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Treasury to Aid Private Student Lenders

November 26, 2008

by Scholarships.com Staff

Yesterday, the Federal Reserve and Treasury announced a new program to further shore up the banking industry in the face of a recession that appears to still be worsening.  The program would devote $200 billion to shoring up consumer credit markets, including credit cards, car loans, and student loans.  The hope is that this new program will make these forms of credit more widely available to people who need them, including students who depend on private loans to help pay for school.

The New York Times explains that this is the first time the federal government has intervened to finance consumer debt and describes the program as " com[ing] close to being a government bank."  Coupled with recent efforts to expand and sustain federal student financial aid programs, namely the Federal Family Education Loan Program (FFELP), the federal government has expended a fairly vast amount of resources on student financial aid.  However, some are questioning how the money is being spent.

The Project on Student Debt is one organization that has encouraged the federal government to exclude private student loans from rescue packages.  While the lending industry has been hit hard in the last year, this organization is one of several voices urging that students be steered towards more affordable means of financing their educations.  The National Association of Student Financial Aid Administrators, while supporting the Treasury's decision, also called for a reevaluation of the role of private loans in paying for college.  Private student loans, which carry higher interest rates than federal loans, are intended to be used as a last resort after Federal Stafford Loans, campus-based aid programs, and scholarship money have been exhausted and students are still coming up short on their education expenses.

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Groups Call for Economic Stimulus for Student Aid

December 12, 2008

by Scholarships.com Staff

With bailouts, economic stimulus packages, and a number of other pieces of emergency legislation being passed to prop up seemingly every aspect of the economy this year, a group of organizations connected to student financial aid are asking for additional support for college students.  In a letter to Congress, thirteen higher education advocacy groups, including the Project on Student Debt and the National Association of Student Financial Aid Administrators, asked that the next economic stimulus legislation include expansions to financial aid, namely Federal Pell Grants and Federal Work-Study.

While maximum Pell Grant awards have gone up slightly in recent years and legislation such as the Ensuring Continued Access to Student Loans Act has helped students continue paying their bills, these thirteen advocacy groups feel that more still needs to be done.  Family 529 plans and other savings, as well as college endowments, have taken enormous hits, putting tuition costs potentially further out of reach of many.  Meanwhile, private loans have become harder for students with poor credit or no cosigner to obtain, further jeopardizing some students' ability to continue attending college.  Advocacy groups hope that stimulus legislation can help alleviate these college financing problems.

The letter called for four major changes.  Two involve contributing more to existing federal aid programs, a third suggests making minor adjustments and clarifications, and a fourth involves establishing an emergency fund for students who have been hit hardest by the recession.  Under the proposed plan, Congress would increase the maximum Pell Grant amount to $7,000 per year (it's currently $4731) and fully fund the program.  Funding for campus-based work-study programs would also increase by 25%.  The group also would like to see PLUS loans become easier for families to learn about and obtain.  Finally, the group suggests that an emergency student loan pool be created for students who still are unable to meet their financial need through help from their schools, college scholarships, and federal student financial aid.  This pool would only be available at institutions that show a strong commitment to helping students pay for school.

While there's no guarantee Congress will incorporate any of these suggestions, higher education groups are hopeful.

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Another Stimulus Request from Higher Ed

December 16, 2008

by Scholarships.com Staff

An open letter to Congress appearing in The New York Times and The Washington Post yesterday joined what is quickly becoming a chorus of voices asking for financial aid for higher education institutions.  The letter, which was put together by the Carnegie Foundation, was signed by over 40 higher education officials, including leaders of several state university systems.  The letter requests that Congress devote 5 percent of the next stimulus package to improving higher education infrastructure, namely state colleges.

Leaders argue that the infusion of cash into state university systems will help keep America competitive on a global scale, noting that for the first time ever, the segment of the population between 25 and 34 years of age is not as well-educated than the previous generation.  The letter argues that construction and renovation projects are an important first step for colleges and universities that want to remain competitive, and that these projects would immediately generate jobs for displaced workers.  While the signers recommend applying the money towards infrastructure, they suggest that it be given to states in the form of block grants that would supplement state education budgets, leaving open the possibility of other forms of spending.

This follows two other proposals for higher education's inclusion in stimulus packages.  Both other proposals called specifically for increases in student financial aid.  While this proposal doesn't do that, it may help prevent some tuition increases and discourage state budget cuts that would negatively impact the ability of public college students to pay for school.

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Obama Transitional Website Seeks Comments on College Affordability

January 7, 2009

by Scholarships.com Staff

Barack Obama became known for his web presence during his Presidential campaign.  He and his transition team have kept up this reputation through YouTube addresses and websites such as Change.gov, the official transitional website.  Now the Obama transition team is asking for public comments--or at least blog comments--on issues related to paying for school.  A post on the Change.gov blog is currently soliciting feedback about college affordability.  While there's no guarantee that the President-elect himself will read your post, if you would like to weigh in on educational policy at least in a small way, you can view and comment on the January 5 Change.gov blog post "Keeping College Affordable." 

The blog post, along with many other recent discussions of college costs, makes a nod to former Rhode Island senator Clairborne Pell, who passed away on January 1.  Pell was instrumental in shaping the current federal student financial aid system by helping create the Federal Pell Grant, which was named after him.  Pell Grants continue to make up an important part of the financial aid packages of many students, covering up to the full cost of tuition at some state and community colleges

However, as tuition costs rise, Pell Grants and other sources of federal aid are not enough to make college affordable for an increasingly large number of students.  During his campaign, Obama proposed a few substantial changes to the way college financial aid is structured, and hopefully his administration will do more to seek out and act upon feedback from those who are struggling with the costs associated with higher education.  However, if you're skeptical, or just looking for more immediate ways to make college affordable, there are resources available.  Start with a free college scholarship search on Scholarships.com.  Many scholarship application deadlines are approaching in the coming months, but there is still abundant scholarship money for those who take the time to apply.

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Senate Holds Confirmation Hearing for Arne Duncan

January 14, 2009

by Scholarships.com Staff

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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Academic Competitiveness and SMART Grants More Popular, Still Underused

January 15, 2009

by Scholarships.com Staff

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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Draft of House Stimulus Package Revealed

January 16, 2009

by Scholarships.com Staff

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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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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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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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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