October 22, 2007
In recently published (previously-known) financial aid news, student lenders were found to have made millions by accepting excess subsidies from the government. By finding loopholes in government regulations, the student lender Nelnet, one of the biggest offenders, was able to collect $278 million in excess payments between 2003 and 2005. Based on calculations released by the Washington Post, other lenders accepted an estimated $300 million in excess subsidies between 2003 and 2006—paid for by taxpayers.
Because students applying for government aid are restricted in how much they can borrow, the government offers subsidies to lenders who borrow to students. In exchange for the money, lenders offer students loans at rates that, although usually higher than those offered by the government, tend to be lower than those offered by unsubsidized lenders.
When average student loan interest rates were higher, the government guaranteed lenders a 9.5 percent interest rate for loans. Once average loan rates fell, many lenders continued to take in large subsidies.
And although the government lowered some subsidy sums after rates fell, they continued to guarantee a 9.5 percent rate on loans previously funded with tax-exempt bonds. To extend the pool of loans still eligible for larger subsidies, Nelnet divided tax-free bonds among various pools. They would then claim that pools of loans at least partially composed of tax-free bonds were eligible for 9.5 percent subsidies.
The government did little to stop them in the past, and it is doing little to punish them now. According to the Washington Post, the Department of Education Secretary Margaret Spellings did admit that the government shouldered some of the responsibility for the “confusion”. However, she indicated no intent to pursue full accounting, nor did she suggest that reimbursement from lenders would be sought.
October 25, 2007
Based on a new report released by the College Board, government aid has increased in the past few years—but college costs have as well. And they’ve done so more quickly.
According to the report, a public four-year institution charges in-state students 6.6 percent more in tuition and fees than they did last year. The increase for out-of-state students is 5.9 percent.
Students who attend private four-year colleges haven’t fared any better. They may not have to worry about the whole in-state out-of-state thing, but their tuition rates are still higher than those at public colleges, and they are likewise increasing. Since last year, tuition and fees have increased by 6.3 percent at private four-year colleges.
Community colleges are pretty good when it comes to keeping the prices down, but their costs, as well as those of for-profit schools, have been rising as well.
Before you say it, yes, stated cost and actual cost are two different things. You don’t go into a car lot expecting to pay the ticket price, and you probably won’t pay the full price when it comes to college tuition. But that doesn’t mean that you’re being cut a deal. Even though government aid has been increasing—and will continue to do so due to the recent passage of the College Cost Reduction and Access Act—students are still paying more for college.
As my chemistry teacher used to repeat, “All things being equal, things aren’t going well.” (Maybe the second half was mine; it’s just what comes to mind when I think of chemistry.)
Thankfully, students don’t have to depend on the government to completely cover the cost of a college education. There are plenty of financial aid options out there, and they don’t all require interest payments. Students searching for tuition money can always look to college scholarships and grants for help. Plenty are available, and they won’t cost you a penny (don’t be scammed into believing that you should pay for scholarship consideration). Conduct a free scholarship search, and check out the numerous opportunities available to you.
October 26, 2007
A recent evaluation released by NASFAA, an organization representing the interests of financial aid professionals, brings into question the effectiveness of a new student lender auction system. The recently-passed College Cost Reduction and Access Act created, among other things, a new auction system wherein student lenders would bid on exclusive market rights in each state. While the law concentrated on cuts in student lender subsidies and increases in free student grants, the auction system aimed at lowering taxpayer burdens was also enacted.
When the system goes into effect in 2009, lenders interested in participating in the government's subsidized FFEL Plan would have to compete for the lowest subsidies. Those who won the bid would get exclusive state lender rights. Only lenders who would choose to take part in the government’s FFEL program would be effected, and only rights to PLUS loans would be auctioned.
However, the NASFAA report questions whether an auction would really be as effective as it initially seems.The statement suggested that the auction program was based on the rash assumption that lenders who bid for loan rights would be willing to greatly lower subsidy expectations, and that taxpayers would really benefit from lower subsidies. This assumption, based on the report, may prove to be faulty. State competition could be lower than expected, and some states could problematically benefit more than others. After a few years, the competition is likely to decrease altogether, and lenders may simply choose to opt out of the program.
Doubt was also cast upon the assumption that student borrowers would not be affected by the auction system. Based on the report, it is more likely that lenders will get rid of certain student benefits once they have exclusive rights to a state. Borrower services that could be affected include default prevention, financial literacy and electronic processing. The report disputes the claim that very few students are eligible for benefits. Instead, it suggests that most students qualify for at least some helpful services or benefits.
How an auction would in effect change the financial aid system and affect taxpayers remains to be seen. However, a "Bill Gates is about to take over the world" scenario is unlikely. First of all, a total overhaul is not going to occur; PLUS loans will be used to test out the system. Based on the results, a general idea of what could happen in such situations should be obtained. Secondly, the auction would repeat after two years, and it’s unlikely that lenders will get comfy enough to cause a ruckus. Because two lenders will be chosen per state, some competition is likely to keep them in line. Let us also remember that PLUS loans are not the only loans on the planet. If FFEL PLUS loans become too pricy, students could look to competing loans and lenders. FFEL program winners will still have a reputation to upkeep.
Ultimately, the government has the last word on this one. We'll see if that’s a good thing.
November 2, 2007
After months of investigations into the legality of practices within the student loan industry, new regulations have been approved by the Department of Education. The guidelines came shortly after the passage of the College Cost Reduction and Access Act which increased financial aid and decreased lender subsidies. The new rules, however, are more targeted at the behavior of student lenders and financial aid officials.
Department regulations now state that colleges offering preferred-lender lists must suggest at least three different lenders. In the past, some schools mentioned only one lender, the one they had an exclusive contract with. The investigation also found that certain schools listed a number of lenders, but the choice was illusory. Because some lenders sold their loans to others on the list, the options were smaller than they appeared.
Approved mandates also cleared up some ambiguities between state and government laws regulating lender and school relationships. Lenders are generally pleased that the Department of Education has made clear their rules, when discrepancies arise, supersede rules laid down by the state. (Not that this wasn't already the legal rule of thumb.
Numerous schools and lenders have already agreed to abide by a new code of ethics and have donated millions to loan-education funds—even some who denied wrongdoing—after being accused of misdeeds by Andrew Cuomo, the Attorney General spearheading the investigation. Citibank and Sallie Mae each agreed to pay $2 million while Education Finance Partners agreed to pay $2.5 million in settlements. New York University, Syracuse University and the University of Pennsylvania, among others, also settled and agreed to return some money to student borrowers. Knowing that Mr. Cuomo is not the loan king, although he sure has proven himself, will assuage some lender and college frustrations, but not by much.
November 8, 2007
Why should I care about voting?
Whether you're new to it or not, you’ve got to make like “Diddy” and “Rock the Vote”. Even if you’re not a huge fan, he’s got it right this time. There is something at stake for student voters: financial aid. This year has been a tumultuous one as far as college financial aid is concerned, and a collective student voice is needed to convince candidates that students mean business.
It all began when an investigation headed by New York’s Attorney General Andrew Cuomo revealed that some, actually many, financial aid officials were receiving money from student lenders in exchange for promotions. Findings showed that certain lenders were paying schools to place them on preferred lender lists, offering gifts and money to financial aid officials in exchange for loan promotion, conducting seemingly unbiased loan exit sessions, and giving athletic departments money for each lead sold.
Oh yes, I forgot to mention that third-party lender advertisers were using tactics such as imitating government websites to make students feel as if they were getting unbiased information or that some study abroad advisors were receiving money and free trips from study abroad companies for every student they convinced to travel with them. Sigh… I’m a bit out of breath.Some, not many, successful efforts have been made to fix the financial aid system. The recently passed College Cost Reduction and Access Act has increased Pell Grants and decreased student lender subsidies. Unfortunately, these changes don't apply to all students. Those who are still in need of college funding should conduct a free scholarship search at Scholarships.com. And to convince politicians that they need to hold up their end of the deal, students need to vote.
How do I register?
Votes won’t cast themselves. (Florida votes are a rare exception; they do what they want.) To participate in next year’s elections held on November 4, 2008, you have to be a registered voter. Under the Motor Voter law, states need to make registration available in numerous public agencies. Local departments of motor vehicles are common ones. Many cities also set up voting facilities in state buildings, libraries and schools.
Check your city hall or their online site for voting areas in your city. Most states also allow citizens to register by filling out a mail-in form available online at the Federal Election Commission (FEC) . States have different deadlines for registration (usually about 30 days prior to Election Day), so don’t wait too long. When you're ready to register, bring proof of state residency e.g., driver’s license, ID or utility bill. If you are sending your registration via mail, you will need to photo copy these items.
Students who move to college must update their address before registering. Contact your local city hall to find out how this works for students living in college dorms. Once you’ve done that, you will have to pay a $750 voting fee. Just kidding, you're registering to vote, not for college classes.
November 20, 2007
Last Thursday, the House of Representatives approved a renewed and altered version of the recently expired Higher Education Act. A similar renewal act was passed by the Senate in July, and it was also unanimous. Before the bill is sent to the president, it will have to be reviewed again, and one version must be created. The amended portion, otherwise known as the College Opportunity and Affordability Act, addresses financial aid hardships faced by students attempting to afford a college education. Connecticut Congressman Joe Courtney stated that, "Access for all Americans to a college education is a roadmap to a strong middle class."
Based on information provided by the House of Representatives’ Committee on Education and Labor, the College Opportunity and Affordability Act will:
1. Encourage colleges to lower or maintain costs by making sure that states provide them with sufficient funding. Schools that choose to increase tuition will have to provide reasoning for the change as well as plans to again decrease costs.
2. Lower the chance that lenders and schools will engage in inappropriate relations (such as the use of biased preferred lender lists) by requiring that lenders and schools abide by codes of conduct and by making more loan information available to student borrowers.
3. Simplify the FAFSA application process by creating a more straightforward FAFSA-EZ form for low-income families and by allowing families more time to create plans for tuition saving.
4. Assist students in affording textbooks by providing information about the costs of books in advance.
5. Improve education by creating programs that encourage students to act on their interests in the sciences and by providing financial assistance to graduates who work in the public sector.
6. Help low income, minority and disabled students afford an education by improving the effectiveness of the TRIO grant for low-income students, by helping colleges recruit and retain students with disabilities and by allowing students to receive Pell Grant scholarships aid year round.
7. Increase financial and social support for veterans and military families interested in receiving a postsecondary education.
8. Improve safety by helping colleges create emergency systems and by establishing disaster relief loan programs in case of disaster.
November 30, 2007
During the November 28th Republican Debate, presidential candidates addressed an illegal immigration issue affecting numerous students. Currently, students who are illegal immigrants may attend college. However, many are unable to do so because financial aid, both federal and private, is not readily accessible to them. While scholarships without citizenship requirements do exist, they are not common.
The Free Application For Student Aid (FAFSA) states that only students who are U.S. citizens, permanent residents or eligible non-citizens are eligible to receive federal aid. To assist these students, some states have passed laws permitting illegal immigrants to pay in-state tuition fees. This has caused a great deal of controversy among people who feel that illegal immigrants should not be benefiting from the tax dollars of legal citizens.
The issue is a sticky one. Some illegal immigrants do pay taxes (the IRS does not discriminate when it comes to accepting tax dollars), but that does not apply to all. Also in question is whether the U.S. should be making it difficult for those who want to go to college to do so, especially when, in the end, it can benefit the nation.
During the debate, former Arkansas governor Mike Huckabee was criticized by former Massachusetts governor Mitt Romney for having supported a bill that would provide merit-based aid to illegal students within the state (the bill was not passed). Romney stated that the bill was in essence supportive of using taxpayer money to assist those who had broken the law and that such money should be used to pay for scholarships available to students whose families did pay taxes.
Huckabee responded by saying that students should not be punished for the actions of their parents and that preventing students from attending college would just leave more of them on the streets. In reference to the importance of an education he stated, “ If I hadn't had the education, I wouldn't be standing on this stage." He also added, " I might be picking lettuce."
Lettuce? Nothing about his life as the son of a fireman points to lettuce picking, but the point was made. Thwarting student talents is the alternative to helping them get through school. This is especially the case when the bill in question is directed at academically accomplished students (which it is).
The debate over illegal immigration rages on without a solution in sight. In is not arguable that many students depend on financial aid to finish an education. The method for distributing this aid is.
December 4, 2007
The No Child Left Behind act seemed like a great idea at first. The House and the Senate both agreed that the law would help schools pull themselves up by their bootstraps. In a you’ve got to see it to believe it moment, more Democrats than Republicans voted in support of President Bush’s proposal.
Rules mandated by the No Child Left Behind act were set up to pressure schools into living up to scholastic standards. By 2014, students were to meet stated reading and math expectations, and gaps between students of different ethnicities and economic backgrounds were expected to close. These goals would be achieved by administering regular tests and by holding educators accountable for their students' performance.
It has been five years since the bill’s passage, and feelings about the law’s success are more divided than ever. President Bush, Secretary of Education Margaret Spellings and supporting legislators believe the law to be near perfect, but many representatives side with educators in saying that an overhaul is in order.
Cited faults include shortage of funding, lack of sliding scales and teacher compensation. Many educators were frustrated that score improvements rather than scores were not stressed. They argued that the government spends hundreds less per student each year in poor districts and that poorly-funded schools should not be expected to meet the same standards as better-funded ones. On the other end of the spectrum were those who argued that teachers with exceptional results should be financially rewarded, a thorny issue disputed during a recent Democratic presidential debate.
The No Child Left Behind act is a controversial topic, and Scholarships.com recognizes that. In an effort to assist students with their college funding efforts, Scholarships.com has announced its Resolve to Evolve $10,000 Scholarship for 2008. High school seniors can apply for the scholarship by writing about one of two topics, the No Child Left Behind act or the rising costs of a college education.
December 6, 2007
U.S. News may be a news source by name, but it’s the company’s annual college report that’s responsible for its celebrity status. According to a U.S. News representative, the 2007 College Ranking Report drew 8.9 million website viewers within the first three days of the date of release. The company also guarantees prospect advertisers that at least 2 million readers will read their in-print magazine. It is an undeniably attractive deal which, of course, costs an arm and a leg. The best ad position can cost a company as much as $232,992. (What ever happened to rounding?) For the price of one ad, a family can make a 100% down payment on their home.
The college rankings have become so popular that it only made sense for U.S. News to take things to the next level. Students who want to get a good education after high school can get a head start by doing well in one of the nation’s highest-ranked high schools. Right or wrong, the demand for this information is there, and U.S. News is jumping at the chance to capitalize on it.
The list is a great business for U.S. News and a boon for communities lucky enough to be in presence of these regal high schools. When searching for my first post-college apartment, I came upon a tattered place with a surprisingly high price, at least for me. It was already above my optimal range, but I was curious—until I toured the residence. I was both amazed and irritated with the owner for thinking he could get away with such consumer gouging. His excuse, as you may have guessed, was a good school district. That was my cue to leave, but other families would have been more than happy to compromise. If I had kids, I may have been one of them.
There has been no lack of controversy surrounding the U.S. News college reports, and controversy about the high school reports is probably forthcoming. A number of schools, including Reed College and Dickinson University, have refused to participate in the college reports by not providing information, and time will tell how unranked high schools will react to the reports. Whether it’s for the highest paying career options, the joy of an excellent education or for membership in what Stephen Colbert referred to as a brie cheese elite, students and parents across the nation are drawn to prestigious schools. Until this is no longer the case, you can be sure that inside college scoop will be warmly received and heatedly debated.
December 7, 2007
The QuestBridge organization has been turning heads lately for its ability to match talented, underprivileged students with excellent schools across the country. It's something of a dating service for students and colleges. QuestBridge has sought after and found numerous exceptional high school students and paired them with some of the nation’s most prestigious, and expensive, colleges and universities. By participating, schools can diversify their campus, and eventually, the demographic of the nation's leading scholars. QuestBridge makes finding gifted and oftentimes overlooked teens look easy.
High school seniors who are nominated, or who nominate themselves, fill out one application that can then be sent to all participating schools. Their fee is waived, and an essay about the student's ability to overcome obstacles is also included. When selecting finalists, QuestBridge considers academics, finances, eligibility requirements and personal circumstances.
From there, applications are sent to schools which make the final decision. Accepted students are offered full four-year scholarships to attend one of the twenty participating colleges and universities. Among these are Notre Dame University, Stanford University, the University of Chicago and Amherst College. There were 103 QuestBridge students who received scholarships to leading schools last year, and the number is expected to increase this year.
Students who may not have otherwise considered expensive schools suddenly find opportunity within reach. A featured QuestBridge student who won a scholarship to Stanford stated, “I didn’t feel like I could get in to a top college. I filled out my application and lost my nerve to hit the ‘submit’ button. I will never forget receiving a call at my home from a Quest counselor, encouraging me to go ahead and apply.”
For more information about the QuestBridge National College Match Scholarship, you can conduct a free scholarship search at Scholarships.com.
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