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Both House and Senate Include Higher Ed in Stimulus Bills

January 27, 2009

by Scholarships.com Staff

It's looking like federal student financial aid will be increased in the forthcoming economic stimulus package, at least based on the legislation presented in each house of Congress in its current form.  While the House stimulus bill contains more aid for education, the Senate bill also proposes higher education tax benefits and increases in Federal Pell Grant funding.

The House bill promises:

  • $15.6 billion to increase the Pell Grant by $500 to $5,350 and fully fund the increase
  • $490 million to Federal Work-Study
  • $12.5 billion over the course of 10 years to offer a $2,500 tax credit that will be 40% refundable for those who would otherwise make too little to qualify
  • $6 billion to higher education infrastructure
  • $1.5 billion to improve energy efficiency for colleges, schools, and local governments
  • $39 billion to school districts and state colleges
  • $25 billion to states for "high priority needs" which can include education
  • a $2,000 increase in loan limits on federal Stafford Loans

The Senate bill appropriates:

  • $13.9 billion to increase the Pell Grant by $281 in 2009-2010 and $400 in 2010-2011 and fully fund the increase
  • $12.9 billion to create a 30% refundable $2,500 tax credit
  • $61 million to Perkins Loans
  • $3.5 billion to improve energy efficiency and infrastructure on college campuses
  • $39 billion to school districts and public colleges
  • $25 billion to states for "high priority" needs which may include education

The House bill also includes money to improve financial aid administration and further assist student loan lenders, while the Senate bill will allow computers to be counted as education expenses towards which 529 plans can be used.  The bills are facing some Republican opposition, especially regarding education spending, as it's been argued that construction projects and increases to student financial aid will not directly and immediately benefit the economy.  As Congress and the White House continue to hash out the details of these bills, amounts are likely to change.  But for now, it appears that colleges and college students may receive a little extra financial aid from the government this year.

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Study Shows Extent of Endowment Losses

January 29, 2009

by Scholarships.com Staff

College and university endowments plunged an average of 23 percent between July 1 and November 30 in 2008, with many sustaining further losses since then.  While almost everyone who's been reading higher education news or attending college knows that endowments have dropped, the depth and the breadth of the damage has largely been left to the realm of speculation.

Endowment losses had become a hot topic at some schools, including the one my youngest sister attends, even before the release of this study.  Undergraduate students previously unaware that colleges even have investments are worrying about the (admittedly slim) chance of their schools' investment funds disappearing, taking their scholarships, their degree programs, or their favorite instructors with them.  While such drastic cuts have not been made, schools are facing very real struggles to preserve their staff, their services, and their endowments in the face of a still-deepening recession.

The extent of losses varies, as does the extent of reactions to losses.  Several universities have instituted hiring freezes, while others have resorted to layoffs or mandatory unpaid furloughs.  Brandeis University and the University of Pennsylvania have both made unpopular moves to cut budgets. Penn has done so by cutting 18 campus museum staff positions, and Brandeis has announced plans to close the institution's art museum entirely and sell its collection. Some state universities battling shrinking endowments and drastic cuts to state funds have been forced to look at double-digit tuition increases.

Still other schools are making almost opposite responses.  Some institutions are looking into freezing tuition or increasing it by small amounts, such as Princeton University, which has announced a tuition increase of only 2.9 percent for 2009-2010.  Others are hiring new faculty as planned or launching additional searches, hoping to attract stronger talent.  Many schools are also increasing student financial aid to help families hit hard by the recession.  Even schools making budget cuts are reluctant to touch financial aid, recognizing its importance.  However, fears remain that students who need money for college may be unable to find it from their schools.  Whether these fears are justified remains to be seen, though many hope that the proposed economic stimulus package will allow schools to continue to fully fund or even expand essential programs.

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Student Loan Rescue Plan to Move into Next Phase in February

January 30, 2009

by Scholarships.com Staff

The student loan rescue plan that will allow the Department of Education to buy up student loans issued since 2003 will begin operating in February.  The plan will set up a bank to act as a "conduit" for purchasing older student loan assets and will also allow the Treasury to become the buyer of last resort for assets the conduit bank is unable to refinance.  The Treasury will buy up student loans through this program for the first 90 days, after which the Department of Education will take over.  The Bank of New York Mellon is currently the only authorized conduit, though more could be added later.

This plan will hopefully allow banks that have had to leave the FFEL program to find the capital to reenter it through selling some of their older student loans to the conduit bank.  While students borrowing Stafford Loans through the FFELP had few problems finding loans in 2008, this program should help the student loan marketplace continue to stabilize and should help prevent potential problems down the road.

Another $200 billion program announced by the Treasury in November is also set to begin operations in February.  This one targets consumer credit in general, but also includes private student loans.  Between these two programs and the proposals contained in the economic stimulus package currently working its way through Congress, students entering college in 2009 may have an easier time finding financial aid.

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Credit Crisis Leaves Student Loans Stuck in Default

February 10, 2009

by Scholarships.com Staff

The recession seems to be bringing an almost constant stream of stories about people in all sorts of circumstances who are facing new and varied financial troubles.  These stories could easily be read as a guide for "things not to do in a recession."  The latest addition?  "Default on your student loans."

While neglecting even one payment is a bad idea at any time, borrowers who have found themselves in default on their loans are facing an even more difficult time as a result of the credit freezeThe Chronicle of Higher Education published a story today about this particular aspect of the trouble facing participants in the Federal Family Education Loan Program. Currently, 19 of the nation's 35 guarantee agencies (the companies that service student loans in the FFEL program) lack a buyer for their student loans, including rehabilitated loans.

People who borrowed Stafford loans, defaulted on their payments, then agreed to "rehabilitate" their loans, or make consistent payments until the loan can be repackaged and resold and thus brought out of default, are finding that there's currently no market for their rehabilitated loans, so they're stuck in default status longer than necessary. This hurts their credit score and also keeps them from being eligible for federal student financial aid if they choose to go back to college, as many people affected by the recession are doing.

Currently, the federal government cannot buy up these loans, though legislation may be in the works to fix this.  While students do have other options, such as consolidation through Direct Loans (the federal government loan program), students were typically pushed toward rehabilitation before the credit crunch, as it was most profitable for the lenders, according to the Chronicle of Higher Education article.

If you have a student loan currently in repayment, be sure to work with your lender if you're having trouble making payments.  Look into consolidation loans, and ask about extended payment plans, in-school deferments (if you're planning to go back), loan forgiveness programs for certain career paths, and hardship forebearances.  Student loan debt cannot be discharged in bankruptcy, so if you default, you're stuck with the consequences--possibly for much longer than you'd think.

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Report Shows Long-Term Effects of State Cuts to Higher Ed

February 11, 2009

by Scholarships.com Staff

The loss in funding faced by state and community colleges this year may not be a one-time thing.  A report issued this week by the State Higher Education Executive Officers (SHEEO) indicates that state budget cuts to higher education made during recessions tend to become permanent.  With many attempting to eliminate multi-billion dollar budget shortfalls, cuts to education are almost certain to happen across the country, and based on data collected by SHEEO, they are likely to continue into the future.

Per-student state higher education spending peaked in 2001, when it hit the highest level in inflation-adjusted dollars since data was first collected in 1983.  A recession in 2001 prompted drops in education spending that continued until 2006, when spending began to grow again until 2008, though per-student funding did not return to 2001 levels before another recession interfered.

In response to cuts in funding of around 7 percent between 1998 and 2008 and increases in enrollment of around 25 percent over the same period, tuition revenue has risen 20 percent.  The report suggests this trend is likely to continue, with funding potentially falling off permanently and tuition hikes continuing as a result of this year's budget cuts.  Thus, the burden is passed on to already cash-strapped students and families, who are already facing the prospect of needing more student loans due to losses of income and declines in college savings plans.

The SHEEO expressed hope that the stimulus package currently moving through Congress might mitigate this effect.  However, the version passed yesterday by the Senate eliminated billions of dollars that would have gone to offset state budget cuts, so the positive impact on higher education could be less than is hoped.  Additionally, members of Congress have expressed frustration with rising tuition rates, especially given tuition's likelihood to continue to outpace increases in Federal Pell Grants, such as the new funding currently included in the stimulus.

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House and Senate Reach Compromise on Stimulus

February 12, 2009

by Scholarships.com Staff

The Senate passed their version of the economic stimulus bill Tuesday, and by late afternoon yesterday it was announced that a compromise had been reached between the House and the Senate. The compromise bill includes less funding than either version--$789 billion as compared to $820 or $838 billion, and one of the areas that faced cuts was education.

While the final draft of the stimulus bill has not been released--or necessarily written--yet, some details are emerging in media coverage. It appears that a Pell Grant increase has made it into the final draft, though the exact amount is still unknown. Federal Work-Study also receives a funding boost, though it's also unclear whether it's the full $490 million appropriated by the House. The $2,500 tuition tax credit has also survived, as have several other tax credits not related to education. Proposed increases to Perkins Loans and unsubsidized Stafford Loans appear to have been axed from the conference committee's version of the bill. States will receive some money to offset educational expenses and aid in school construction and renovation, though not as much as the House had appropriated.

More details will likely emerge over the next couple days as the bill makes its way back through the House and Senate for final approval. The stimulus package could be signed by President Obama as soon as Monday. While the stimulus will provide some help to most people attending college, it's not too late to find other ways to boost the funding to your own college education. Conduct a free college scholarship search to see what financial aid is out there.

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House Passes Economic Stimulus Bill

February 13, 2009

by Scholarships.com Staff

The House of Representatives just passed the compromise version of the economic stimulus package.  Now there are just two stop left for it before it becomes law: the Senate and President Obama's desk.  The Senate plans to vote later this evening, putting it on track to be signed on Monday.

As the dust settles, more detailed accounts of what's actually in the bill are emerging.  While the final totals have not yet been made public, Inside Higher Ed has an updated version of their stimulus chart online today, featuring many of the stimulus provisions related to higher education.  The $787 billion stimulus package will include: 

     
  • $17.1 billion to increasing the maximum Pell Grant award by $500 and eliminate a shortfall in funding
  •  
  • $200 million to college work-study programs focused on community service
  •  
  • A $2,500 education tax credit available for four years of college.  The credit is 40 percent refundable, so people who don't make enough to pay taxes can still receive $1000.
  •  
  • A provision to allow computer purchases to count as qualified educational expenses for 529 plans
  •  
  • $39.5 billion to offset state budget cuts to education, including money to modernize facilities
  •  
  • $8.8 billion for states to award to high-priority needs, including education
  •  
 While several items related to federal student financial aid were cut from earlier versions of the stimulus, the final verison will hopefully minimize tuition hikes by giving states more money for education, help the neediest students deal with tuition increases through an increase in grants and work-study, and help all college students a little with the tax option included.  The stimulus package also includes tax rebates, increased funding to several social welfare programs, and changes to unemployment benefits, which could further aid struggling students and families.

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Making College More Affordable

February 17, 2009

by Scholarships.com Staff

Reducing college costs continues to be a hot topic of discussion, especially given survey results that show that college affordability is a growing public concern.  Recent congressional acts, including the education provisions in the stimulus bill President Obama will sign today, the Ensuring Continued Access to Student Loans Act of 2008, and last year's reauthorization of the Higher Education Act, have kept the issue in focus, as have economic events, such as losses to 529 plans, rising unemployment, and new financial troubles for colleges.  A wide range of ideas have attracted the attention of lawmakers and the media, including several suggestions making the rounds this month.

Jesse Jackson recently wrote an article in the Chicago Sun-Times suggesting that Congress pass a law to offer a 1% interest rate on federal student loans, including Stafford Loans and PLUS Loans.  The Minneapolis Star-Tribune ran a column in January that went even further, suggesting that the federal government forgive all student loan debt.  Meanwhile, Lamar Alexander, a republican Senator from Tennessee, has gotten some publicity for suggesting that more colleges offer three-year paths to degrees, as one of many potential cost-saving measures.  Some states are looking into "no-frills" universities, and partnerships between state colleges and community colleges are also gaining traction as cost-saving options.

So we were wondering what people who are in the process of paying for college think.  What would you like to see happen to make college more affordable and reduce the burden of student loan debt on college graduates?

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Students Protest College Costs

February 20, 2009

by Scholarships.com Staff

This week, several groups of students have decided to take a new approach in attempting to reduce their college costs.  Students in Minnesota and South Carolina both held rallies at their state capitols this week to try to influence their state legislature's decisions regarding their schools.  Meanwhile, students at New York University have barricaded themselves inside a building on campus, refusing to come out until the university meets their list of demands.  Each group has different requests, but most come down to money.

More than 200 students from state colleges and universities in Minnesota protested outside the State Capitol Wednesday.  Many held signs stating their anticipated student loan debt (answers included $38,000 and "too much" according to an article in The Minneapolis Star-Tribune), while others gave speeches and encouraged their legislators to reject the governor's proposed budget cuts to higher education.  Several legislators expressed solidarity with the students, and a newly formed student group plans further protests.

Students in South Carolina also urged their state legislature to make college funding a spending priority, though their actions were largely in protest to a proposed state tuition cap.  Students expressed concern that their universities may need to sacrifice educational quality by cutting faculty or course offerings to deal with reduced funding.  Students were concerned they'd wind up getting less for their money and possibly paying more money over time by taking longer to get the classes they needed to graduate.  They urged the legislature to leave the power to set tuition in colleges' hands.

New York University had the most radical student protest and the lengthiest list of demands, with a small group of students taking over a cafeteria and demanding greater accountability and transparency in the university's budgeting process.  The NYU students also wanted a tuition freeze, a union and better benefits for graduate student assistants, and according to one sign, "enough financial aid" for all students, among other things.  The students and the university have been in an ongoing standoff since Wednesday night, with crowds of up to 300 students gathering outside the occupied building at one point yesterday.

Whether student rallies, protests, or sit-ins are the best means of funding your education is debatable.  Students with activist inclinations who seek other routes to paying for college with better odds of immediate success should consider doing a scholarship search.  There are numerous scholarship opportunities for students who are involved in their communities and interested in bringing about change, and they don't require presenting anyone with a list of demands.

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Most Stimulus Jobs Require Postsecondary Education

February 24, 2009

by Scholarships.com Staff

In yet another sign that a college education is becoming a necessity, rather than a luxury, a recent study of the stimulus legislation reveals that many of the jobs the stimulus is expected to create will require some education or training beyond high school.  In fact, at least 54 percent of the estimated new positions will require at least a postsecondary certificate according to analysis by Georgetown University’s Center for Education and the Workforce.  Considering a major goal of the stimulus package was to create jobs for less-skilled workers who are usually hardest hit by economic downturns, this figure is especially telling.

It appears that despite the calls for "shovel-ready" projects, few workers will be expected to merely wield shovels. Many of the "non-college" jobs created by this legislation still may require some employer-provided training or time spent at a community collegeInside Higher Education has more complete information, including a chart of the percentage of anticipated stimulus jobs that will require various education credentials.

While some required training will be covered by grants to employers and the increased Pell Grants and college tax benefits in the stimulus, those hoping for job security but apprehensive about college costs may be left with little choice but to go to collegeCollege scholarships and grants, as well as student loans and other financial aid can help.  A postsecondary education is becoming increasingly necessary in our economy, and it appears that this trend will continue.

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