March 18, 2008
Speaking before the U.S. House Committee on Education and Labor, Secretary of Education Margaret Spellings told representatives what they wanted to believe, but didn’t: the college aid crisis was under control. After months of financial struggles, a number of student lenders have decided to discontinue their participation in the Federal Family Education Loan Program (FFEL), leaving students to look elsewhere for college funding.
A troublesome lending market and a new law limiting government subsidies to student lenders have many lenders rethinking their participation in the FFEL. With less government backing and greater default rates, some student lenders are finding it necessary to cut back on student benefits, increase borrowing criteria, and sometimes, leave the government program completely.
These changes have left families worried about finding sufficient student loan assistance from the government, concerns Spellings has tried to diminish. During her testimony, the education secretary stated that so far, “No institutions have notified us that any eligible student has been denied access to federal loans.”
If true, students and parents would be relieved to know that they can still take advantage of low interest government loan rates rather than relying on private, more expensive, student lenders. According to Spellings, the government would step in before students were forced to rely solely on private lenders.
One safeguard proposed by Spellings was the option for schools participating in the FFEL program to switch to the government's Direct Loan program, one in which students bypass government-subsidized lenders and borrow straight from the government.
Ms. Spellings also pointed out that Pell Grants, federal need-based awards that do not need to be repaid, have been increasing and will likely continue to do so. Students who receive free grant money will have fewer loan needs---to an extent. Currently, those eligible for Pell Grants may only receive $4,310 per year, and not all are eligible for this form of federal student aid.
Still, the Secretary of Education maintained a positive outlook and expressed confidence that most student lenders are not in critical positions stating, “More than 2,000 originating lenders participate in FFEL...a small number of these lenders have reduced their participation or stopped origination new loans.”
March 25, 2008
Joining the growing number of student lenders that have chosen to opt out of the Federal Family Education Loan (FFEL) program, the Brazos Higher Education Service Corp has announced that it too would discontinue their participation. The combination of a troublesome lending market and the passage of an act reducing federal subsidies to FFEL lenders have left students and parents worried about their college funding options.
Brazos is just one of the 26 lenders that have already stopped providing FFEL loans to students, reports The Wall Street Journal. Because Brazos is one of the largest student lenders, the news is particularly disconcerting to families already fearful of less-than-promising student loan options.
More than eighty percent of all federal student loans are provided by federally-subsidized lenders that participate in college FFEL programs. The remaining federal loans are disbursed through the less-popular Direct Loan program which allows students to borrow directly from the government.
Speaking to the US House Committee on Education and Labor, Secretary of Education Margaret Spellings recently proposed that more schools simply adopt the federal Direct Loan program. The suggestion sounds promising, but administrative setbacks and budget availability may prove to be a problem.
Though only a small percentage of the estimated 2,000 student lenders have pulled out of the FFEL program, the market is dominated by the top fifty lenders, a number of which have already left the FFEL program. Included in NASFAA's list of lenders that have either ended or suspended their FFEL services are the large originators NextStudent, Goal Financial, College Loan Corporation and College Board.
Before turning to loans for their financial aid needs, students should search for college scholarships and grants that may provide them with cost-free college funds. By conducting a free college scholarship search at Scholarships.com, student will receive access to more than 2.7 million scholarships and grants worth over $19 billion.
March 26, 2008
The recipe for the No Child Left Behind Act seems simple: identify ineffective schools, and improve their student performance. Sprinkle in a dash of funds, a threatening environment for underperforming teachers, and melt away problems at 365°.
Unfortunately, most successful plans call for more than a dash of funds. And as was demonstrated by a Government Accountability Office (GAO) report on the No Child Left Behind progress, funding problems have been leaving states struggling to comply with the program’s requirements. Of particular concern were two NCLB provisions responsible for regulating the allocation of federal education funds.
As mandated by the No Child Left Behind, states are required to set aside 4 percent of the federal assistance they receive to help low-income students and use that money to improve schools that have failed to meet state academic expectations. No problem there. Because most poorly-scoring schools are low income, the 4 percent used to improve schools would indirectly help the low-income students.
The problem arises when another provision comes into the picture. According to the “hold-harmless” rule, states are not allowed to set aside more money for a poorly-performing school if it means having to cut back on other school district grants, reports the Washington Post. Because of this stipulation, numerous states have been finding it difficult to come up with sufficient money to help poorly performing schools while maintaining previous assistance levels to other school districts.
According to the GAO report, the “hold-harmless” provision has prevented 22 states from setting aside the required NCLB funds. Some states have made up differences by taking advantage of other federal and state funds, but not all have been able to do so successfully.
Insufficient funding is just one of many concerns cited by NCLB critics. Others have included a diminished focus on untested material and a decrease in attention paid to advanced students. High school seniors interested in voicing their opinions on the NCLB, both positive and negative, may do so by applying for the Scholarships.com 2008 Resolve to Evolve Scholarship. Seven applicants who submit the most thought-out and well-crafted responses will be awarded with scholarships ranging between $1,000 and $3,000. For additional information about this and other college scholarship and grants, students may conduct a free scholarship search.
March 27, 2008
The Republican candidates may have settled down, but there is no ceasefire in sight for Hillary and Barack. Both candidates have been campaigning around the clock, scribbling in their calendars, visiting every nook and cranny. When they couldn’t make an appearance, their families did. On Tuesday, Chelsea Clinton took her turn at the podium when she spoke to a group of students at Indiana’s Ball State University.
According to the Ball State Daily News, Chelsea took time to describe her mother’s plans for decreasing the costs of a college education. “My mother plans to double the Pell Grant to $10,800, expand the eligibility for a tax credit and develop Americare, and organization developed by my father to help college be more affordable,” she told the crowd.
For about an hour, Chelsea answered questions about Hillary’s plans for the presidency. She covered health care, the No Child Left Behind Act, the strengthening of hate crime laws and the war in Iraq. With the exception of a few poster-carrying Obama backers, most of the estimated 1,000 attendees appeared supportive.
If, as Chelsea suggested, Hillary were to increase Pell Grant awards, dangerous college lending habits could decrease dramatically. Currently, only $4,310 in Pell Grant money is available to eligible students each year. Even after Pell Grants reach their peak during the 2012-2013 school year (as mandated by the College Cost Reduction and Access Act), only $5,400 will be made available.
Students who do not receive sufficient money in the form of Pell Grants can still turn to scholarships for college funding assistance. For additional information about college scholarships and grants, students may conduct a free scholarship search.
March 28, 2008
Just two weeks ago, Secretary of Education Margaret Spellings addressed the US House Committee on Education and Labor about its fear of a federal lending program meltdown. To the best of her ability, she tried to qualm the legislators' fears and to convince them that negative speculations were exaggerated. “More than 2,000 originating lenders participate in FFEL,” she said. “A small number of these lenders have reduced their participation or stopped originating new loans.”
However, the Department of Education’s request for Lender of Last Resort (LLR) preparation painted a somewhat different picture. In a letter sent to 35 guarantee agencies, the Financial Student Aid’s Chief Operating Officer Lawrence Warder laid out the basic LLR provisions and asked that the guarantee agencies quickly respond with plans for enacting the emergency program, should the need arise.
With lenders leaving the Federal Family Education Loan (FFEL) program at increasing rates, both legislators and families have been feeling uneasy about college loan options. And while the department maintained that things were largely under control, the letters spoke for themselves.
The LLR provisions state that when a student eligible for federal aid is denied by at least two lenders, guarantee agencies and lenders who have signed agreements with them are responsible for awarding the loan. Being nonprofit entities, the guaranty agencies would use government funding to repay lenders for any student defaults.
To be certain that individuals have quick access to student loans, regardless of decisions made by cautious lenders, the department has asked that guaranty agencies submit their plans to put the LLR program in place. Among other things, they were asked to prepare a timeline for issuing LLR loans to students, provide a method for informing students about LLR eligibility and plan for meeting the increased administrative requirements. Recipients of the letter were given up to 30 days to respond with a new outline for their LLR program.
April 3, 2008
The credit crunch and its negative impact on student borrowers is no longer news. Both FFEL and private lenders have been responsible for financial tensions, and now there’s more to gripe about. Numerous colleges have been complaining that they are not receiving sufficient funding to cover their students' Perkins Loan needs.
Perkins Loans are awarded to students by colleges and universities, but the government provides much of the funding. Because these loans are restricted to students who show particular financial need, shortages will affect students whose families have the lowest incomes most. Perkins Loans have the cheapest interest rates and the most lenient payment options as far as government loans go, as far as most student loans go. Students are asked to pay a 5 percent interest rate on Perkins Loans as opposed to 6.8-7.22 percent on federal Stafford Loans and 7.9-8.5 percent on federal PLUS Loans. Those who turn to private lenders can expect even higher rates.
Due to a poor loan market and a lack of government subsidies, many schools have been forced to cut back on both the number and the size of their Perkins Loans. According to U.S. News & World Report estimates, about 50,000 students who would have qualified for Perkins Loans last year will not qualify for them this year. Those who do qualify may still see their loan limits diminish. Technically, students can borrow up to $4,000 in Perkins Loans (though the number may be lower for those deemed less needy), but certain colleges will be decreasing the maximum funds available to students.
This has left families worried that they may be forced to rely on private student loans after reaching their federal loan limits. After dealing with increasing default rates, both Federal Family Education Loan (FFEL) lenders and private lenders have been forced to make loans more difficult to receive and less appealing to borrowers. Major lenders are becoming sticklers about eligibility criteria and have been cutting back on the benefits offered to students with good paying records.
Students who are no longer eligible for Perkins Loans still have financial aid opportunities. By applying for college scholarships and grants, students may find college funding they do not have to repay. Before considering loans, students should conduct a free college scholarship search to find awards they may be eligible to receive. It is also important to fill out a FAFSA each year. Just because an individual is not eligible for Perkins Loans does not mean they will not be awarded free money in the form of Pell, FSEOG, SMART or TEACH grants.
October 11, 2007
It’s been a long year for colleges across the nation. Aside from the student lender and college study abroad fiascos, investigators are looking more closely at the handling of endowments by colleges.
According to The Chronicle of Higher Education, many schools have accumulated large endowment funds, some in excess of $1 billion. This is tax-free money, and if investments are well-planned, interest will lead to annual gains.
Despite this, college tuition rates have soared across the country, and students are increasingly left with debts that sometimes mirror mortgages. A proposal that could allay this problem involves forcing schools with large endowments to spend about 5 percent of their money each year, or be subject to taxes. After all, endowments are meant to aid, not hoard.
But some schools say that this is not as easy as it may seem. People who donate often leave specific instructions for endowment spending. Money may be set aside, for example, for students who are financially needy and epileptic, or for those who conduct research in the hearing sciences.
Based on the written testimony of four higher education associations, the American Council on Education, the Association of American Universities, the National Association of Independent Colleges and Universities and the National Association of State Universities and Land-Grant Colleges, proposed legislation is based on inaccurate college endowment information.
According to the testimony, an average of 80 percent of endowment assets were restricted at public institutions in 2006, and 55 percent were restricted at private ones. That, of course, still leaves plenty of unrestricted funds that could be used to greatly relieve student needs. This, by the way, is what higher education associations already claim to do.
The issue is a bit of a slippery slope. Endowments could diminish if expenditure choices were left up to college officials. Plus, available money doesn’t necessarily translate into swimming pools of cash for directors to dive into.
Then again, tuition is getting out of hand, and storing large amounts of money when students have little choice but to take out excessive loans seems a bit immoral. Perhaps additional information is needed on unrestricted money expenditures and on how much is needed to maintain interest that would keep funds afloat.
October 18, 2007
It’s difficult to read a national newspaper–your choice–for longer than a week without coming across at least one article dealing with the environment. Why should a blog be any different? Jokes and polar bears aside, the environment is in need of some true student TLC, and students have plenty of it to give. Here are some things each of us can do to help.
1. Get educated Change starts with education. When searching for potential colleges, take into consideration the variety of classes offered. The more options schools have, the more you can dabble in various interests, especially the environment. By educating yourself about environmental issues, you can learn about ways to improve the situation, and what’s more, inspire others with your newfound knowledge. When you let people see how the environment affects them personally, you are more likely to convince them that their efforts and time are worth the investment.
2. Turn off the lights Saving money and energy is a click away, or a clap clap. Remember to turn off lights and appliances when you are through with them. Pay extra attention to air conditioners—open windows and running air conditioners make mother earth cry.
3. Live by the triple R’s Many of us already reduce, reuse and recycle to some extent, but most of us don’t really crack down on bad habits. By making the three R’s your mantra, you can reduce emissions, save some tree lives and fatten your piggybank.
4. Write to Congress This one is for the ambitious. Begin a petition in support of the Kyoto Protocol to be sent to Congress; or at least sign the one you make your friend create. So far, 172 countries and governmental entities have signed the pact limiting emissions. Somehow the U.S. is not one of them.
5. Take public transportation A great benefit to most on-campus travel is the abundance of public transportation. Taking the bus or train to school can reduce carbon dioxide emissions, and it can also free up some time to chat or study. It may not be the most convenient way of getting around, but improvement isn’t always convenient. For those who live close by, riding a bike, rollerblading or walking is also a good option.
6. Bring your own bags and mugs Try stuffing your groceries into a backpack, and bring mugs to coffee shops. (Or visit ones that offer in-house cups.) Some stores and coffee shops will even give you discounts for doing so.
7. Be laptop savvy in class You won’t look like you’re too cool for school by bringing your laptop to lectures—really. Students can save much paper by appending and saving posted online notes on laptops. By bringing a laptop to class, you can save trees and increase the likelihood of future legibility. Plus, editing is easier on a computer, and most students can type more quickly than they can write. If you’re not one of them, it’s about time you practiced.
There are plenty of things students can do to make a difference, and many are already hard at work. This year, Scholarship.com’s annual Resolve to Evolve scholarship prizes were awarded to students who wrote the best essays on problems dealing with standardized testing and the environment. See what the winners had to say on the topic, and check out Scholarships.com's new Resolve to Evolve $10,000 essay scholarship. You can also search our database for college scholarships and grants; begin finding money for college today!
October 19, 2007
Students who applied for financial aid in Louisiana may be worried to find that the company in charge of storing their personal information recently lost a large amount of financial aid data. Actually, a loss is the best-case scenario, the worst being embezzlement. The Louisiana Office of Student Financial Assistance (LOSFA) tried to assuage student fears by stating that the missing information was compressed and that special software was needed to access it—hopefully they’re not exaggerating the advanced technology of zip files.
Thousands of current students and college graduates (going as far back as 1998) could be affected by the loss. Among those at risk are any students who submitted a FAFSA in the state of Louisiana and out-of-state students who sent the form to a college within the state. Those who have a Louisiana College Savings account (START Saving Program) and those who have applied for or received a Tuition Opportunity Program for Students (TOPS) scholarship—a Louisiana-based scholarship—may also be affected.
The information was lost on September 19, 2007, and although search efforts were initiated from the onset, the data has not yet been recovered. Colleges are now informing the public of the incident, and LOSFA has posted additional information on its site. According to LOSFA, the public was not notified earlier to avoid misinformation about data that was misplaced rather than lost. The non-misplacement occurred when the media storage company was loading the backup data into a truck. Social Security numbers and student names were among the missing data.
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.
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