August 15, 2008
Yesterday, President Bush signed the Higher Education Opportunity Act, the official reauthorization of the Higher Education Act (HEA) which governs federal student financial aid for college, as well as other federal programs and regulations that pertain to higher education.
Under the new version of the HEA students can expect a number of benefits when it comes to finding money for college. Some of the changes include:
The National Association of Student Financial Aid Administrators also offers a point-by-point breakdown of the Higher Education Opportunity Act on their website.
September 9, 2008
In a hearing yesterday, Senator Charles Grassley of Iowa suggested that he would back off from his proposal of mandating that colleges and universities spend five percent of their endowments on financial aid, provided schools continue to voluntarily increase grant and scholarship awards to students as many have been doing this year.
This is the latest development in a series of events that began unfolding when Congress began looking into the endowment spending of several of the country's wealthiest universities earlier this year. Legislation to mandate increased endowment spending has since been proposed and withdrawn, as several schools with large endowments began offering significantly larger financial aid packages to their students.
The panel, which was made up of representatives of several universities and the Senate Finance Committee also discussed the rising cost of college education, what schools and lawmakers can and should do in the face of the issue, and the importance of flexibility in endowment spending. Lawmakers and educators are both concerned about the increasing burden of student loan debt on American students, but colleges are also concerned about being forced to spend more than they can afford to assist students with their tuition payments.
Primary among their concerns, though, was an increase in transparency of university endowments and spending habits. Colleges were more willing to agree to making information about their endowments and spending available to the public, as opposed to accepting a mandate for how much they are required to spend on student financial aid each year. Grassley also introduced a plan to make colleges fill out a Form 990, the tax form all nonprofits file, using a version of the form similar to the one designed for hospitals.
While the Senate Finance Committee has moved away from requiring colleges to devote a substantial portion of endowment spending to helping students pay for school, Sen. Grassley's words seem to suggest that if schools don't keep up their efforts to make attending college more affordable for their students, Congress may yet decide to intervene.
Hopefully, what this will mean for students is a continued increase in campus-based aid programs, such as scholarship opportunities and grants and fellowships. At the very least, it looks like it may be getting even easier to compare information about spending habits of various schools in your college search, being able to ultimately arrive at a better determination of which schools are most likely to want to help you afford to attend.
Inside Higher Ed has more complete coverage of the hearing available here.
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.
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 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 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.
October 31, 2008
Remember that provision in the Higher Education Act that was supposed to help keep tuition down by requiring states to maintain their level of funding for higher education? Since state governments are required to balance their budgets each year, the act included a provision that allowed the Secretary of Education to waive this "Maintenance of Effort" requirement in the event of "a precipitous and unforeseen decline in the financial resources of a State or State educational agency."
Yesterday, the National Governors Assocation sent a letter to Margaret Spellings arguing that the current economic situation qualifies as such a circumstance. The letter cites the budgeting crisis over half the country currently faces, with a budget shortfall of more than $26 billion spread across 27 states and expected to grow. States are forced to make tough choices to balance their budgets, and the choice of cutting funding to higher education is certainly among these.
If the Maintenance of Effort requirement is not waived, states that fail to maintain required levels of higher education spending will lose out on some federal grant money designed to help low-income students prepare for and attend college. Either way, students struggling to pay for school may find themselves struggling more next year. So keep plugging away at those scholarship applications!
November 4, 2008
It's November 4th, and that means election day for everyone in the U.S. If you haven't already cast an early or an absentee ballot, here's yet another reminder to show up at the polls today. Education has become a major concern due to economic instability, decreasing availability of student loans, and the rising costs of attending college. Today you can make your opinion on education known, and not only in the Presidential and Congressional races.
Voters in eleven states will pick a new governor, and according to The Chronicle of Higher Education, new governors in five states will play an important role in setting educational policies in coming years. Voters in Indiana, Missouri, North Carolina, Vermont, and Washington can check out coverage of what's at stake in terms of education here.
State referenda in thirteen states also have the potential to affect educational policy on issues ranging from school funding to affirmative action. The Chronicle of Higher Education provides info on these referenda here, and Diverse Issues in Higher Education also addresses them here.
If you're just starting down the road to a college education, the people elected today and the measures passed today will have a direct influence on the shape of your academic journey. Your ability to fund your education, your experience at college, your ability to meet your college goals, and even your chances of getting into the college of your choice could change based on what happens today. So if you can, read up on the issues and get out there and vote.
November 5, 2008
The election is over, and while we're still waiting for some results to come in, such as the ultimate fate of Colorado's anti-affirmative action ballot measure, most races have been decided and commented on. Overall, higher education fared well yesterday, and Inside Higher Ed provides a breakdown of wins and losses for college-related measures, as welll as an in-depth discussion of the brand new affirmative action ban in Nebraska.
The biggest focus this morning has been on Barack Obama's presidential win. News sources across the country are already speculating on what he will and will not be able to accomplish once he takes office in January. While Obama had stated in his second debate with Senator McCain that he planned to make education a priority for his administration, concerns are being expressed over financial barriers to his proposals. As President, Obama would like to shore up the Federal Pell Grant program, eliminate the Federal Family Education Loan Program (FFELP) in favor of Direct Loans, and implement a $4,000 tax credit for families with students in college, among other goals. However, the economic crisis may make these goals difficult.
A more Democratic Congress also has ambitious plans that could affect higher education, including potentially revisiting a bill that would allow private student loans to be discharged in bankruptcy. Democrats also are hoping to provide more money for job training programs to community colleges, as well as more support for and fewer restrictions on research conducted by universities. Congress also expects to revisit and revise No Child Left Behind, the Bush administration's ambitious, though largely unpopular, education bill.
Education policy makers will also change in January, with some seats in the House and Senate educational committees being vacated and a new Education Secretary coming in with the new president. How the results of the election will change the face of attending college and funding your education remains to be seen.
November 26, 2008
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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