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by Agnes Jasinski

A financial aid officer at a for-profit college that closed this week has been charged with felony theft of more than $7,600 in students’ tuition payments. The school, Ascension College in Louisiana, closed quite suddenly to the surprise of the students there, and has been under investigation for what officials say is a misuse of federal aid.

According to an article in The Chronicle of Higher Education, the school had to close when the U.S. Department of Education ruled that it was no longer eligible for federal aid, the school’s primary source of income, based on new rules targeting for-profits. The school already had financial problems before the Education Department’s decision. In recent weeks, students had begun to complain about the cost of their educations there versus the quality. The school had been awarding certificates in fields like office administration and dental assistance.

The news comes on the heels of a report released today by the Government Accountability Office (GAO) pointing to evidence that recruiters at for-profit colleges encouraged prospective students to lie on financial aid applications in order to receive more federal funding. The report also shows widespread misinformation from the recruiters about the cost of their for-profit programs, their quality, and how much money graduates would be expected to make once they received their degrees.

The GAO used four undercover investigators posing as potential students at 15 for-profit colleges to get the information. Recruiters at four of those 15 encouraged financial aid fraud; in one example, a recruiter suggested an applicant not report $250,000 in savings when applying for aid. All 15 of the for-profit recruiters made statements the GAO described as “deceptive or otherwise questionable” in their report. In one example, a recruiter based tuition costs on nine months of classes rather than 12, making the total costs seem much lower than they actually were. In another, a recruiter told an applicant that barbers can earn up to $250,000 a year, a gross exaggeration. The GAO also discovered how incessant some recruiters can be once they know a student is interested in a for-profit education. According to the report, one of the investigators received 180 phone calls in one month at all hours of the day and night after registering to receive information on for-profit colleges.

The GAO was quick to note, however, that there were instances where the investigators were given helpful information, such as warning students about borrowing beyond their means. While the report overall doesn’t bode well for for-profits, especially at a time when legislators are watching the industry more closely and calling for more federal review, there are good options in the for-profit sector. For students looking to get into a particular trade, a flexible schedule, or alternatives to a traditional four-year university, for-profit schools do meet a need. The most important thing is to get your facts from a reliable source. Don’t ever take everything a recruiter at any college, for-profit or not, says at face value. Do your own research in the college search to make sure you’re making the right decision and investing wisely.


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by Agnes Jasinski

You’ve read all about how colleges have been coping with budget cuts over the last year or so. Wait lists. Hiring freezes and holds on infrastructure improvements. Short weeks.

Yesterday, the U.S. House of Representatives passed a bill they hope will allow administrators at those institutions of higher education to breathe a little easier. The $26 billion they approved will go toward those same state budgets that have suffered in the economic crisis; while the funding isn’t specifically earmarked for state colleges, any funding the states receive at this point will allow those schools to avoid further cuts in an already-hurting higher education system. About $16 billion of that total will go toward Medicaid assistance.

According to an article in The Chronicle of Higher Education, more than half of the country’s state lawmakers have been counting on varying amounts of emergency federal aid from Congress. While the expected totals aren’t as much as many had hoped—Maine had budgeted for $100 million, but will receive $77 million; Pennsylvania had budgeted for $850 million, but will receive about $600 million—the funding will help public university systems avoid further cuts. In Maine, administrators were preparing for cuts in the $8.4 million range, according to The Chronicle. While they had already reduced their budgets by $8 million over the previous year, the new funding will allow the state’s colleges to remain steady in the coming fiscal year.

Some states had already been preparing for massive cuts had the funding not come through. In Massachusetts, funding for public colleges there was already cut by 12 percent, a move lawmakers there must analyze now that some additional funding has come through. In Texas, a higher-education panel recently recommended that students take more of their learning off campus to save public institutions some money. According to another article in The Chronicle of Higher Education, the proposal suggested students should complete at least 10 percent of their degrees via online courses and remote programming. The plan would affect undergraduates at all of the state’s public colleges. While this is still just a proposal, a push toward online learning isn’t a new idea. In Minnesota, higher education officials hope to have students earn 25 percent of all credits earned through the public college system through online coursework by 2015.


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by Emily

Even as much of the student loan agenda President Obama announced last year remains stalled in Congress, he is expected to propose a new plan to assist middle-class workers in repaying their student loans as part of his State of the Union address on Wednesday. On Monday, the White House announced some of the points Obama plans to address, and among the items is a plan to make student loan payments more affordable.

Obama’s proposal would alter the federal Income-Based Repayment plan to make it beneficial to a wider range of borrowers. Currently, college graduates who choose Income-Based Repayment are expected to make loan payments equivalent to 15% of their discretionary income each month (defined as income above 150% of the poverty level for the borrower’s household size) and to make consistent payments for 25 years, at which time their remaining loan balances will be forgiven. Under the new plan, borrowers would have to make payments of only 10% of their discretionary income each month, and would only have to make payments for 20 years before their remaining balances are forgiven.

This change would have an added bonus for students pursuing careers in public service. Students who enroll in IBR and work in approved public service fields (such as teaching, healthcare, non-profit work, or government employment) can see their loans forgiven after just 10 years of payments in IBR. For many students, this can mean a substantial reduction in their overall loan obligations as well as more easily manageable payments as they begin their careers.

To illustrate the benefits of the President’s proposal, the Institute for College Access and Success provided the following example: someone with $33,000 in student loans who currently makes $30,000 per year would have a loan payment of $110 per month under this plan, compared to $170 per month under the current IBR plan, and $380 per month under the standard repayment plan.

Although it has the potential to enormously benefit individual borrowers, the proposed adjustment to the IBR plan is likely to run into some opposition. In the example above, as in many other cases, the new IBR plan will result in a significantly smaller amount being repaid by borrowers, especially those who go into public service. However, it may substantially reduce borrowers’ likelihood to default, which would prove beneficial overall. Still, calculating the overall cost to taxpayers is likely to be vital to this proposal’s viability, especially given the Obama administration’s announcement of a planned three-year freeze on federal spending.

Overall, these changes would benefit an estimated 36 percent of borrowers, according to Inside Higher Ed. The National Association of Colleges and Employers lists the average starting salary for college graduates at $48,633, and depending on household size and overall debt, graduates in this bracket may not see much benefit from IBR. By contrast, the average starting salary for liberal arts graduates is $36,624, making them most likely to benefit from this program. However, many recent graduates are considering themselves lucky to find jobs paying substantially below these figures right now. It’s likely that a broad range of college graduates, especially those pursuing careers in fields that have been badly impacted by the recession, may welcome the proposed changes.

What do you think of this plan?  Would it help you or would you rather see federal resources being used in another way?


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by Emily

Immediately on the heels of an announcement that President Obama would be calling for additional assistance to college graduates struggling to repay student loans, the administration also unveiled a proposal to hold federal discretionary spending to current levels for the next three years, a move that could potentially have serious implications for colleges and students.

Currently, most federal education spending, including student financial aid, is discretionary, not mandatory, so it would fall under the umbrella of the budget freeze. This makes it possible that students will see limited increases to federal grants, work-study, and subsidized student loans in the coming years. The White House has pledged to make education a funding priority, but with states and colleges also struggling financially, it’s quite possible that financial aid programs will see an end to the boost in financial support they’ve received in the last few years.

It’s possible one federal aid program, at least, may be spared from the budget freeze. Last year, President Obama proposed making the Pell Grant an entitlement, putting it in the category of Medicare and other programs that would be exempt from the budget freeze, but the bill to do so still has not passed the Senate. If the bill passes, Pell funding will be mandatory and increases in Pell Grants will be tied to inflation, guaranteeing students a small, but steady, increase in available aid. If not, it’s up to Congress to allocate limited resources for any increases in grant amounts, and with increases in the numbers of college attendees, applications for financial aid, and Pell Grant recipients, it may be all Congress can do to hold funding levels steady for the next three years.

As details of federal and state budgets emerge, and emergency legislation that temporarily boosted funding to schools and student aid begins to be revisited and possibly phased out, exact changes to college funding will become clearer. Already, though, many families are finding paying for college increasingly challenging, even with the aid of college scholarships and grants. There’s a possibility that a federal budget freeze could mean that students in the next few years will see a situation similar to the one that faced students at the start of the last decade, where tuition increased rapidly while federal aid held steady and more and more students came to rely on private student loans.


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by Emily

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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by Emily

During his confirmation hearing Tuesday, Arne Duncan, Obama's appointee for Education Secretary, disclosed broad ideas but few specific plans for education in America.  Much of the hearing before the U.S. Senate focused on elementary and secondary education, though questions related to paying for college did surface.  Duncan's primary focuses appear to be on college access and college affordability, moving away from the emphasis on accountability the nation has seen under Margaret Spellings, the current Secretary of Education.

According to coverage by The Chronicle of Higher Education and Inside Higher Ed, Duncan's primary goal related to college aid is to guarantee access to student loans for everyone attending college.  Taking up one aspect of Spellings' policy, he also expressed an interest in simplifying the FAFSA to make applying for federal student financial aid more enticing for college students.  Additionally, Duncan pledged to work towards the goals of increasing Federal Pell Grants and instituting the $4,000 education tax credit that made up a major part of Obama's campaign platform.

Congress may already be taking steps towards some of these goals in drafting the next economic stimulus package.  Reports have abounded this week that plans are in the works to increase the maximum available Pell Grant by $500 and to consolidate two existing federal higher education tax options into one $3,000 tax credit for higher education expenses.


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by Emily

While many stories right now are focusing on financial aid programs finding themselves strapped for cash to award an increased of needy applicants, this is not universally the case. Data published by The Chronicle of Higher Education shows that two federal grant programs that were added in 2006 still have more awards than applicants.  The Academic Competitiveness Grant (ACG) and Science and Mathematics Access to Retain Talent (SMART) Grant have gained some participation, but still they're still falling short of enrollment goals.

Both grants are intended to supplement Federal Pell Grants for students who are both academically talented and financially needy. The ACG is a grant of $750 to $1,300 for college freshmen and sophomores who have completed a rigorous high school curriculum and excelled academically, while the SMART Grant is an award of up to $4,000 per year designed to support college juniors and seniors who are enrolled in a science, math, engineering, technology, or critically needed language program.  Approximately 465,000 students received the ACG and SMART grants in the 2007-2008 academic year, up 95,000 from the first year they were offered.

In order to attract more applicants and meet their goal of doubling participation by the 2011-2012 academic year, the department is pushing financial aid administrators to become more aware of award criteria and to make sure the grants are being fully awarded.  In addition, requirements have also been loosened and students enrolled in eligible five-year programs will be able to receive a SMART grant in their fifth year of school beginning in July.


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by Emily

While it's still a long way from becoming law, the first published draft of the economic stimulus legislation created by the House of Representatives includes billions of dollars for higher education, including several provisions designed to make paying for school easier.  The bill still has to be approved by both the House and the Senate (which is drafting its own stimulus legislation) then signed by the President, so it remains to be seen how many of the following appropriations will make it into the final version of the stimulus package.

The stimulus bill would increase funding to several federal student financial aid programs, as well as providing emergency funds to states to prevent further drastic budget cuts, and designating money to help colleges, especially ones affected by disasters, make needed improvements and repairs.  If the bill is passed, federal work-study will receive a boost in funding, as will Pell Grants, eliminating a projected budget shortfall for the program.  Unsubsidized Stafford Loans will increase by $2,000 per year, bringing the loan limit to $7,500 or more for undergraduate students.  The maximum Pell Grant award will also increase to $5,350.  In addition, lender subsidies will also increase, hopefully enticing more banks to remain in the FFEL program.  The Hope tax credit and a provision that allowed families to deduct up to $4,000 in educational expenses will also be combined into a new $2,500 tax credit, through which families with too little income to file taxes could still receive $1,000.

As Congress hammers out the details of the stimulus bill in coming weeks, these numbers will likely change.  A more detailed breakdown of these and other proposals affecting colleges and universities is available from Inside Higher Ed.


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by Emily

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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by Emily

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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