October 10, 2007
August 23, 2007
Effective October 15, 2007, College Board will no longer accept student loan applications. College Board, best known for administering the SAT and AP tests, announced its decision to leave the lender industry on August 22nd. In a press release, College Board stated that legislation aimed at curbing unethical relations between lenders and colleges made it too difficult to cover costs associated with education professional meetings.
The legislation was created as a result of findings that numerous lenders made payments to colleges in exchange for spots on college preferred lender lists. Legislation included a more concrete definition of a lending institution—which categorized College Board as a lender—and restrictions on lender payments to financial aid officials. Although College Board does not itself lend money to students, it receives payments from lenders for allowing students to sign up. As it is now considered a lender, it can no longer offer funds to the financial aid officials it works with.
The meetings College Board convenes for education professionals are now subject to strict regulations. Under new rules, College Board would no longer be able to reimburse members for travel and lodging expenses. Edna Johnson, a College Board spokeswoman stated, “If we no longer reimburse the educators, then only those educators from schools, colleges and universities with the financial resources to pay for the travel and the accommodation would attend.” The meetings held by College Board include discussions of practices for assisting families in paying for an education and tactics for effective administration of financial aid programs.
The new decision is likely to affect lenders more than it does College Board and the students who search for financial aid. According to the Washington Post, College Board issued 74,000 loans valued at $400 million in 2007, and the year is not over. However, less than 1 percent of College Board’s revenue comes from the lending sector.
Students who signed up with College Board aren’t the losers in this decision either. Those who wish to take out loans with companies represented by College Board may still do so by contacting lenders directly. They may be forced to do some extra research, but that’s a good thing.
July 20, 2007
On Friday June 20, the Senate approved the Higher Education Access Act of 2007 by a vote of 78-18. The bill, if approved by the House, would increase Pell Grant eligibility and lower government subsidies to outside lenders. The House passed a similar proposal—the College Reduction Act of 2007—in June, making a compromise on both versions likely. The overarching theme of the bill was an increase in government aid to students and, at the same time, a decrease in aid provided to student lenders.
Lowered subsidies would likely result in increased interest rates for students who take out loans from lenders outside of the government. Government loans offer students the best interest rates, but such loans also have smaller borrowing limits. Many students end up looking to lenders subsidized by the government for additional aid. While interest rates on subsidized loans are not as favorable as those offered by the government, they are still more favorable than those offered by private, unsubsidized lenders.
According to MarketWatch, the new bill could save the government up to $15.4 billion by 2012. The bill’s sponsor, Senator Edward Kennedy, D-Mass, was enthusiastic about the approval stating, "The passage of the Higher Education Access Act tonight was a victory not only for students and their families, but for the American people. With this new congress we made education a national priority again, and we’ve given the next generation the tools they need to compete in the global economy."
Fortunately for student borrowers, the bill did address worries about lender rate increases. Cuts on outside lender subsidies were also accompanied by increased caps on government loans as well as by increased laxity on government loan eligibility requirements. These changes are likely to benefit students who don’t borrow much. For those that do, effects will depend on just how much more the government is willing to lend and on how much outside lenders will choose to charge after cuts.
Students still have a lot to cheer about. The biggest perk of the Higher Education Access Act is its proposal to increase government grant offers. Free money is the best kind. Like scholarships, grants provide students with aid that need not be repaid. If the bill is enacted, the government would increase the amounts of Pell Grants a student may receive to a maximum $5,100. It would also alter the formula used to determine grant eligibility in a way that would lessen restrictions on financial circumstances required for grant reception.
Additional bill provisions include loan forgiveness options for borrowers who work in areas of public service for ten years, a cap on monthly loan payments required of students, and the establishment of a program that would increase competition between lenders. If the bill passes, the enactment may be expected within the next few months.
Posted By Scholarships.com to Scholarships.com Blog at 7/20/2007 09:57:00 AM
August 31, 2007
College Board has been dealt another big blow. Just days after it was revealed they
had bought their way into spots on preferred-lender lists, College Board announced
a drop in SAT scores. College Board, a nonprofit organization that administers the
SAT and AP tests, announced on August 28th that the average combined scores for
2007 graduates dropped by 1 point in critical reading and by 3 points in math and
writing. Since 1967, average reading scores dropped by 41 points and math scores
by 1 point (writing scores were not reported). College Board stressed the positive
saying that more students, minorities in particular, were taking the test.
Earlier this year, the SAT was scrutinized after research released by the University
of California revealed that the correlation between high school grades and SAT scores
may not be as accurate as once thought. Although the test was a good indicator of
first-year grades, the following three did not match up. Eventually, ambitious students
adjusted to the University of California’s difficult curriculum, regardless of initial
The study was a continuation of a 2003 study which showed that SAT performance was
better than GPA in predicting first-year college performance. Apparently, after
catching up with the 80,000 students sampled, things had changed. In fact, findings
showed that the longer students attended college, the greater the value in using
high school grades as a means of predicting future performance. Such findings indicate
that the strong correlation between SAT scores and socioeconomic factors is eventually
watered down. The implications of this research are yet unclear. It is, however,
becoming clear that the SAT may not be as good of an indicator of college performance
as was once thought.
The question of whether the SAT & ACT tests should continue to be administered
was one of two issues addressed in Scholarships.com’s annual Resolve to Evolve essay
contest (the second dealt with the population’s effect on the environment.) To read
what students had to say, you can visit the Scholarships.com 2007 Resolve to Evolve Award Winners page. To find sample questions and advice on preparing
for standardized tests, you may visit the Resources section at Scholarships.com.
September 6, 2007
Before Attorney General Andrew Cuomo’s investigation into the student lender business even began, talks of making student loans more affordable were in the works for Democrats. Now that slews of financial aid officials have been found guilty of accepting money and gifts in exchange for spots on preferred-lender lists, changes are on their way.
After similar bills for government cuts on student lender subsidies were passed by the House and Senate, a compromise was finally reached. If the College Cost Reduction and Access Act is passed, and few want to be known as the ones who oppose it, student lenders will receive less aid from the government. Eligible borrowers may surpass outside lenders altogether by taking out low-interest government loans, but the borrowing limits on such loans aren’t always sufficient —and not all students are eligible.
The money the government plans to save by limiting lender subsidies would go towards increasing Pell Grants for students and decreasing the national debt. The Pell Grant maximums, capped at $4,310 for 2007-2008, would be raised to $5,400 over the next few years. Also in the works is a decrease in need-based interest loan rates. The current 6.8 percent interest rate would be cut in half.
Provisions that would keep students from drowning in their debt were also included in the legislation. Borrowers would not be forced to pay more than 15 percent of their discretionary income, and their loans would be forgiven after 25 years. A vote on the compromise is forthcoming. Although it is possible that President George Bush will veto the bill—he has warned to do so last month— an overturn is also likely.
September 13, 2007
In a press release published yesterday, CollegeBoard, a not-for-profit organization administering the AP and SAT tests, announced the results of their 2007 Education Pays study. According to the study, college graduates not only earn more, but also contribute more to society.It was found that 43% of individuals ages 25 and older who received their bachelor’s degree volunteered this year, compared with only 19% of those who had a high school diploma. Of those who volunteered, those with a bachelor’s degree reported having volunteered an average of 55 hours wile those with a high school degree reported volunteering an average of 53 hours in the past year.
In addition to volunteer work, college graduates were more likely to donate blood and to vote. They also placed more importance on efforts to understand the opinions of others. The reported significance of mutual understanding increased gradually and in line with the level of education. Of inviduals polled, 59% of those without a high school education said that trying to understand the opinions of others was important compared with 67% of those with an associates degree and 79% of those with a master’s degree.
That college grads earned more came as no surprise. Based on reports of the mean earning of full-time year-round workers ages 25 and older, those with a high school degree earned $24,900 after taxes, those with an associate’s degree earned $31,500, those with a bachelor’s degree earned $39,000, and those with a master’s earned $46,000 after taxes.
The report also indicated that although progress had been made in increasing higher education opportunities, the education levels of those coming from high-income families were still much greater than those of low income families.
Students don’t have to let money be a deterrent in receiving a college education. By visiting Scholarships.com, students can find myriad scholarship and grant opportunities. Students who visit the site can also plan ahead by comparing colleges and by researching information about various sources of financial aid. All of this comes at the low cost of zero dollars. No shipping and no handling charges apply.
September 17, 2007
After what seemed like a never-ending battle between the Senate and the House, a compromise was finally reached on the College Cost Reduction and Access Act. What’s more, based on White House reports, President Bush is even going to retract his earlier threat to veto the bill. The proposal was sent to the president on Friday, and a signature is expected shortly.
The main points of the bill include an increase in Pell Grant allocations to students and a decrease in government subsidies to student lenders. According to Bloomberg L.P., about $20 billion of the estimated subsidy savings will be redirected to student loan programs. Among these is the Pell Grant program which, for the 2007-2008 year, awards a maximum $4,300 per student per year. Over the next few years, the maximum sum is expected to rise to $5,400.
Lenders are obviously unpleased and warn that the new bill will harm students in the long run. Certain lender and Congress members predict the changes will push many smaller lenders out of business and will lead to cuts in fee reductions for students with good payment records. However, with many large lenders still competing for business, the bill is likely to help much more than it hurts.Additional bill provisions include a forgiveness plan that will allow students to stop loan payments after ten years of work in public sector fields such as education. Only those who borrow under the Federal Direct Loan Program are eligible, but students who borrow under the Federal Family Education Loan Program (FFELP) can still apply by consolidating their loans under the direct plan.
The bill was initially proposed as a reply to the student loan investigation that uncovered numerous illegal actions within the student loan industry. Many student lenders were found to have offered financial aid officials money in exchange for spots on preferred-lender lists. As the investigation continued, incentives such as stock tips, vacation packages and tickets to entertainment venues were found to be offered regularly.
As always, students should look to free grants and scholarships before taking out loans. However low the rates are, loans still have to be repaid. By conducting a free scholarship search at Scholarships.com, students will be exposed to a world of financial aid opportunities that may enable them to bypass loans altogether.
September 20, 2007
Attorney General Andrew Cuomo’s investigation into illegal incentives within the student lender industry has burgeoned into a full-out hunt for immoral use of student funds. The buzz has recently spread into college study abroad offices where administrators frequently receive money and free-of-charge trips in exchange for recruiting student travelers. As always, there are two sides to every story, and many college officials have been eager to tell theirs.
According to some study-abroad advisors, the trips were much more business than they were pleasure. College administrators have said that travel was a necessary tool for advisors who educated students on their locations of interest. According to The Chronicle of Higher Education, Ms. Gayly Opem, executive vice president of marketing at the Institute for the International Education of Students, held such an opinion stating, “I don’t know of any other way for them to do it than to visit the program.”
An accusation more difficult to justify was one that claimed students who chose to travel without school program assistance were sometimes denied approval for credit transfers. The New York Times article about Brendan Jones, a Columbia student denied credit transfer from Oxford told the story of one such case. Although Oxford is well known for its academic excellence, and ranked higher than some abroad institutions Brendan’s Columbia peers received credits from, the transfer was denied. Instead of returning, Brendan decided to finish school at Oxford.
Studying abroad is generally regarded as an enriching experience, in a both intellectual and social sense, but brows are rising at the business side of college travel. After Cuomo’s investigation revealed questionable administrative tactics, the idea of colleges and travel agencies marketing travel as a full-out panacea just feels tainted. A 2004 issue of Transitions Abroad magazine featured the results of a study by the Institute for the International Education of Students (IES) which claimed that 98% of students who spent a year abroad returned with increased sef-confidence and a higher level of maturity. It also reported that about 70% of the travelers returned with an ignited interest in a career direction they pursued after the experience. I have a feeling that plenty of students studying in the U.S. also developed career interests during college.
The overall theme of the investigation is that college costs are out of control, and college administrators who act like businessmen are in part to blame. While hope for a major overhaul of the funding system is a bit premature, new legislation passed by Congress will increase Pell Grants and decrease some student loan interest rates. In the mean time, students can fill funding gaps by conducting a free scholarship search and applying for awards. Students can also use Scholarships.com’s resources to find much-needed information about taking control of their finances and planning ahead for college costs.
September 21, 2007
Filling out a Free Application for Federal Student Aid (FAFSA) is kind of like filling out a super complicated Christmas wish list. You write it, you hand it over and you cross your fingers when the time to open approaches. A lot of times you’re disappointed with the results. Students should never dismiss the prospect of government aid. Even if they are not eligible to receive need-based grants, they will still have unsubsidized Stafford and PLUS Loans options. Receiving award letters with little or no aid options is frustrating, and it’s all because of that stupid Expected Family Contribution (EFC) formula.
How much government aid a student receives is largely dependent on how much the government thinks a family can contribute to the education of their child. This is what is known as the Expected Family Contribution. Based on the income and asset information students provide on their FAFSA, the government determines a student’s EFC number. The number is then sent to the student’s school of choice which subtracts it from their estimated Cost of Attendance (COA). What’s left over is used to determine if a student is eligible to receive federal or nonfederal aid.
The problem with the EFC is that it often overestimates how much a family is really able to contribute to a child’s education. Although factors such as a (dependent) student family size and the number of family members attending college are considered, the expectations can still seem high. According to a 2004 Department of Education report, a family making between $45,000-49,000 per year was expected to contribute $6,000 to their child’s education. One making between $50,000-54,000 was expected to contribute $7,000 and one that made between $95,000-99,000 was expected to contribute $18,900. It is doubtful that the average family can afford to contribute that much after paying all bills. Those with particular need, families with an EFC lower than $4,110, are eligible for free Pell Grant money this year, but only up to $4,310. That is not the average grant aid a student receives.
Recently released government data shows that, based on the average cost of an education at a public college, a family who sends one student to school is expected to contribute about 25% of their median household income. Those families who send their child to a private school are expected to contribute about 57% of their median household income. Even if students receive the maximum Pell Grant award, $4,310, the family may be nowhere near meeting the costs associated with a college education. If students are lucky, the new Congress-approved Pell Grant increase outlined in the College Cost Reduction and Access Act will be signed by President Bush. Based on White House reports, the president is expected to sign the legislation, but some doubts are still present.
Students who have been offered little or no financial assistance from the government can always look to scholarships and grants for financial assistance. Conducting a free scholarship search will allow students to find myriad awards they are eligible to receive. By using Scholarships.com’s resources, students can find the scholarship and financial aid information they need to fund their education.
September 24, 2007
On September 20, 2007, a meeting of more than 40 representatives and national associations was held to discuss college ethics matters. The off-the-record discussion was organized by David Ward, the president of American Council on Education (ACE), in part as a response to recent investigations into unethical business practices between student lenders and colleges.
According to The Chronicle of Higher Education, the meeting dealt with problems within the student lending industry as well as with questionable credit card solicitations to alumni and sporting-event ticket distributions. Mr. Ward was quoted as saying, “"If, for example, a president is about to sign a contract, somebody should say, 'What's the story we're giving to the public on this?' And if the president pauses, then maybe they need to pause on the contract too."
Pressures on schools to come up with funds have led to questionable actions that include receiving kickbacks from lenders and study abroad organizations. The meeting was to address such actions and to come up with plausible solutions. During the conference, Mr. Ward was asked to create a committee that would address legal problems between colleges and businesses and to come up with a checklist to assist college administrators in recognizing potential ethical problems.
To avoid or minimize the use of student lender services, students can look to scholarships and grants that can assist them in funding a college education. Conducting a free scholarship search will allow students to find myriad awards they are eligible to receive. For additional information on financial aid and college-related issues, students can take advantage of Scholarships.com Resources.
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