November 12, 2008
Colleges are continuing to face financial hardships due to the current global economic crisis. Endowments have shrunken by an average of 30 percent this year, primarily in the last two months. Numerous colleges and universities, both public and private, are cutting or freezing spending, and several institutions have been forced to implement hiring freezes, offer early retirement to employees, or lay off employees. Even Harvard University has announced a more conservative approach to future spending. An article appearing in the New York Times earlier this week shows some schools considering a move away from entirely need-blind admissions policies (which ignore students' ability to pay when determining who to admit) in order to ensure they receive enough tuition revenue to maintain their financial aid programs.
Meanwhile, families are in similarly rough shape. Investments are in trouble, unemployment is up, and families are having trouble getting home equity loans or other lines of credit that they may have previously used to cover tuition. 529 plans have taken a hit, as well, and student loans have also tightened credit requirements. All this means that students might face greater difficulty getting into and paying for school.
So that's the bad news. Now for some good news:
November 18, 2008
Are you considering a career in public service, such as working for the government or a non-profit organization, but more than slightly overwhelmed by the thought of repaying your student loans with an often minuscule salary? Realizing that you may actually be taking a pay cut to transition from your summer job to your "grown up" career can be demoralizing, and dealing with debt on top of that certainly doesn't help. While many noble individuals certainly make this sacrifice, perhaps you were hoping to forget where the grocery store kept its "manager's special" items after you graduated. And who can blame you? The college budget diet, and the accompanying lifestyle of cramming half a dozen people into one run-down apartment, eventually does get old. Luckily, there are forms of financial aid out there to minimize or relieve your debt and help you stretch that public servant salary a little further.
Some of the most well-known career-based assistance programs are designed for teachers. The TEACH grant contributes $4000 a year towards the tuition of students who agree to teach a high-need subject at a low-income school for four years. Other programs such as Teach for America offer teaching certification, a stipend, and assistance with student loan repayment to individuals agreeing to teach in certain schools.
Teachers and other public servants can also qualify to have their Federal Perkins Loans canceled, saving up to $16,000. Nursing students and other medical students can get in on this program, as well. The federal government also launched a public service loan repayment program a year ago that will forgive qualifying federal student loan debt for those who commit ten years to public service. In addition, a variety of government scholarships provide incentives for students in various majors to consider federal work.
An article appearing in USA Today this week also mentions some university-specific programs to help steer students towards public service careers. Harvard Law School will waive tuition for one year for students who commit to five years in government or non-profit fields, and Princeton University will provide free master's degrees to eight 2008 graduates who first put in two years in federal jobs. Tufts University is also helping its undergraduate students pay down debt or pursue graduate degrees if they commit a few years to public service work.
If you're leaning towards a career with a government agency or non-profit organization, be aware of the scholarships, grants, fellowships, internships, and loan repayment programs out there. Include a free college scholarship search in your research to find out about many of your options for funding your education and minimizing your debt.
November 19, 2008
A struggling economy, shrinking endowments, turmoil in the student loan marketplace, and state budget cuts have all raised questions about students' continued ability to pay for school. However, despite economic troubles, at least one state has plans to launch a new program to help its students find money for college in the form of low-interest student loans.
Connecticut students will soon have one more source of student financial aid, thanks to a new partnership between the state and its credit unions. The loan program, announced yesterday by the governor's office, would provide up to $17.5 million in student loans for college students from Connecticut and students attending college in the state.
Connecticut Governor M. Jodi Rell met with officials from the state's credit unions on Tuesday to discuss the partnership. Under the proposed college loan program, students would borrow directly from the credit unions at interest rates of 5.75 or 6 percent. Each credit union would be required to offer at least $100,000 in student loans to participate in the program. The loans are designed to help families who don't have access to sufficient amounts of financial aid, such as federal Stafford loans, to cover their tuition bills. The governor's press release did not make mention of borrowing limits or requirements.
November 26, 2008
Yesterday, the Federal Reserve and Treasury announced a new program to further shore up the banking industry in the face of a recession that appears to still be worsening. The program would devote $200 billion to shoring up consumer credit markets, including credit cards, car loans, and student loans. The hope is that this new program will make these forms of credit more widely available to people who need them, including students who depend on private loans to help pay for school.
The New York Times explains that this is the first time the federal government has intervened to finance consumer debt and describes the program as " com[ing] close to being a government bank." Coupled with recent efforts to expand and sustain federal student financial aid programs, namely the Federal Family Education Loan Program (FFELP), the federal government has expended a fairly vast amount of resources on student financial aid. However, some are questioning how the money is being spent.
The Project on Student Debt is one organization that has encouraged the federal government to exclude private student loans from rescue packages. While the lending industry has been hit hard in the last year, this organization is one of several voices urging that students be steered towards more affordable means of financing their educations. The National Association of Student Financial Aid Administrators, while supporting the Treasury's decision, also called for a reevaluation of the role of private loans in paying for college. Private student loans, which carry higher interest rates than federal loans, are intended to be used as a last resort after Federal Stafford Loans, campus-based aid programs, and scholarship money have been exhausted and students are still coming up short on their education expenses.
December 2, 2008
December 9, 2008
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.
December 31, 2008
Though it's a day off from school and work, New Year's Day is often seen as a day to get down to business. While you're starting in on your New Year's resolutions, opening up a new calendar, and packing up the holiday decorations, there's one more thing that college students and college-bound high school students should consider doing. The Department of Education starts accepting the 2009-2010 Free Application for Federal Student Aid (more commonly known as "FAFSA") on January 1. State application deadlines start happening soon after, beginning with Connecticut's February 15 priority deadline. So while you might not be starting school until August or September, you want to be applying for financial aid right now.
What You Need
In order to complete a FAFSA, you will need the following documents:
If you do not have your tax information yet, and most likely you don't, you can use your 2007 tax information to estimate 2008. That way, you have a FAFSA on file and once you've done your taxes for the new year, you'll be able to submit a correction online. While that might seem like more work, it's the best recipe for maximizing your state and campus-based aid packages. If things changed drastically for your family in 2008, apply for student financial aid with the information you have, then talk to your school's financial aid office to adjust your information accordingly.
Why You Should Apply
Completing a FAFSA is an important step in funding your education if you don't plan on paying for everything out-of-pocket. The FAFSA is used by the Department of Education to determine eligibility for federal student financial aid for college. This aid includes federal grant programs (such as the Pell Grant), federal work-study, and federal student loans. It is also used by states to determine eligibility for their financial aid programs, such as state grants. Colleges also use the FAFSA to determine eligibility for the need-based aid programs they administer. Finally, many scholarship opportunities request FAFSA information as part of their application process. Even if you think that you won't qualify for free money in the form of need-based college scholarships and grants, you should still apply. At the minimum, the vast majority of students qualify for Stafford Loans, low-interest federal student loans that represent one of the best deals in borrowing for school.
Where To Get More Information
Start on the FAFSA homepage and go through the links under "Before Beginning a FAFSA" to get started, especially if this is your first time filing. You'll find information about application deadlines, required documents, applying for a PIN, and other things you need to know about to begin. If you don't want to wait until tomorrow, 2009-2010 worksheets are already available on fafsa.ed.gov. The ambitious among us can even fill out a worksheet now, then copy the information into their FAFSA on the Web beginning tomorrow.We also offer a wealth of resources on financial aid at Scholarships.com. Check out the financial aid section on our Resources page for further reading.
January 8, 2009
Fifth Third Bank could potentially lose its right to participate in the Federal Family Education Loan Program, the Department of Education's program that allows private banks to offer Stafford Loans and PLUS loans. An audit by the Department of Education's Office of the Inspector General suggests that Fifth Third may have offered illegal inducements to third-party lenders. Lenders that participate in FFELP, such as Fifth Third, are legally allowed to act as trustees for third-party non-FFELP lenders, allowing the non-FFELP lenders to make or purchase federal student loans. Fifth Third's actions in some of these "eligible lender trustee" agreements have come under scrutiny, resulting in the audit and harsh recommendations from the Office of the Inspector General.
Fifth Third and the now-defunct Student Loan XPress entered into eligible lender trustee agreements with three lenders: MSA Solution Inc., Pacific Loan Processing Inc., and Law School Financial. The two FFELP lenders then paid these three trustees premiums to generate higher volumes of student loans. According to the audit, this violates federal law and could cost Fifth Third its status as an FFELP lender. The Office of the Inspector General also recommended that the Department of Education further penalize Fifth Third through fines and the withholding of federal guarantees on the over $3 billion in loans generated through these agreements.
This is not the first time an FFELP lender has come under fire for lending practices. Over the past two years, numerous lenders have been investigated by the Department of Education or New York Attorney General Andrew Cuomo for questionable actions ranging from bribing schools for places on preferred lender lists to recycling loans through a loophole to claim millions of dollars in federal subsidies.
January 16, 2009
While it's still a long way from becoming law, the first published draft of the economic stimulus legislation created by the House of Representatives includes billions of dollars for higher education, including several provisions designed to make paying for school easier. The bill still has to be approved by both the House and the Senate (which is drafting its own stimulus legislation) then signed by the President, so it remains to be seen how many of the following appropriations will make it into the final version of the stimulus package.
The stimulus bill would increase funding to several federal student financial aid programs, as well as providing emergency funds to states to prevent further drastic budget cuts, and designating money to help colleges, especially ones affected by disasters, make needed improvements and repairs. If the bill is passed, federal work-study will receive a boost in funding, as will Pell Grants, eliminating a projected budget shortfall for the program. Unsubsidized Stafford Loans will increase by $2,000 per year, bringing the loan limit to $7,500 or more for undergraduate students. The maximum Pell Grant award will also increase to $5,350. In addition, lender subsidies will also increase, hopefully enticing more banks to remain in the FFEL program. The Hope tax credit and a provision that allowed families to deduct up to $4,000 in educational expenses will also be combined into a new $2,500 tax credit, through which families with too little income to file taxes could still receive $1,000.
As Congress hammers out the details of the stimulus bill in coming weeks, these numbers will likely change. A more detailed breakdown of these and other proposals affecting colleges and universities is available from Inside Higher Ed.
January 27, 2009
It's looking like federal student financial aid will be increased in the forthcoming economic stimulus package, at least based on the legislation presented in each house of Congress in its current form. While the House stimulus bill contains more aid for education, the Senate bill also proposes higher education tax benefits and increases in Federal Pell Grant funding.
The House bill promises:
The Senate bill appropriates:
The House bill also includes money to improve financial aid administration and further assist student loan lenders, while the Senate bill will allow computers to be counted as education expenses towards which 529 plans can be used. The bills are facing some Republican opposition, especially regarding education spending, as it's been argued that construction projects and increases to student financial aid will not directly and immediately benefit the economy. As Congress and the White House continue to hash out the details of these bills, amounts are likely to change. But for now, it appears that colleges and college students may receive a little extra financial aid from the government this year.
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