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by Agnes Jasinski

An analysis of long-term data conducted by The Chronicle of Higher Education has found that the number of students who default on their loans is far greater than what the federal government has been reporting. According to the data, about one in every five federal student loans overall has gone into default since 1995; the default rate for student loans covering costs at for-profit colleges is even higher, at 40 percent. The default rate for community college students is about 31 percent.

The federal government’s numbers are much lower. The U.S. Department of Education reported default rates for federally guaranteed student loans at about 6.9 percent for fiscal year 2007’s cohort. Why the disparity? The Chronicle says the government’s numbers only show those students who defaulted on their loans two years after entering repayment. The Chronicle’s analysis looks at 15 years of data. According to their new analysis, default rates only worsened as time went on, increasing years after those borrowers had left college.

For-profit colleges have already been getting some negative attention lately, with legislators concerned about the share of federal financial aid the schools receive compared to their total enrollment numbers. (The for-profit sector accounts for less than 10 percent of total enrollments but about 25 percent of federal financial aid disbursements.) This new data certainly won’t help them. If the federal government moves to pass rules on student loan default rates, a number of those institutions could be at risk for losing federal aid if they cannot improve their numbers. According to the Chronicle, there are a number of for-profit colleges out there that have default rates even higher than 40 percent, including the Tesst College of Technology and Chicago’s College of Office Technology.

No matter how you skeptically you look at the numbers—critics of the data have already said the numbers don’t consider the economy and the demographics and total enrolled at community college and for-profit universities versus four-year institutions—default rates should be taken seriously. Defaulting on your student loan is never a good idea. It hurts your credit, and any wages you do have may be seized by the government that issued you that loan. It’ll then be harder to not only make ends meet, but to get other loans years down the line, including mortgages and new credit cards. You may also be faced with higher interest rates if you are able to land that car loan. You can see now how important it is to borrow responsibly and make sure that if you do need to take out student loans, you’re doing so to pay for the costs of an accredited program that will help you land a decent job after graduation.

by Suada Kolovic

Dropping out of college would surely ruffle a few feathers at home, but it seems mom and dad may not be the only ones affected. While dropping out after a year can translate into lost time and a mountain of debt for the student, now there’s an estimate of what it costs taxpayers: billions.

According to a report released Monday, states appropriated almost $6.2 billion for four-year colleges and universities between 2003 and 2008 to help pay for the education of students who did not return for year two. The report takes into account spending on average per-student state appropriations, state grants and federal grants – such as Pell grants for low-income students – then reaches its cost conclusions based on students retention rates. It’s worth mentioning though that the report’s conclusions are considered incomplete: Because it’s based on data from the U.S. Education Department, it does not take account of students who attend part time, who leave college in order to transfer to another institution, or who drop out but return later to receive their degrees.

And with figures in the billions, critics agree that too many students are attending four-year schools – and that pushing them to finish wastes even more taxpayer money. Robert Lerman, an American University economics professor, questions promoting college for all. He said the reports fleshes out the reality of high dropout rates. But it could just as easily be used to argue that less-prepared, less-motivated students are better off not going to college."Getting them to go a second year might waste even more money," Lerman said. "Who knows?"

by Suada Kolovic

With the typical six-month grace period on student loans right around the corner, recent college graduates across the country will start making monthly payments whether they’re ready to or not . If you’re one of those students, or just starting your college career, here are a few suggestions from the Project on Student Debt, an initiative of the Institute for College Access & Success, a nonprofit independent research and policy organization, on how to manage your loans.

• Know where you stand.

  A great way to get the exact amount you owe is to visit your lender – in some cases, lenders – or you can find details of your student loans, including balances, by visiting the National Student Loan Data System, the U.S. Department of Education’s central database for student aid. If you have non-federal loans, there is a possibility they won’t be listed so contact your institution for that information.

• When’s the first payment?

  The grace period for student loans is the time after graduation before having to make your first payment. But the length of grace periods can vary; for Federal Stafford loans it’s six months, nine months for Federal Perkins Loans and Federal Plus Loans depend of when they were issued. To find out the grace period attached to private loans contact your lender.

• Keep in touch with your lender.

  It’s important to remember to keep your contact information updated with your lender. Whether you’re moving or changing your phone number, an updated contact sheet could save you from unnecessary fees.

• Consider what repayment option works best for you.

  One option is the Income-Based Repayment Program (IBR), which is not available on private loans, that sets a reasonable monthly payment based on a borrower’s income and family size. Under IBR, after 25 years of qualifying payments, your remaining debt, including interest, will be forgiven.

• Prepare for life and the unexpected.

  Sometimes life doesn’t go according to plan. If you can’t make payments due to unemployment, health issues or other unexpected financial challenges, you have options for managing your federal student loans. There are options to temporarily postpone your payments, such as deferments and forbearance. Contact your lender for more information and the interest attached to those options.

• Never ignore your financial responsibilities.

  Ignoring your student loans – or any loan for that matter – can result in serious consequences that can last a lifetime. When you default, your total loan balance becomes due, your credit score is ruined and the total amount you owe increases dramatically. If you default on a federal loan, the government can garnish your wages and seize your tax refunds.

by Suada Kolovic

The U.S. House of Representatives passed legislation Wednesday to give undocumented students who’ve graduated from high school, completed two years of college or military service and have no criminal record a shot at citizenship. The bill, known as the Dream Act, passed by a 216-198 vote after heated debates stemming from the fact that said students would also be eligible for federal financial aid.

The legislation is backed by President Obama who, according to the Huffington Post, called it “an important step” toward comprehensive immigration reform. In a statement, Obama said, "This vote is not only the right thing to do for a group of talented young people who seek to serve a country they know as their own by continuing their education or serving in the military, but it is the right thing for the United States of America.” Republicans, on the other hand, have slammed the bill and repeatedly referred to the Dream Act as a “nightmare act.” Rep. Dana Rohrabacher (R-Calif.) described the bill as nothing more than “mass amnesty that will undoubtedly encourage millions more to illegally immigrate into our country.”

Today, the Senate is scheduled to vote on whether to begin debate on a slightly different version of the bill...though it’s unlikely Democrats can muster the 60 votes needed in the 100-memeber chamber to advance it.

by Alexis Mattera

While "Honest Barack" doesn't have quite the same ring as our 16th President’s nickname, we have to give him credit for keeping his promise to privilege spending on education and research...for the most part: Some potentially painful cuts could slice through the higher education pie relatively soon.

First, the good news. The 2012 budget blueprint reveals the maximum Pell Grant (currently set at $5,550 per year) would not be slashed by $845 as originally expected and funding will continue for financial aid programs including AmeriCorps, the Perkins Loan and Supplemental Educational Opportunity Grant Programs and academic research agencies. The Education Department's overall budget would grow by 4.3 percent in 2012 under the President's budget but despite this positive information, it won’t be all unicorns and butterflies for college students. Education Secretary Arne Duncan said the administration had to make some "tough choices" to maintain the current level of funding and compensate for future spending. For example, the department's 2012 budget calls for ending a three-year experiment allowing students to qualify for two Pell Grants in a calendar year and use this funding to attend college year-round, as well as eliminating the subsidy in which the government pays interest on graduate student loans while the students are in school; the Leveraging Educational Assistance Partnership Program, the Byrd Honors Scholarships and the TEACH Grant program would also be eliminated.

Obama said, "Education is an investment that we need to win the future...and to make sure that we can afford these investments, we’re going to have to get serious about cutting back on those things that would be nice to have but we can do without," but student advocates, like Justin Draeger, president of the National Association of Student Financial Aid Administrators, were quick to show their displeasure. "It is regrettable that the administration is proposing to maintain Pell by making cuts to other student aid programs that provide much needed funds to students," he said.

The information above merely scratches the surface (check out Inside Higher Ed’s article for all details) but it’s enough to get the conversation started. What do you think of the proposed budget? Will the changes impact your ability to pay for school? Would you propose a different course of action?

by Suada Kolovic

The GOP is no stranger to controversy and Friday’s interview with Rep. Denny Rehberg (R-Mont.) was no exception. In a radio interview with Blog Talk Radio, Rehberg went on a rant in which he compared the Pell Grant Program – the nation’s largest financial aid program – to the likes of welfare and denounced the fact that students who receive them don’t have a graduation requirement. "You can go to school, collect your Pell Grants, get food stamps, low-income energy assistance, section 8 housing, and all of a sudden we find ourselves subsidizing people that don’t have to graduate from college.” Rehberg added under the federal program, a student could "go to school for nine years on Pell Grants and you don’t even have to get a degree."

Jason Delisle, director of the Federal Education Budget Project at the New America Foundation, took issue with Rehberg's comments. "I don't know if it's a fair characterization that someone has decided to go through the hoops of applying to college, getting enrolled and showing up every day because it's the welfare lifestyle," he said. "If the issue is people are being lazy and living off the dole, so to speak, I don't think their first step is to enroll in college."

For the 2012 fiscal year, the Pell Grant program is set to exceed $40 billion. Some lawmakers have been exploring ways to reduce the cost of the programs by lowering the maximum grant size – which is currently $5,550 – or restricting eligibility. In Montana, Rehberg recently voted for the House GOP budget resolution, which would reduce the maximum Pell Grant to $4,705 and narrow the eligibility of applicants. If you’re eligible for Pell Grants, what do you think? Are Rehberg’s assumptions out of line?

by Brittni Fitzgerald

Working part-time while in school has its benefits because you are getting real work experience but if you don’t want the headache of balancing an outside job and school, there is another option: work-study.

Work-study allows you work on campus but the employer works with your school schedule. They understand that your first priority is being a student; off-campus part-time jobs typically do not have this extra benefit and are not as flexible with your work schedule and school schedule as a work-study job can be. Some work-study programs even allow days off during midterms and finals so you can study, compose papers and have an overall lower stress level.

As for compensation, part-time job and work-study positions usually pay similarly because of the minimum wage laws observed in most states. The downfall with having a part-time job that is not located on campus and you have to drive back and forth to campus for class – with today’s gas prices, why drive to work when you can work from campus? – and once you secure a work-study position, it's likely you can keep it until you graduate. Talk about job security!

Now that you see why work-study can be more valuable than working a part time job, find out what the work-study options are at your school and check out this post from Kara Coleman, another Scholarships.com virtual intern, about finding the right place to work on campus.

Though she moved from Fremont, Calif., to Chicago at the age of 5, Brittni Fitzgerald will always remember the sun and fun of California life. She is the youngest of six children and is currently attending Chicago State University. There, Brittni is an accounting major and an active member of the Student Government Association but also a published poet (in 8th grade, her work was published with the Illinois’s 2004 “Celebrate! Young Poets Speak Out”). Brittni enjoys running, swimming, dancing, singing and shopping. Her motto is “Live Life Loud.”

by Alexis Mattera

Ladies and gentlemen, prospective and current college students, I (or the federal government, rather) give you the 2011-2012 Free Application for Federal Student Aid (FAFSA). Hooray!

Vacuum up the confetti because it’s time to get down to business. January 1st marks the first day college-bound seniors, continuing undergraduate and graduate students, and their parents can begin filling out the FAFSA online. Completing the FAFSA is a vital part of the college process: The Department of Education uses it to determine eligibility for federal student financial aid for college. This aid includes federal grant programs (such as the Pell Grant), federal work study, and federal student loans; it is also used by states to determine eligibility for their college aid programs, such as state grants. Colleges also use the FAFSA to determine eligibility for the need-based aid programs they administer and, finally, many scholarship opportunities request FAFSA information as part of their application processes. Even if you think that you won’t qualify for free money in the form of need-based college scholarships and grants, you should still apply. At the minimum, the vast majority of students qualify for Stafford Loans, low-interest federal student loans that represent one of the best deals in borrowing and paying for school.

Submission deadlines vary by state (verify yours sooner than later here) so, as with any sort of college funding, we recommend you complete the FAFSA as early as possible because funds do run out. For more information, visit the official FAFSA website or review our federal aid pages. Happy filing (and New Year)!

by Alexis Mattera

Applying for scholarships requires hard work, creativity and time...not boatloads of cash, frustration and empty promises. Each year, however, students are duped into ponying up exorbitant application fees for scholarships they aren’t even guaranteed to win. This is just plain WRONG, people – scholarships are supposed to be free money for college! – and while we’re betting you’ve already checked out our pages on scholarship scam prevention, the Washington Post recently published some refresher info:

• Filling out the FAFSA is 100-percent free and you can do it either online or on paper. If you would like to fill it out online, be sure your search terms are correct: A seemingly small typo like "FASFA" can direct you to sites that ask you to pay to file...and the forms they have are sometimes the wrong ones.
• It's legal for for-profit companies to charge for providing scholarship information but it's illegal for them to collect fees but never provide the information, misrepresent themselves as government officials or guarantee they'll get the student full funding for college.
• Voice any concerns about an organization to a high school or college counselor; they've been there and done that and can point you to the truth.
• If you are alerted that you're a finalist for a contest you've never entered or if credit card/banking information is requested online, go no further unless you are positive the organization is legit.
• Don't give in to anything branded as a "limited time offer" or "exclusive opportunity." They're just high-pressure sales tactics.
• Investigate the success stories presented at seminars. These so-called "satisfied customers" could have been paid to give glowing recommendations so ask for a list of at least three local families who used the service and contact them directly to make sure the organization delivered on its promises.
• If you do find a legitimate organization that requires payment, get in writing how much the service costs, what exactly the company will do and the refund policy.

College is expensive enough so save those application fees for books and other college expenses: All Scholarships.com’s services – from the scholarship search and college matchmaker to financial aid information and college preparation tips – are available completely free of charge. You’re welcome!

by Suada Kolovic

If you’re a high school senior and have received your financial aid package from your dream school, listen up: Congress may cut the Pell Grant program’s budget this year and colleges may have to roll back a portion of the financial-aid offers they made to students for the coming academic year. Translation: You may receive a smaller financial-aid package than was originally offered.

According to the Chronicle, both parties acknowledge that some type of restructuring will be necessary to put the program on sound financial footing, but lawmakers disagree on the size and scope of the cuts. Some proposals suggest lowering the maximum award, ending the year-round program and changing the income requirements in order to reduce the number of people eligible for the grants.

At a news conference held by the U.S. Public Interest Research Group, a college administrator and student advocates agree that cuts in award levels this late in the admissions process would be particularly hurtful to the low-income families the program serves. "Families with the most unsteady income, or who don't have much financial flexibility ... need the most time to thoroughly plan out their expenses," said Misty Whelan, a Pennsylvania high school counselor. With most decision deadlines around the corner – May 1 at many colleges – how do you feel knowing these cuts could potentially dictate where you go? Do you think it’s fair for colleges to backtrack on their offers? What ever happened to no takesy backsies?