFAA), the financial aid industry is eager to demonstrate a willingness for change--especially NASFAA.
The massive financial aid organization representing students and financial aid officials at more than 3,000 schools across the nation has made it clear that they are reevaluating the way their organization is run. Like numerous colleges, NASFAA has adopted a new code of ethics that will govern the way they work with student lenders and students.
In addition to the code, NASFAA has announced the appointment of a new president and CEO to replace Dallas Martin, the president who, after 32 years of work, retired amidst scrutiny of ill relations with lenders. Newly appointed President Dr. Philip R. Day has previously served as the chancellor of City College of San Francisco. He has also been the president of Beach Community College, Cape Cod Community College and Dundalk Community College. In a NASFAA news report, Dr. Day stated that he was, “committed to advancing NASFAA’s mission.”
January 16, 2008
An audit released by the Department of Education’s Office of Inspector General on January 9, 2008 points to problems in financial aid disbursements. Based on audit results, over $1.5 billion in financial aid was awarded to students whose FAFSA responses were either questionable or made them ineligible for aid.
Stated problems included Pell grant overpayments, awards exceeding loan eligibility, citizenship questionability, lack of Selective Service registration and awards offered to students with drug convictions.
Over $812 million was said to be disbursed to 86,246 students who had not resolved their citizenship confirmation problems. More than $447 was offered to males not registered with the Selective Service and over $3 million to students convicted for drug-related matters.
Officials from the Federal Student Aid Department responded by stating that the, “Risk suggested by the report is overstated.” They also claimed the audit had not taken into account additional security measures the department used to minimize errors.
January 17, 2008
It’s no secret that student lenders have had a rough ’07. After an investigation by New York Attorney General Andrew Cuomo revealed that student lenders had been forming illegal agreements with colleges that promoted their services, the spotlight was cast on negative aspects of student borrowing.
Even though newly established ethics codes are likely force the lending industry to clean up its act, students are not likely to have better borrowing experiences. The poor housing market has not only affected those looking for mortgages, but also those in need of student loans. To be eligible for loans and loan consolidations, students will soon need proof of greater savings and higher credit scores. According to a CNN report, even students who show promise may see their interests rates increase by an estimated 1 percent.
At the same time, the rewards they receive for paying on time are expected to decrease. After the Higher Education Access Act of 2007 minimized student lender subsidies offered by the government, numerous lenders minimized their student benefits. The savings students were used to receiving for good payment track records are expected to curtail or disappear altogether.
As always, students have other options. Debt can pose a heavy burden on college graduates, so loans should be used as a last resort. Instead, students can use scholarships to diminish the costs of a postsecondary education. By conducting a free college scholarship search at Scholarships.com, students will have access to a database containing information on more than 2.7 million college scholarships and grants. Just about everyone can find awards they are eligible to receive.
January 18, 2008
Tuition hikes and complaints about illegal behavior on the part of financial aid officials and student lenders have put the pressure on colleges to dip into their endowment funds. With new reports showing that endowment returns are on the rise, these pressures are likely to increase.
According to the Chronicle of Higher Education, a recently released statement by Commonfund, an endowment manager for more than 1,900 colleges and nonprofit organizations, has shown that returns were averaging 16.9 percent in 2007, up from 10.6 percent the previous year.
Unlike one-time student scholarships, endowments are used to annually award money to college students. These funds are kept intact by investing the original donation and using the returns to provide students with yearly scholarships.
News of funding bounty is likely to prompt legislators to put additional pressure on schools with large endowment funds. Wealthy colleges, some of which are said to have accumulated endowments in excess of $1 billion, are being criticized for keeping their money locked up during a time when student debt is at an all-time high.
The problem with spending more, argue schools, is a strict endowment use policy. Many scholarship providers donate money on the condition that it be used only to assist a designated group of students. For example, a donor may choose to set up an endowment for the sole purpose of helping female students who play croquet, major in English and have a GPA above 3.5 (okay, maybe that’s a bit of a stretch). Point being, schools are legally bound to award scholarships to students that meet particular requirements.
It's hard to argue with that, but perhaps legislators can do something about the whole "legally-bound" part.
January 29, 2008
In last night’s State of the Union address, President Bush called on Congress to cut down on bill earmarking. Earmarks, often attached to spending bills at the last minute, have been used to designate money to benefit legislators' personal interests. Local and state projects that may not have otherwise been funded are often successfully snuck into an earmark and financed.
Sometimes used as “paybacks” for organizations that donate money to a legislator’s campaign, earmarks have received negative attention in the press. However, numerous colleges and universities have also been able to profit from them. According to the Chronicle of Higher Education, $2 billion for research, construction and school projects was earmarked for colleges and universities in 2003. Criticizing the practice, President Bush stated that most earmarks don’t even make it to the floor of the House or Senate saying, “You didn’t vote them into law. I didn’t sign them into law.”
If earmarking is curbed, some schools may see a decline in their budgets, and will have to look elsewhere for additional funding. But because Mr. Bush was referring to the 2009 budget, legislators still have the option of bypassing a veto by delaying approval of the spending bill.
January 23, 2008
Faced with government subsidy cuts and a major slump in the mortgage loan market, Sallie Mae has decided to get picky about who they lend their money to. For students, this may be either a scary setback or a much-needed lesson in wise financing. Most likely, it will be both.
Students who don’t receive sufficient financial aid from the government will soon find it more difficult to secure the funding they need to cover college expenses. This may force more students to opt for cheaper but not necessarily most desirable colleges and universities. If the problem becomes severe, a drop in the number of students who pursue a college education may be seen.
However, the rising number of student borrowers with overwhelming debt may make the news a benefit in disguise. Many students don’t realize the impact debt can have on their post-graduate lifestyles. Students who cannot quickly find high-salary jobs often find themselves either struggling to get by or sacrificing career goals for better-paid, less appealing jobs.
Because of Sallie Mae’s high standing in the business, their decision may be an early indication of what’s to come. Students who decide to take out loans frequently turn to Sallie Mae for help. The company manages almost $164 billion in student loans for 10 million borrowers and tops the list of most popular lenders. Troubles for Sallie Mae may portend ones for lesser-known student lenders.
This is not the first setback Sallie Mae has faced in the recent months. Over the past year, details of New York Attorney General Andrew Cuomo’s investigation into illegal actions within the lending industry have placed Sallie Mae in hot waters. Along with a number of other lenders, Sallie Mae has been accused of paying college financial aid officials to place the lender’s name on preferred lender lists, lists students heavily rely on when making important and difficult borrowing decisions.
Luckily, loans are not a student’s only option. Those who cannot afford a postsecondary education and have not received enough government aid should take advantage of the numerous scholarship opportunities available to them. By conducting a free college scholarship search at Scholarships.com, students can gain access to information about more than 2.7 million college scholarships and grants worth over $19 billion. Just about everyone can find awards they will be eligible to receive.
April 30, 2008
After an appeal by the Students for Sensible Drug Policy (SSDP), an international grassroots network of students concerned about the impact drug abuse has had on communities, the court has once again rejected the claim that withholding federal student aid from drug offenders is unconstitutional.
According to the 1998 Higher Education Act, students who have been convicted for having, for the first time, used drugs are to be denied federal college funding, including free aid in the form of Pell Grants, from the government for one year. The length increases to two years for a second conviction and becomes permanent after the third. For those convicted of selling drugs, the punishment is a two-year federal aid loss or, for two offenses, the permanent withholding of federal aid.
The SSDPF has complained that the double jeopardy law, one which prevents an individual from being tried twice for the same offense, makes such procedures illegal. According to The Chronicle of Higher Education, Judge Kornmann disagreed with the claim stating that the law served legitimate federal interests by minimizing college drug use and preventing taxpayers from having to fund the education of drug users or sellers.
February 1, 2008
Complaints about skyrocketing tuitions at four-year colleges and universities have been reverberated around the nation for quite some time—especially within the past year. Less attention has been paid to the financial difficulties at community colleges.
Even though four-year schools offer less expensive classes, they also possess fewer funds to offer students additional help in affording an education. Many universities have alumni who donate thousands, sometimes millions to their beloved alma maters. Some have accumulated endowments in excess of $1 billion. Such is rarely the case for community colleges.
According to an article published by the Associated Press, the financing problem is further compounded by the fact that community colleges are in dire need of funding for graduation rate improvement. While few four-year colleges and universities can brag about the high number of students who receive diplomas after enrolling, especially as far as undergraduate programs are concerned, rates are particularly poor at community colleges. These schools enroll 6.6 million students who seek credits or degrees (and a few more million who don’t), but many students don't accomplish their graduation or transfer goals before leaving.
The results of a Cal State Sacramento Institute for Higher Education Leadership & Policy study that tracked 520,407 community college students over a six-year period showed that only 24 percent of those seeking to graduate or earn a degree were able to do so in six years.
Community colleges find themselves in a difficult situation because they need funds to get students in and ones to get them out, with a degree. These schools receive financial aid based on the student population, so they go out of their way to make enrollment easy. Once students are in, including ones with outside jobs and those who registered late, they have trouble completing their education.
February 5, 2008
On February 4th, President Bush unveiled his much criticized national budget to a frustrated Congress. Members of both parties found fault with the president for his proposal to increase funding for the military at the expense of Medicare. According to the Los Angeles Times, President Bush’s proposal could slow the growth of Medicare programs by nearly $208 billion over the next five years.
The budget for the Department of Education, on the other hand, was received with mixed reviews. A firm advocate of scientific research, the president proposed that funds for physical-science research, much of which would go to colleges and universities, increase in the upcoming year.
While physical scientists cheered in one corner, medical researchers jeered in the other. Once again, The National Institute of Health (NIH), the primary government agency responsible for health-related research, was upset with the president's funding proposal.
After his decision to veto a bill that would increase NIH funding in November, the president's budget did not come as much of a surprise. Upon hearing last year's proposal, Bush claimed that Congress was, "acting like a teenager with a new credit card." Ironically, if Bush's budget is approved, skyrocketing national debt is expected. The current U.S. debt could more than double over the next two years if Congress chooses to accept the budget. More likely, the proposal will be stalled until President Bush leaves office.
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