September 30, 2008
The U.S. Department of Education released a series of new statistical reports last week showing a dramatic increase in participation in the federal direct lending student loan program. Motivated largely by the economic downturn and the credit crunch of the last year, 400 new colleges joined the federal direct lending program. Overall, student borrowing through the program has increased by 50 percent in the last year.
The federal direct lending program provides students at participating schools with Stafford Loans directly, instead of going through the intermediary of a bank, as is done in the Federal Family Education Loan Program (FFELP). In previous years, borrowing through FFELP could land students with lower interest rates, as well as significant repayment incentives, but that has changed significantly since 2007 as a result of subsidy cuts and economic difficulties faced by FFELP lenders. Since direct loans are serviced directly by the Education Department, they are largely exempt from the fallout of the credit crunch and are currently more appealing to many colleges.
There is good news for students at schools that continue to participate in FFELP, though. Lenders are participating in the loan buyback program enacted as part of the Ensuring Continued Access to Student Loans Act passed earlier this year. About 40 percent of the student loans in the bank system have been sold to the Education Department, with paperwork being completed on much of the remaining balance. This move appears to have worked to allow lenders to fund loans for students, as the Education Department also reports that not a single student has had to participate in the federal "lender of last resort" program.
In other financial aid news, Congress recently approved $2.5 billion in Pell Grant funding, to help tide the program over through March 2009, at which point most spring semester grant awards should have been disbursed. All of this news suggests that students are highly likely to be able to continue to find federal student financial aid for college, at least for the forseeable future. Of course, finding scholarships and avoiding student loans is still a smart plan, but this news suggests that despite growing fears about the economy, federal financial aid will still be available to students who need it.
September 29, 2008
This week's Scholarship of the Week is an essay scholarship for all the opinionated female college students out there. The Independent Women's Forum is sponsoring an essay contest open to any woman currently enrolled in a four-year college or university. The essay prompt asks students to share their opinions on the cost-effectiveness of federal spending to combat the potential impact of global climate change. A 750-word response could earn you up to $5,000 in scholarship money!
Prize: One first prize winner will receive $5,000. Second and third prize winners will receive $2,000 and $1,000 respectively. Ten honorable mentions will each receive $250.
Eligibility: Female students of any age enrolled in a four-year college or university during the 2008-2009 school year.
Deadline: December 1, 2008.
Required Materials: Completed scholarship application, available on the Independent Women's Forum website, and an essay of no more than 750 words answering the question posted on the IWF Essay Contest website.
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 26, 2008
Congress will be in session only a few more days before breaking for the November election. While a lot has already been accomplished this session in terms of educational spending, such as the passage and renewal of ECASLA and the reauthorization of the Higher Education Act, some education funding concerns still need to be addressed. Primary among these is the education and research spending bill that will fund research and federal student financial aid programs for fiscal year 2009, which remains on the Congressional to do list.
When Congress reconvenes either in November or January, one of the most pressing financial issues they will have to contend with is finding the money to cover a projected $6 billion shortfall in the budget for the Federal Pell Grant program. Lobbyists still worry that Congress may wind up having to cut the maximum grant award, as they did last year when the bill exceeded Bush's budgetary requests. However, given the popularity of the program, such cuts are unlikely, especially after all of the attention financial aid has been receiving this election season.
Another issue Congress may contend with is whether to combine higher education tax credit programs, such as the Hope and Lifetime Learning credits into a single, partially refundable credit. The idea has received widespread support and is expected to come up during the next Congressional session.
You can read more about the educational issues still on Congress's plate in today's Chronicle of Higher Education.
September 25, 2008
In the wake of the credit crisis of the past year, innumerable articles have been written about the impact on the student loan industry, as several student lending agencies have been forced to stop offering federal and private loans to students or at least scale back their operations considerably. Credit requirements have gotten more stringent for students whose lenders are still in business, and taking out a student loan is an even more time-consuming and uncertain process now than ever.
At the same time, the economic downturn that's accompanied the credit crisis is highlighting the difficulty students are facing repaying all of these student loans--loans they're being told now that they're lucky to get. Many students feel caught in a difficult position. Do they take out student loans, go horribly in debt, but get to ultimately pursue a fulfilling degree and a potentially more fulfilling career? Do they work full-time through school and take longer to get the degree and spend less time in their dream job? Or do they minimize debt by going to work sooner in a field that's easier to break into and requires less education?
According to the results of a survey published in the Boston Business Journal, that first option might not even be an option for many students. An online poll of 336 recent college grads revealed that 47 percent said that their career pursuits were influenced by their need to make student loan payments, while 25 percent reported putting future education plans on hold in order to minimize debt. While these numbers are the results of only one web survey, they still send a pretty clear message that avoiding student loans is a good idea when trying to pay your way through school.
Congress is advocating the wider adoption of college savings accounts, such as 529 plans, and more universities are retooling their financial aid packages to benefit more needy students and rely more heavily on scholarships than on student loans. Many of the nation's top colleges have made a commitment to helping all accepted students afford to attend, and other schools are offering larger scholarship awards to students who most need them, as well. For example, Spelman College in Atlanta, Georgia just launched the Starfish Initiative, where anonymous donations are used to cover the remaining tuition balances of deserving seniors who might otherwise need to take out a substantial private loan or leave college.
But institutional aid and college savings accounts aren't the only options available to students. A vast number of scholarship opportunities are out there, and despite the scholarship myths you may have heard, you can fund a substantial portion of your college education with such sources. So start your scholarship search early and be persistent. While soaring college costs and a weak economy may make it harder to pay for school, they don't mean you have to stay home or be overwhelmed by debt. Do your research and find out what resources are available to help fund your education.
September 24, 2008
The National Association of College Admission Counselors (NACAC) plans to address questions of early decision admission and the role of standardized testing in the admission process in panels during their annual conference this week. In preparation, they have released the results of a survey showing that early decision admissions had begun to fall, as well as commentary on the state of the Scholastic Aptitude Test (SAT) and American College Test (ACT) in college admissions.
A special panel convened by NACAC released a statement suggesting that standardized tests such as the SAT and ACT may play too prominent a role in college admissions. While the report emphasizes that standardized tests can play an important role in the admissions process, especially in helping students choose which schools may be a good fit for them, it also declared the importance of avoiding a one-size-fits-all approach to testing. This position represents a shift from previous NACAC commissions' stances on standardized testing.
Another survey released this week by NACAC highlighted other shifts in college admissions, namely a slowing of the increase in early decision admissions as compared to previous years. Many schools are giving students going through the college application process the option to make a binding committment to attend that college if accepted in a process known as early decision. Critics argue that this puts poorer students who are unwilling to commit to attending a college without receiving their financial aid package at a distinct disadvantage in being considered for admission. While many colleges still are embracing the idea, this shift in figures could show some hesitation on the part of admission offices or students regarding the still-controversial issue.
Additionally, the survey illustrated some doubt regarding a new practice of priority applications, which are sent to students based on a variety of criteria and are already partially completed. Priority admission applications are sent by the school, rather than requested by the student, and are typically sent out based on prior contact with the admissions office, test scores, or geographic location. Only 4% of these forms, which occasionally come with an application fee waiver, are sent to students based on economic status.
Other survey results showed that more students seem concerned with ensuring they make the right college choice, and that most students who apply to schools are given the opportunity to go to college. An increasing number of students are applying to more than seven colleges, and that about the same number of students as the previous year applied to more than three schools. Nationally, 68 percent of students who apply to colleges are admitted. Online applications also continue to gain popularity.
September 23, 2008
A study abroad experience can be an important part of attending college. Study abroad programs expose college students to other languages and cultures, giving them a valuable experience beyond mere tourism, and allowing them to gain a better sense of the wider world and their place in it. For many students, trips abroad help shape their identities and their college experiences, typically for the better. However, for many students, studying abroad is still seen as an option open only to white, well-traveled, and well-off students.
This stereotype has been highlighted both by popular media (the Chronicle of Higher Education points to a post in the popular blog Stuff White People Like, which humorously explains trends embraced by young, urban, middle-class, and predominately white people) and by academia. Unfortunately, unlike other stereotypes and scholarship myths, it has some truth to it, as more white students tend to travel abroad while in school. However, colleges and scholarship providers are struggling to change this and attract more minority and working-class students to study abroad programs.
Over the last few years, many schools have increased efforts to promote study abroad as something not only attainable but desirable for students who haven't yet traveled outside the US. These efforts include making minority students more visible in promotional materials, making shorter and more affordable study abroad options available, and highlighting financial aid opportunities available to lower income students.
One such scholarship award, mentioned in the Chronicle of Higher Education article, is the Benjamin A. Gilman International Scholarship Program, which helps fund semesters abroad for Pell Grant recipients. Numerous other study abroad scholarships exist, and low-income and minority students, as well as any students unsure of their ability to afford to study outside the country, are encouraged to apply. To find out more about study abroad programs, talk to the study abroad office at your college. To find more scholarship money for study abroad, conduct a free scholarship search on Scholarships.com, where we list several awards applicable to studying outside the country, as well as other opportunities for need-based financial aid and scholarships for minorities.
September 22, 2008
Lately, we've made a few blog posts about efforts to lower the amount students are forced to spend on college textbooks. Professors are starting to turn to more and more online and open-source course material, Congress has legislated changes in the way textbook sellers do business, and students at the University of Michigan can now print a bound copy of a non-copyrighted book for $10. However, cool stuff happening at other schools or scheduled to happen in the future doesn't necessarily help you afford that $150 biology textbook now. For those of you still struggling with coming up with an additional $500 or more to buy books, this week's Scholarship of the Week can help.
Beans for Books, a non-profit organization started by students working at coffee shops, raises money to help top students afford the textbooks they need to continue to succeed in college. Grants of $500-1000 are awarded each semester to be used solely for buying books. The application cycle for the spring semester is just beginning, so if you're anticipating a semester laden with science, math, and foreign language classes, now is the time to apply!
Prize: Winners will receive a grant of $500-1000 to be spent on textbooks for the next college term.
Eligibility: Students who will be enrolled in college in the following semester, and who demonstrate financial need and maintain a GPA of at least 3.7 on a 4.0 scale.
Deadline: Varies by semester.
Required Materials: Completed online scholarship application, available on the Beans for Books website.
September 19, 2008
In order to reduce the amount their students have to spend on textbooks, more and more professors are using course material that can be found for free. With the advent of sites such as Google Books, which serve as valuable and easily accessible sources of full-text works that are no longer copyrighted, students can get their course material for free, rather than having to shell out $15 or more for a brand new copy of a book originally published a century ago. I noticed this trend gaining momentum throughout my academic career, especially in courses geared towards graduate students.
This option to access older literature online and save money is nice, but it still leaves students who don't want to spend hours hunched over their computers with the task of tracking down a hard copy of the book on their own, especially since my professors, at least, never seemed to place bookstore orders for texts they knew we could find for free. Buying a copy requires forethought and printing the complete text of a 200-page essay can eat up a student's morning and their on-campus printing budget. This scenario too often leaves students with less than a week to find, read, annotate, and understand a lengthy reading assignment for class.
The University of Michigan has just taken a step to make procuring books for class easier. They have purchased and installed a machine, dubbed the "ATM of Books," that can print and bind a book in a few minutes at a cost to students of around $10 per copy. This isn't much more expensive than buying a used paperback online or in the bookstore and is much faster and more convenient.
The Espresso Book Machine has access to the school's database of pre-1923 books, as well as websites that offer works that are not copyrighted, such as open-source textbooks. Coupled with trends in making more course-related content available online, such as Stanford's recent move to place engineering and computer science course materials online, widespread use of the Espresso Book Machine could revolutionize the way students get textbooks.
This is nothing but good news for students: free digital course material, $10 bound copies of textbooks, and no worries about hunting all over for a book or printing a copy and losing pages. With the prospect of eventually spending as little as $40-100 on textbooks for a semester, students at the University of Michigan will be able to stretch their financial aid dollars further and dip less into their college savings for books. As online libraries of free textbooks continue to expand, hopefully other schools will invest in similar tools, cutting down on students' book expenses and making it a little bit easier to pay for school.
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.
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