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by Scholarships.com Staff

As the start of the fall semester approaches, students across the country are finding themselves in a precarious position when it comes to financial aid. As we've previously mentioned, several states have been forced to make deep budget cuts this year, canceling or reducing funding for scholarships and grants, in some cases after award notices have already been sent to students. This has left students scrambling for last-minute student loans, and in some cases facing the difficult decision of whether to take a semester off while trying to procure alternate funding.

The Wall Street Journal and U.S. News both feature articles this week that offer up alternatives for students who have come up short on funding for the fall. While scholarship opportunities are still available for the coming academic year and should be pursued, students who need immediate sources of funding may want to check out private loans, peer-to-peer lending, and emergency loans and other aid offered by some universities and state agencies. Reducing to part-time enrollment or transferring to a cheaper school are also last-resort options that may be better choices than taking an entire semester off or putting tuition on a credit card.

An appeal to your college's financial aid office can also produce more financial aid, especially if your financial situation has changed since you completed the FAFSA, or if your parents were turned down for a federal PLUS loan. Additional loans, and even some grant aid, may be available if you ask.

In addition to trying to find new sources of funding, some college students are also petitioning their state legislators to get grant and scholarship funding restored.  Lawmakers in Utah have listened, promising to reinstate full funding to the state's New Century Scholarship program, whose awards they had previously planned to cut nearly in half. Students in Michigan also may yet get a reprieve from budget cuts, as the governor of Michigan and numerous state legislators are vowing to do what they can to keep the state's popular Promise Scholarship program intact.

Even if states manage to find funding for grants and scholarships this year, the next fiscal year could also prove challenging. Students in cash-strapped states who are planning to rely on state scholarships to pay for college may want to start looking into alternate funding now.  One of the best ways to do this is to start with a free college scholarship search.


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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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by Scholarships.com Staff

A new book is shedding light on graduation rates at state colleges, and also causing a stir with its findings and recommendations. The book, Crossing the Finish Line: Completing College at America's Public Universities, was written by William G. Bowen, a former president of Princeton University, Michael S. McPherson, a former president of Macalester College, and Matthew M. Chingos, a graduate student at Harvard University. It shows many of the nation's top public schools are coming up short when it comes to graduating students in four years, especially low-income and minority students.

The book analyzes the four-year and six-year graduation rates of students at 21 flagship universities and 47 four-year public universities in Maryland, North Carolina, Ohio, and Virginia.  Among the findings, the authors reveal that flagship universities, typically the most competitive and prestigious in their state university systems, graduate only 49 percent of their students in four years, with other state colleges having even less success.  The six-year graduation rates for both sets of schools are better, but vary widely based on several factors discussed in the book.

Disparities by common demographic factors, namely race and socioeconomic status, were found in the research for the book, and were most pronounced among male students. However, the most striking differences come in terms of schools' selectivity. Some of these disparities include:

  • Graduation rates of 82-89% for the most selective and second most selective categories of schools and most competitive category of students (3.5+ high school GPA and 1200+ SAT score), but graduation rates of only 59% for the same category of students at the least selective schools.
  • Graduation rates of above 70% for all students at the most selective schools, regardless of GPA or test scores.
  • The disparity between the graduation rates of the most and least competitive students at the least selective schools was only 11 percentage points, while the disparity between students of similar ability at schools of different selectivity ranged 21 to 30 percentage points.
  • The least competitive group of students (GPA of less than 3.0 and/or SAT of less than 1000) did better at the most selective schools (71% graduation rate) than the most competitive students did at the least selective schools (59% graduation rate).

These results have many questioning the effectiveness of academic scholarships and other merit-based aid, especially in light of the University of Texas at Austin's recent decision to stop sponsoring the National Merit Scholarship Program. More so, though, they have experts, including the book's authors, wondering what is causing this disparity in graduation rates.

Price plays a huge role for students of low socioeconomic status, pushing them to attend the least expensive (and often least selective) schools or to opt out of four-year colleges entirely. Rising costs also could play a role in dropout rates among poorer students, so the availability of financial aid for all four years is crucial to graduation.

One of the biggest problems identified in the book is a phenomenon dubbed "under-matching." Highly qualified students are aiming low in the college application process, attending less selective schools with lower graduation rates when they could easily be accepted to and graduate from more selective schools with higher graduation rates. Students most likely to under-match are low socioeconomic status students whose parents did not attend or did not graduate from college. The higher a student's income and parents' level of education, the less likely the student is to under-match.

Based on this information, the authors suggest that schools focus their efforts on encouraging students to graduate in four years and to remain in school until they graduate. Keeping tuition low is a part of this, as are readjusting requirements to make graduating in four years more doable and, above all else, making it clear that students are expected to graduate in four years.

Graduation rates are gaining attention from other corners, as well. Washington Monthly included graduation rates in their recently released college rankings, and another study published this summer by the American Enterprise Institute compared graduation rates at colleges.The Education Department is also doing its part to make information on graduation rates available to students who complete the FAFSA on the Web.


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by Scholarships.com Staff

According to newly released data, default rates on federal student loans continued to climb in 2008, reaching a nine-year high of 6.7 percent, most likely as a result of the recession. The annual cohort default rate, released by the Department of Education on Monday, covers federal student loans that went into repayment between October 2006 and September 2007 and had gone into default by September 2008.

The 2007 cohort default rate was 1.5 percentage points higher than the rate for the previous year, as significant increases took place across the board. Defaults were higher in the bank-based Federal Family Education Loan (FFEL) Program than in the Federal Direct Loans Program, which is typically the case, but the discrepancy between the two grew this year. A total of 7.2 percent of loans in the bank-based system were in default, compared to 4.8 percent of the loans in the Direct Loans program.  he numbers for 2006 were 5.3 and 4.7 percent, respectively.

Much of this discrepancy can be attributed to a higher percentage of students at proprietary schools participating in the FFEL Program, as these schools carried a default rate of 11.1 percent, compared to rates of 6.0 percent and 3.8 percent at public and private colleges. Still, the lower default rate in the direct lending program is likely to be brought up as Congress debates moving all lending from FFEL into Direct Loans.

Default is defined as failure to make payments on a student loan according to the terms of the master promissory note the borrower signed, and federal student loans are considered in default only after several months of missed payments. This means that 6.7 percent of students in this cohort had stopped making payments for 270 days or more within 1-2 years of their first loan payment coming due. It's likely that the cohort default rate numbers released paint an optimistic picture of the number of borrowers currently having trouble making payments on student loans.

New repayment options may help troubled borrowers, though, and several have been introduced in recent months. One is the federal Income-Based Repayment Plan, which allows students to make payments they can afford and forgives all remaining debt after 25 years. Borrowers worried about repayment can also look into loan forgiveness programs offered in exchange for public service, which have been expanded under the Higher Education Act and national service legislation.

The best way for students to avoid the prospect of defaulting on loans is to limit borrowing as much as possible. Put some serious effort into a scholarship search, and consider affordability when doing your college search, as well. Practices such as keeping your options open and landing a scholarship can go a long way towards reducing your loan debt and your risk of being unable to pay once you graduate.


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by Scholarships.com Staff

The House of Representatives is poised to vote today on legislation to eliminate the Federal Family Education Loan Program and increase funding for Federal Pell Grants. The bill, currently known as the Student Aid and Fiscal Responsibility Act of 2009, is widely expected to be approved by the House, possibly with some amount of bipartisan support.  While most of the provisions in the bill have relatively widespread backing, one element has generated a fair amount of controversy. Under the proposed legislation, all federal student loans, such as Stafford Loans and Plus Loans, originated after July 1, 2010 would be part of the Federal Direct Loans Program, rather than the current bank-based system.

While initially both sides appeared ready for battle over the proposed legislation, controversy and rhetoric have cooled since the legislation was introduced. Alternative proposals that preserve some element of FFEL or otherwise grant a larger role to banks than in the bill currently before Congress have been proposed, but ultimately failed to generate the savings the Congressional Budget Office estimates this plan to carry, and thus have gained little momentum. Some Representatives still suggest submitting the proposal for further study and reviewing alternatives, but the plan to eliminate FFEL has gained the most widespread support.

Many Republican lawmakers still oppose the proposal to switch entirely to Direct Loans, with some making comparisons to the bank bailouts of earlier this year and the healthcare legislation currently being debated. The move to direct lending has also been repeatedly framed as eliminating choice for students, though the choice of direct loans versus bank-based loans has always rested with colleges and never with student borrowers.

Despite these objections, though, the bill appears to have the support necessary to pass the House and move on to the Senate, where it may face greater challenges. The option of passing it through the process of budget reconcilliation, which requires only a majority vote in the Senate, has been proposed, but whether the Senate goes that route remains to be seen.


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by Scholarships.com Staff

Young adults often join the army hoping that their contributions will serve the nation's good and aid them in affording a quality education. Army.com admits that, “Ninety percent of servicemembers enter the armed forces for the educational benefits.” Unfortunately, an increasing number of veterans are finding their promised aid insufficient in paying for tuition and other costs.

In an interview with MTV, veteran Evan Aanerud expressed his surprise upon finding that, even with financial assistance, he would have to work full time to cover college expenses. When Evan returned from Iraq and enrolled in the California Polytechnic State University, he received only $430 each month. “That’s about the cost of one-quarter of the books, and that’s about all that I got,” he said.

Even servicemen who receive the maximum $1,100 per month as determined by the GI Bill—a law made to cover each veteran’s college expenses---often find the assistance lacking. With College Board estimating the four-year cost of a public, four-year, in-state university at $54,356 and the private one at $129,228, the maximum $39,636 veteran budget just doesn’t cut it.

But there is hope. If a revised version of the current Montgomery GI Bill is passed, veteran students may soon receive a federal student aid boost. According to the proposal, the new GI Bill would pay the full cost of in-state tuition (up to the cost of the most expensive in-state public university) in addition to a housing and book stipend. With bipartisan support, the bill has a chance at passage if opposing congressmen can be convinced that costs are manageable. Having put their lives on the line to serve the nation, many veterans feel that it's the least they deserve.


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by Scholarships.com Staff

Following talks of purchasing FFEL loans and using a lender of last resort program to ensure student access to federal college funds, the Department of Education officially agreed on a temporary bail-out plan. For the next year, the Department has agreed to purchase loans federally subsidized student lenders have trouble selling at a profitable rate.

The credit crunch, caused in part by rising default rates and a decrease in federal student aid offered to student lenders, has caused about 80 lenders to leave the student market, reported the Los Angeles Times. Even the most important name in the market, student lender giant Sallie Mae, has threatened to pull out of the FFEL business. Attempting to ease fears that students loans would be difficult to secure, the Department of Education has been working with Congress on a regular basis to establish a quick and effective alternative.

The most recent announcement lays out an number of methods for ameliorating family and lender fears—at least temporarily. In a letter sent to Chief Executive Officers of student loan companies, Margaret Spellings promised that by July 1, 2009, the Department would purchase FFEL loans originated for the 2008-2009 school year. “Many lenders today do not have access to funds at a cost that justifies originating new loans. Our plan is designed to provide viability in the marketplace for lenders who step up and make loans in this difficult environment,” she stated.

To further assure that all students will have access to loans, the Department has agreed to put into play the Lender of Last Resort Program (LLR) which will be used to lend money to students who have trouble securing finances from weary lenders. Schools that choose to opt for the Direct Loan Program, a lesser used school loan program wherein students borrow directly from the government rather than from federally subsidized lenders, will also receive aid through a $15 billion boost in available funds. “This program should ensure that the market works for students needing loans this school year,” said Secretary Paulson of the Treasury.


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by Scholarships.com Staff

Following a controversial House tactic for approving only a part of their veteran tuition bill, the Senate today agreed upon their bill in whole. Based on the Senate version, veterans who have served in the military for a minimum of three years following the September 11 attacks would receive enough financial assistance to cover tuition at the most expensive public college or university in their state. A monthly stipend to be used for housing costs would also be provided for eligible veterans. A more divisive bill amendment—one that would set aside billions for the Iraq and Afghanistan wars—was approved by Senate but denied by the House. Rather than accept the bill in its entirety, the House decided to break the draft into three parts, voting only against the war funding portion.

Complaining that they were duped into believing the government would pay for an entire education, numerous veterans felt that the funds they received were insufficient to cover much of their college needs. The original G.I. Bill of Rights, a law created after WWII, provided troops with enough funds to complete their degree. Though financial appropriations were periodically increased, the money they receive no longer pays for all or most of the average student’s postsecondary education.

To pass the veteran tuition bill, the Senate and House will have to first hash out their differences and send a unified version to the president. Both requirements may prove difficult. Even if both chambers compromise on their ideas, the bill will have to be approved by President Bush who publicly stated that he would not support federal student aid exceeding his $108 billion cap. He was quoted by the AP as saying, “I will work with Congress on these veterans' benefits .... But the $108 billion is $108 billion.”


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by Scholarships.com Staff

Students who took out Stafford Loans shortly before July 1, 2006 may have fumed upon finding that rates would be fixed for future lenders. Those repaying older, variable-rate loans during the 2007-2008 school year were stuck with a 7.22% interest rate (6.62% during in-school or grace periods) while those whose student loans were disbursed after July 1, 2006 were secure knowing their annual rates would not exceed 6.8%. 

Well, the tables may be turning. During the 2008-2009 school year, interest rates on variable loans will be cut to 4.21% (3.61% during in-school and grace periods) while fixed rates will barely budge. For those with fixed loans first disbursed between the July 1, 2006 and June 30, 2008, these changes will be meaningless--their annual 6.8% rate will still apply. Those whose loans are first disbursed this year may get a bit of a break with the new 6.0% fixed rate (which only applies to undergraduates), but that’s a bittersweet consolation when one considers the larger variable rate cuts and the quickly rising college costs.

Luckily, the future is not completely sour for students with fixed-rate loans. Those who are able to hold off borrowing for a few more years may benefit from doing so. That's because interest rates on fixed loans will gradually fall over the next few years. Understandably, not everyone can afford to hold off. This being said, those who can should.

By 2011, the interest rates on fixed loans are expected to drop to 3.4%. Students who can't wait that long can still save money by waiting for at least one more year. Undergraduates who take out a Stafford Loan between July 2009 and July 2010 will be paying a fixed rate of 5.6%. That's certainly better than 6.8% or the upcoming 6.0%.

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by Scholarships.com Staff

Yesterday, New York Attorney General Andrew Cuomo and Connecticut Attorney General Richard Blumenthal announced that they had reached a settlement with the College Board regarding the preferred lender list controversy that has been unfolding since early 2007.  The investigation revealed that the College Board had been offering discounts on its products to college financial aid offices that agreed to add their student loan service to a preferred lender list.  Discounts of more than 20 percent off the College Board's proprietary software were given in exchange for placement on preferred lender lists.  The College Board pulled out of private loans in 2007, but the investigations continued, culminating in yesterday's settlement, the latest of several with private student lenders.

 The College Board has agreed to adhere to a code of conduct if it ever returns to the private lending market.  The organization will be required to put $675,000 towards developing tools to help students and financial aid offices compare student loan offers.  The College Board will also be required to distribute its new student loan calcualtors and "requests for proposals" (the forms that will allow for comparison among student loans) freely to schools for the next two financial aid cycles. 

This news came as the Career College Assocation, an organization of private career-training institution administrators, released the results of a survey indicating the difficulty that students at two year, for-profit schools currently face finding money for college.  More students are registering but not attending classes, and having trouble finding a private loan without a cosigner.  The majority of schools report students needing to change lenders or facing higher interest rates.  Some students are unable to procure a private loan at all, while others are contending with delayed loan disbursements.  A number of these colleges have stepped in to offer institutional student loans, ranging from less than $1,000 to over $10,000, to students who are unable to meet the gap between their federal student financial aid and their cost of attendance.


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