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Study Shows Substantial Increase in Private Student Borrowing

April 23, 2009

by Scholarships.com Staff

Analyses of the data published last week by the National Center for Education Statistics are already starting to emerge.  The Project on Student Debt has announced that a significantly larger portion of students borrowed private loans in the 2007-2008 academic year than in 2003-2004, according to the NCES survey.

Private loan borrowing increased by 9 percentage points, with 14 percent of students now relying on private loans, as opposed to 5 percent in 2003-2004.  Not surprisingly, more expensive schools saw the biggest increase in private student loans.  At for-profit colleges, the percentage of students borrowing private loans increased from 14 percent to 43 percent, while private non-profit colleges also saw a substantial increase.  Overall, 32 percent of students at schools charging more than $10,000 per year in tuition wound up borrowing private loans in 2007-2008.

While the credit crunch may slow the rate of private borrowing in the near future, these student loans still are regarded as the best or only option by some students.  According to the Project on Student Debt's analysis, 26 percent of private loan borrowers did not take out any Stafford Loans first, and 14 percent did not even complete the FAFSA.

Private loans generally carry the highest interest rates and least flexible repayment terms out of all student loans and most experts encourage students to avoid them if possible.  Explore other options for financial aid first, especially grants and scholarships.  You will also want to consider your potential debt loand when choosing a college.  Since students at more expensive schools are more likely to have to borrow private loans, students with limited financial resources should think carefully about the relative merits of a private college as opposed to a state college or community college before committing themselves to private loan debt.

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Obama Signs National Service Bill

April 22, 2009

by Scholarships.com Staff

Yesterday, President Obama signed into law a bill to expand Americorps, a national service program that provides small stipends to people of all ages engaged in volunteer work throughout the country.  The act, officially known as the Edward M. Kennedy Serve America Act, paves the way for Americorps to grow in size from its present 75,000 volunteers to as many as 250,000 volunteers by 2017.

In addition to creating more volunteer positions, the Serve America Act will also increase the education stipend for volunteers to $5,350, the same amount as Federal Pell Grants.  This will enable more recent graduates and people currently attending college to participate in Americorps programs, which are becoming an increasingly popular alternative to employment in the current economy.

The national service bill, sponsored by Senator Kennedy, quickly made its way through both houses of Congress, receiving bipartisan support, as well as a ringing endorsement from President Obama, who has long been a proponent of community service.  Congress still needs to find funding for Americorps to begin to expand, but a provision to provide an immediate 25% increase in funding to the program was included in Obama's 2010 budget proposal.

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Anonymous Donations Fund Scholarships at Several Universities

April 21, 2009

by Scholarships.com Staff

In the past few weeks, at least nine universities have received donations of at least $1 million, with instructions that the money be used primarily to fund scholarship programs. The donations, which total at least $45 million, have been given to colleges across the country since March, according to the Associated Press.

While anonymous donations happen from time to time, this circumstance is still highly unusual, since no college officials know who provided the gifts.  Typically, the college knows the donor's identity but agrees not to reveal it.  However, schools benefiting from this wave of anonymous donations have been contacted by representatives of banks or law firms, rather than by the donors themselves, and have been asked not to attempt to ascertain the donor's identity.

The donations have largely been met with gratitude. They are well-timed, given the state of the economy and many colleges' current attempts to meet the increased financial need of students.  Families are experiencing greater need for financial aid, and colleges' endowment funds, including endowed scholarships, have lost large amounts of money, giving them fewer resources to use.

For students at these colleges, as well as other schools that have recently benefited from generous donations, the scholarship opportunities they provide could mean the difference between attending college and staying home.  However, these anonymous donors are not the only people out there dedicated to making a college education possible for students in tough times.  You can do a free scholarship search for information on more scholarship awards.

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Dr. Alma Adams Scholarship

April 20, 2009

by Scholarships.com Staff

Students who are passionate about public health and also have a creative side may be interested in applying for this week's Scholarship of the Week, the Dr. Alma Adams Scholarship.  Adams Scholarships are awarded to students for their outstanding community service and use of artistic abilities to increase awareness about the toll of tobacco within underserved communities.  The awards recognize Alma Adams, a professional artist, educator, North Carolina state legislator and former board member of the American Legacy Foundation.

Up to two scholarships will be awarded each year to students who are pursuing a career related to public health and who have placed an emphasis on working with disadvantaged communities or groups that have been particularly targeted by tobacco advertising campaigns.  Adams Scholarships are awarded to students who have shown a commitment to educate members of these communities about tobacco and drug use, especially through creative campaigns.

Prize:

$10,000

Eligibility:

High school seniors and current undergraduate or graduate students planning to pursue a career in public health, health communications, social work, education, or a related field.  Applicants must demonstrate financial need and must have received a GPA of at least 3.0 in the most recent academic year.  Applicants should also have previous experience working with an underserved community, particularly working to prevent tobacco or drug use. 

Deadline:

April 30, 2009

Required Material:

A completed scholarship application, a personal statement of 500-600 words, a copy of your Student Aid Report and most recent transcripts, and samples of your originally developed health communication materials.

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.

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A Look Inside a Financial Aid Office

April 17, 2009

by Scholarships.com Staff

There was an interesting article in The New York Times today offering a rare behind-the-scenes look at a university financial aid office.  If you're still baffled by your financial aid award letter, or you just are curious to find out how it was created, this article is a good read.  While it focuses on Boston University, an elite and expensive private college, many of the processes discussed carry over to other schools, both public and private.

The article does an especially good job of explaining how financial need is determined, using the FAFSA, the CSS profile and an institution's policies.  It also includes a couple of concrete examples of financial aid packages and family circumstances that provide a valuable window into the logic behind determining financial aid awards, especially for families who may have received markedly different offers from different institutions.  While I'm not sure how universal the process of weighing aid so heavily in the favor of the top tier of students is, it definitely provides support for the idea of broadening your college search and applying to a wide range of colleges and comparing financial aid offers.

The complex nature of college financial aid awards, as well as the common practice of "gapping," where the school does not cover a student's entire financial need, also make a compelling argument for doing a thorough scholarship search.  While some of the largest college scholarships and grants come from universities, there's no guarantee you'll land a full-tuition scholarship anywhere you apply.  Winning scholarships from other organizations gives you more flexibility in where you attend college, as well as a greater level of certainty about how much help you'll receive.

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College Students' Credit Card Debt Increasing

April 16, 2009

by Scholarships.com Staff

While an increasing number of college students received financial aid in the 2007-2008 academic year, that calendar year students also ran up more credit card debt.  The average college student owed $3,173 on credit cards in March 2008, compared to $2,169 in 2004.  This information comes from the student lender Sallie Mae, which has been tracking students' credit card debt since 1998.

The study also found that student credit card debt increases with grade level.  The average freshman owed $2,038 on credit cards, while the average senior owed $4,138.  The money is not just being spent on beer and pizza, either.  According to a supplemental survey by Sallie Mae, the vast majority of students (92 percent) report charging at least one educational expense, such as books, to a credit card.  This figure is also higher than in 2004, as is the percentage of students charging tuition to a credit card, which now stands at nearly 30 percent.  Students reported charging an average of $2,000 in educational expenses to credit cards.

Higher tuition, a poor economy, and difficulty finding private loans may have already pushed these numbers higher for 2009.  With high interest rates and the need to begin repayment immediately, credit cards are one of the worst ways to pay for school.  Scholarship opportunities and federal student financial aid should definitely be explored before students resort to charging tuition to a card.  A variety of grants and scholarships, as well as low interest student loans, can help students avoid credit card debt while in college, and keep their debt from consuming their entire salary when they graduate.  Before you reach for the plastic to pay your campus bills, spend a few minutes doing a free scholarship search.  You may be very glad you did.

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More Students Receiving Financial Aid

April 15, 2009

by Scholarships.com Staff

As college costs continue to rise, the percentage of students receiving financial aid also continues to grow.  As of the 2007-2008 academic year, a full two-thirds of undergraduate students received some form of student financial aid, with 47 percent receiving federal aid. This is according to the "First Look" report on the National Postsecondary Student Aid Study published by the National Center for Education Statistics yesterday.

The First Look report shows that the percentage of students receiving aid has continued to increase, from 63 percent in 2003-2004, and 55 percent in 1999-2000.  It also provides a breakdown of the percentage of students receiving different forms of financial aid, such as grants and scholarships, federal student loans, federal work-study, and federal PLUS loans.  According to the report, 52 percent of students received college scholarships and grants, while 38 percent of students borrowed federal student loans.  Relatively few students took advantage of work-study and PLUS loans.

NCES collects and publishes data on financial aid every three years and the First Look report is typically followed by a more in-depth analysis.  The National Postsecondary Student Aid Study draws from a sizable sample of students:  114,000 undergraduates and 14,000 graduates at 1,600 colleges and universities. Additional information is available on the NCES website.

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Understanding Your Financial Aid Award Letter III

April 14, 2009

by Scholarships.com Staff

Today we move on to the final part of our Understanding Your Financial Aid Award Letter series.  If you were lucky enough to have your entire tuition paid through free money for college, then you can stop reading now.  But the vast majority of students who apply for aid will be awarded at least one less ideal form of financial aid.  Sorting through the rest of your award letter is the tough part--this is where difficult choices may need to be made, including whether and how much to borrow.

Understanding Your Award Letter, Part III: Work-Study and Student Loans

While you probably would not want to decline any of the free money we discussed last week, you may want to turn down some of the aid covered today.  You are allowed to decline any assistance on your award letter if you feel you will not need it, and you can also elect to take a smaller amount than what is given.  Keep this in mind when budgeting for the year, and don't feel obligated to borrow more than you need.  If you change your mind and need this aid later, you can usually get it back.

Federal Work-Study

If you have remaining financial need after any grants and scholarships you've been awarded, you may see an award of federal work-study on your letter.  This is a federally subsidized program for students working certain jobs on, and occasionally off, campus.  Work-study is not money you will receive up front.  You need to get a job that is funded through the work-study program to receive this money, and it will be given to you as a paycheck, not as money off your bill.  Since many jobs on campus are reserved for work-study students, it can be a great option if you're planning to work while you're in college.

However, if you already have a job that is not funded through work-study or you do not plan to work, you may want to decline this award.  There's no penalty for failing to use your work-study, but if you've been funded to your full need or cost of attendance, canceling your work-study may free up space for more or better student loans than you would have otherwise received.

Student Loans

There are two main categories of student loans: federal loans and private loans.  Federal loans include subsidized and unsubsidized Stafford Loans, as well as Perkins Loans and PLUS Loans.  Private loans come from banks and typically carry higher interest rates, though some states offer their own low-interest student loan programs.  Depending on whether the school you attend participates in the Federal Direct Loans Program, or the bank-based Federal Family Education Loan Program, your federal Stafford Loans and PLUS Loans may be issued by a bank, but their terms are still set by the federal government.  We have more detailed breakdowns of the different forms of student loans on our site, but here's a quick refresher, in rough order of desirability.

Federal Perkins Loans

Currently, Perkins Loans have limited funding and are often reserved for students with higher financial need.  Schools award these at their discretion, but you apply for them through the FAFSA.  However, if you receive one, you may want to take it, as they currently carry the lowest interest rates and some of the most favorable repayment terms.  Perkins Loans have a fixed 5 percent interest rate and a 10 year repayment period.  They are subsidized loans, which means interest does not accrue while you are in school.  They also have a 9-month grace period before repayment begins.  The current Perkins Loan limits are $5,500 per year for undergraduates and $8,000 per year for graduate students.

Federal Stafford Loans

Federal Stafford Loans come in two varieties, subsidized and unsubsidized.  Subsidized loans won't accrue interest while you're in college, while unsubsidized loans will.  These are awarded automatically if you indicated on your FAFSA that you are interested in student loans.  The interest rates on Stafford Loans are set by Congress, and are currently fixed at 6.0% for subsidized loans and 6.8% for unsubsidized loans for the life of the loan.  Stafford Loans come with a six-month grace period and a variety of repayment plans, most in the range of 10 to 15 years.  The amount you can borrow each year is based on your grade level, and ranges from $5,500 for dependent freshmen to $20,500 for graduate students.

PLUS Loans

You may or may not see a PLUS Loan listed on your award letter.  This is a federal loan program that allows parents to borrow for their students, up to the student's full cost of attendance.  Some schools include these to fill the gap between your financial aid and your cost of attendance, as a way of letting you know the option exists.  While you are guaranteed to receive a Stafford Loan regardless of your credit, so long as you complete a few basic requirements, PLUS Loans, like private loans, require an application and a credit check (if your parents are denied a PLUS Loan, you can apply for additional Stafford Loans through the financial aid office).

Whether or not you see a PLUS Loan on your award letter, if you still need to borrow money to pay for school, this loan can be an option for many.  PLUS Loans currently carry a fixed interest rate of 7.9 percent for Direct Loans and 8.5 percent for FFEL.  Loans can be repaid immediately or starting six months after graduation, but interest will accrue while you're in school.  Research the relative merits of PLUS Loans and various private loans and discuss with your family which option will be best for you.

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The Kosciuszko Foundation Historical Essay Contest

April 13, 2009

by Scholarships.com Staff

Here's an essay contest especially suited for all those history buffs who can't get enough of World War II documentaries on the history channel, as well as the English majors and budding political scientists fascinated by propaganda campaigns.  If you're interested in researching and writing about the invasion of Poland in 1939, you could win $2,000 in scholarship money through this week's Scholarship of the Week.

In recognition of the 70th anniversary of the Nazi-Soviet invasion of Poland, the Kosciuszko Foundation and the Polish Army Veterans of America are sponsoring an essay contest for American students ages 18-22.  On September 1, 1939, after waging a sustained propaganda campaign, the Nazis invaded Poland from the east, and on September 17, 1939, the Soviets invaded from the west without a formal declaration of war.  The Historical Essay contest asks students to research these events in Poland, paying particular attention the propaganda used by the Nazis and Soviets leading up to each invasion and the impact the 1939 invasion of Poland had on the international community.

Prize:

First prize: $2,000

Second prize: $1,000

Eligibility:

Must be a current U.S. resident and between the ages of 18-22 as of September 1, 2009 

Deadline:

July 1, 2009

Required Material:

An essay reflecting your own original ideas and research of no more than 10 typed, double-spaced pages, submitted along with age verification.

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.

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Understanding Your Financial Aid Award Letter II

April 10, 2009

by Scholarships.com Staff

So you've figured out your cost of attendance, your expected family contribution, and the total amount of aid you're being offered at each college.  However, not all aid is created equal, and a package that appears to meet your full need could actually get you into more debt than a package that leaves a substantial gap.  A useful move both in choosing a college and budgeting out what you need for the year is to separate the grant and scholarship aid you've been offered from all of the other financial aid.  This is going to involve some more math and record-keeping on your part. We'll delve into the best kinds of aid in the second part in our series on understanding your financial aid award letter.

Understanding Your Award Letter, Part II: Grants and Scholarships

College scholarships and grants are money you will not have to pay back.  They come from a variety of places and have different terms attached.  Grants are almost universally need-based, and will typically be awarded based on your expected family contribution and your estimated financial need.  Scholarships are given based on a variety of criteria, and while some may carry a need-based component, not all do.  Below are some of the most common varieties of grants and scholarships you're likely to see on your award letter.

Grants

There are state grants, federal grants, and institutional grants, but they will likely all be listed in the same place.  The most common type of grant is the Federal Pell Grant.  For 2009-2010, Pell Grants come in amounts from $976 to $5350 for full-time students.  Especially needy students may also receive an SEOG, which stands for Supplemental Education Opportunity Grant.  Award amounts vary, but they are usually a few hundred to a few thousand dollars.  First-year students may receive an Academic Competitiveness Grant, or ACG, which carries an award of $750 to $1,300.

There are also federal grants for people in specific fields.  SMART grants and TEACH grants reward students pursuing training in STEM (science, technology, engineering, and math) fields and education.  SMART grants are only available to juniors and seniors who meet eligibility requirements.

Most states have at least one state grant program, and students who met deadlines and other criteria may see an additional state grant award on their letter.  Many states also offer major-specific grant programs, as well as grant programs for other specific student populations.  You can talk to you financial aid office or visit your state board of higher education's website to find out more about these programs.

Scholarships

Most universities offer at least one need-based scholarship, which is roughly the same thing as a university grant.  Numerous varieties of university scholarships exist, but the most common are need-based, academic, major-specific, and athletic.  If you've received a grant or scholarship award from your college, you will likely receive a letter explaining it in more detail.  Make note of the terms of the award, including whether it's renewable and what conditions have to be met to receive it.  This is especially important for college academic scholarships, as many require a fairly high GPA or heavy course load to renew.

It's also important to keep track of the grants, scholarships, and other institutional aid you receive because sometimes the awards may not appear on your first award letter, or they may show up under a different name.  Many scholarships come from endowed funds, and you may get a letter giving the more general name of the award, but may see it on your letter under the donor's name.  This can cause confusion and disappointment if you think you got a bonus scholarship but actually did not, and if your award is missing, adding it on later may result in your financial aid being recalculated if you're funded beyond your financial need or your cost of attendance.

Finally, if you've received any scholarship money through places other than the university or the state (such as awards you found through our free scholarship search), make sure it's represented on your award letter.  Many scholarship providers send the check to your school, and the school will need to make sure it doesn't alter your aid package before they disburse it. If you need the money to pay tuition or buy books, you want to make sure everything's set up so the check can smoothly make its way from the scholarship provider to your account.

If you're comparing offers from different schools, tally up the grant and scholarship aid you will receive this year, as well as the aid you can anticipate in future years.  Compare what your total award over four years will be for each school for the most accurate picture of who has given you the best deal.

Now that we've gotten through the free money, we can get to everything else.  Check out Part III for information on work-study and loans.

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