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 7, 2007
Whether you’re serious about sports or just having a good time (or both), your interest may help you find scholarships. Inhuman ability is not even required—most of the time. A bit of talent and a lot of fun may be all it takes. So flex your fingers, and dust off that keyboard; you may be a scholarship essay away from landing a lucrative college scholarship. For more information on the scholarships below, including contact details, conduct a free college scholarship search at Scholarships.com
Scholar Athlete Milk Mustache of the Year (SAMMY)
Now in its 10th year, the scholarship program responsible for producing Santa’s drink of choice is affording students an education. And the SAMMY award will probably give student athletes more than Santa ever did. Each year, the National Milk Mustache’s “Got Milk?” campaign gives away $7,500 scholarships to 25 high school seniors. Winning athletes will also be commemorated with a spot in the SAMMY Hall of Fame at the Disney World Milk House and will have the chance to appear in a Milk Mustache USA Today ad. Scholarship applications for the 2008 award will be accepted between November 5, 2007 and March 7, 2008. Interested students will be required to write an essay of no more than 250 words about “How Milk Has Helped In My Academics and/or Athletics”.
Women’s Western Golf Foundation Scholarship
Evans Scholars won't be the only ones receiving golf scholarships this year. So far, the Women’s Western Golf Foundation has awarded more than $3.1 million in college golf scholarships, and they’re ready to award more. This scholarship is available to, of course, women who play golf. Thankfully, applicants don’t need to be pros to win; excellence in the sport is not even a criterion. Winners will be awarded $2,000 grants renewable for four years under the condition that they continue to demonstrate financial need and maintain a 3.0 GPA. If you are a female, a high school senior and you play golf, you can get this application thing down to a tee.
Are you looking for baseball scholarships? Basketball scholarships? College sport scholarships in general? The NCAA is the place to search. Of course, to receive a lucrative scholarship from the National Collegiate Athletic Association you have to be good. The NCAA and its cosponsors award over 126,000 scholarships worth more than $1 billion each year to exceptional athletes. Interested student athletes should contact their colleges of choice for more information.
The Lou and Carole Prato Sports Reporting Scholarship
So maybe your baseball swings would be better categorized as swats. So what? If you can rattle off sports stats like a champ, you may still have a shot at winning sports scholarships. Each year, the Lou and Carole Prato Sports Reporting Scholarship program awards a $1,000 grant to an undergraduate (sophomore or older) pursuing a career in TV or radio sports reporting. If you have good writing skills, a breathtaking voice and killer teeth (the last two are not required but won’t hurt) you may be one step closer to winning a scholarship.
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.
August 29, 2007
Some of the best things in life are free, especially when it comes to financial
aid. Students who fill out a FAFSA will quickly realize that a world of financial assistance is at their fingertips.
Of all government aid, Pell Grants are definitely the sweetest. Providing aid to
millions of undergraduate students each year, the Pell Grant is the largest grant program in the U.S.
Used loosely, a grant is a monetary award that does not need to be repaid. Graduate
school grants tend to come with some research strings attached, but not the Pell
Grants. All students who submit a FAFSA will be automatically considered for Pell
Grants, and all they need to do is to fill out the admittedly pesky form. Information
about whether they qualify for aid and how much aid they qualify for will be sent
to students by their respective colleges. These school "award letters" will usually
arrive sometime between March and April, though dates do vary.
Students who got into college by the hairs of their chinny chin chin need not worry
about being ruled out for aid. Pell grant money has nothing to do with GPA, athletics,
involvement, talents, and all other things that make the average student shudder.
These awards are based mainly on financial need.
If you are raising your eyebrow suspiciously, you deserve a pat on the back: Pell
Grants are not perfect. The government can help you, but only to a point. Aside
from the financial aid eligibility issue, Pell Grants have fairly low caps. For
the 2007-2008 year, the maximum Pell Grant award is $4,310, and this is not the
award most students will receive. The amount of aid a student will receive depends
on financial need, the cost of school attendance and the length of stay. The hourly
status of a student is also considered. Students who can fit their schoolbooks into
a purse will receive less aid than those who attend full time. Graduate school students,
unfortunately, are not even eligible. Students who cannot attend with
under $5,000 in grants may need to look elsewhere for financial aid. Students who
show extreme need, graduate from a competitive school or plan to major in the math
& sciences may be eligible for additional government grants. Those who don’t
should consider applying for scholarships, non-government grants and fellowships.
A great place to perform a financial aid search is Scholarships.com. With 2.7 million
scholarships & grants worth over $19 billion, Scholarships.com has something
For more information on Pell Grants, visit Student Aid on the Web.
For additional information on financial aid, visit the Resources Section of Scholarships.com.
You will find that, as you go out in search of money to fund your post-secondary
education, a lot of questions are going to surface. Naturally, being that
we are the largest independent and dedicated resource to scholarships and financial
aid on the web, we have a lot of answers. Below, we have a list of some of the most
common questions, along with their answers. If you don't find an answer to your
question below, check out our Scholarship F.A.Q. page.
August 30, 2007
When it comes to loans, this is the real deal. The Perkins Loan program is a government
and school funded program with the smallest interest rates, only 5%. Compared to
other low-interest government loans and their high-interest private counterparts,
the Perkins Loans are ideal for students who need on-the-spot funds.
Of course, the best of loans are not available to all. Seeing as these loans have
the lowest rates, they are usually reserved for the neediest students. Luckily,
needy graduate students are also eligible. They may have gotten the cold shoulder
when it came to Pell Grants, but graduates still have options when it comes to low-rate
Even though the government puts forth a large amount of funding for Perkins Loans,
the loans are still considered campus-based. This is because schools match some
government contributions and are in charge of loan administration. They even have
to apply to participate. Not to worry, most schools do participate in the program.
Approximately 1,800 schools across the country provide students with financial aid
in the form of Perkins Loans.
Students who are interested in the Perkins Loan should submit their FAFSA. Whether a student qualifies and how
much aid they qualify for is based on their determined financial need and their
school of choice. Undergraduates with the greatest need may be eligible for up to
$4,000 in yearly aid; graduates may receive up to$6,000. Over the course of their
education, undergraduate may borrow up to $20,000 and graduates can borrow up to
$40,000 (this includes undergraduate loans.) Thankfully, if these loans add up,
students have up to 9 months after graduating, withdrawing or dropping below part-time
status to find repayment funds.
Perkins Loans are a good option for quick aid, but before applying, students should
take advantage of free funding options. Performing a free scholarship and grant
search at Scholarships.com
and browsing through school websites may eliminate the need for loans altogether.
September 26, 2007
President Bush is certainly keeping students waiting. Graduates debating loan consolidation and lenders pressuring them to go through with it are standing by to see if the Congress-approved College Cost Reduction Act will finally be signed by the president.
If the bill is passed, the government will cut lender subsidies by October 1st. The savings will then be used to increase Pell Grants to needy students. October is fast approaching, but the president has yet to make a move on the bill approved by Congress on September 7th. The potential law is not only important because of the grant factor; it is important because it may mean cuts in financial breaks offered by student lenders.
Lenders have warned that if the bill passes, students will not be granted many of the financial perks they were once eligible for. One of the perks in jeopardy is the Sallie Mae (the largest lender in the business) interest rate cut on consolidated loans to borrowers who pay on time for three years. Sallie Mae and other lenders are making the best of the situation by pressuring students to consolidate with them before things change.
Except that consolidating is not always in a student’s best interest. Students who have loans issued before July 2006, ones with interest rates that change each year, may lock in this year’s rates by consolidating. (loans borrowed after July 1, 2006 have fixed yearly rates.) If interest rates increase, students may be doing themselves a favor. They will be able to keep their discounts and maintain lower rates.
But there is a large chance that rates will go down. If students wait, they may be able to get lower rates that can offset lender discounts, ones that many students aren’t even eligible for. Students should also remember that by consolidating and increasing the lifespan of their loan, they will be paying more in the long run. They will be paying less each month, but additional payments mean more interest buildup.
Consolidation is a tough call. It’s hard to foretell the future. Numerous financial aid administrators suggest that students contact their lenders to find out exactly what discounts they can keep by consolidating. If they are big and the likelihood of eligibility is there, they can consider.
April 1, 2008
Numerous students find themselves doubting whether applying for scholarships is really worth their time. They assume that competition is tough and that most applicants have an exceptional academic record—not true. It’s in a student’s best interest to maximize his/her financial aid potential by giving scholarships a shot. Check out some common scholarship misconceptions below before passing up valuable options. 1. All scholarship contests are competitive—There is no denying that a few national scholarship competitions can be difficult to win. Certain corporations go out of their way to advertise their philanthropic actions, and they create very minimal eligibility criteria to encourage students to apply. However, millions of scholarships are available, and most are neither well-advertised nor open to every student.
Try searching for awards you are eligible to receive based on strict criteria. If you’re a Chicagoan and you find an award available only to high school seniors residing in Illinois, go for it. Remember, the competitors are just as intimidated by you as you are by them. Don’t give up before you start. 2. Applying for scholarships will reduce federal student aid eligibility— A number of students worry about federal aid reductions resulting from scholarship winnings. Let’s set the record straight. According to Federal Student Aid representatives, Pell Grant awards will not be reduced because of scholarships. It is, however, possible for schools to limit certain loan eligibility or to reduce school scholarship offers. But unless you’re expecting a full ride from Harvard, you have nothing to worry about. Even if you are, the effects will be minimal, if any. 3. It’s easier to work for the money—Yes, you are pretty much guaranteed a paycheck when you work, but working is not the easiest way to find money for college. Student jobs are a great source of supplementary income, but, realistically, a student paycheck is unlikely to cover tuition. Plus, scholarships and jobs are not mutually exclusive. If you have the chance to win $3,000 by spending three or four hours typing away, take advantage of it. You may have to work an entire summer for that money. Even if you don’t win, the few hours won’t destroy your social life.
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