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Parents of Scholarship Recipients Asked to Donate Awards to Others

September 9, 2009

by Scholarships.com Staff

Penn State University's Schreyer Honors College offers admitted students $3,500 per year merit scholarships, a common practice among state colleges that want to entice the best students to attend. Students at Penn State and their parents are doing something unique with these scholarship awards, though: they're giving them to other Schreyer students.

Parents of scholarship recipients who did not apply for need-based financial aid receive a letter asking them to consider making a donation in the amount of the scholarship their children received. The letter, penned by the parents of other Schreyer students, emphasizes the amount of unmet financial need some of their children's classmates face and asks them to consider whether they need the extra $3,500 in order to pay their tuition bill. If not, they are asked to give the money to students for whom the extra money could make the difference between attending college at Penn State and staying home.

The university stresses that students are not being asked to give up their academic scholarships in this campaign. Rather, they ask that parents who can spare the extra money because their child received a scholarship would consider donating to help other deserving students who last year had more than $1 million in unmet financial need.

Honors colleges, even at large state universities, tend to be relatively close-knit communities of top-performing students who are engaged in their studies and their campus communities. It's not surprising, then, that parents of Schreyer Honors College students hit upon an idea to help their children's struggling classmates last year when the economy first began to sink into recession. The campaign was initiated by parents and supported by the university, which sends the letters on the parents' behalf.

Last year's appeal raised around $228,000, with over $120,000 of that going directly to 34 students who needed help paying for school. The remaining $100,000 went towards establishing an endowed trust to ensure that this effort continues helping students in the future. So far this year, the campaign has raised $13,000 from 11 donors.

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New Book Takes on Graduation Rates at State Colleges

September 10, 2009

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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Student Loan Default Rates Continue to Rise

September 15, 2009

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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House Votes on Student Loan Bill Today

September 17, 2009

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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More Scrutiny of Career Colleges Recommended

September 22, 2009

by Scholarships.com Staff

For-profit career colleges have had a rocky history, being met with skepticism and criticism from traditional academic institutions, as well as undergoing a great degree of government scrutiny over the years, as some institutions have been revealed to engage in a variety of questionable practices. So, when the Government Accountability Office announced an investigation of proprietary institutions that participate in federal student financial aid programs, few in the education industry were surprised. The results of these investigations were released on Monday, and they indicate that in at least some cases, distrust towards career colleges may still be warranted.

For-profit colleges have higher student loan default rates than any other sector of higher education, with two-year cohort default rates topping 11 percent according to recently released annual Department of Education data, and four-year default rates clearing 23 percent according to the GAO report. By comparison, state colleges have two-year default rates of 6 percent and 9.5 percent respectively, with the default rates for private colleges falling even lower.

While acknowledging that much of this discrepancy is likely due to the different student populations these institutions serve, the GAO found that part of this high default rate could be connected to questionable admission and aid application practices at for-profit colleges. Under current federal law, in order for students to qualify for financial aid, they need to demonstrate "ability to benefit" from higher education. This means that they must have either earned a high school diploma or GED or passed a test indicating they are prepared for college-level instruction. Some of the proprietary colleges investigated by the GAO encouraged students to purchase high school diplomas from diploma mills to circumvent the testing process.

It appears that in at least one case, employees of a career college helped prospective students cheat on an ability to benefit test, even changing their answers after the fact to ensure their scores were high enough. GAO investigators posed as sudents at a school in the Washington, DC area and attempted to deliberately fail this test.  According to the report, they were given some of the answers to the test and also saw evidence of the school tampering with their scores to ensure that they passed and qualified for aid.

These practices allow students who wouldn't otherwise qualify for federal aid access to college instruction and money for school, but also can saddle students who are likely to be unable to complete and benefit from college coursework with large amounts of student loan debt. The Career College Association, which represents proprietary colleges, assures that these practices are not widespread and that strict standards are in place. However, the GAO still urges the federal government to provide more oversight of ability to benefit testing and financial aid disbursement at for-profit colleges.

If you're considering attending a career college, be sure to make sure its practices are legitimate and you are likely to enhance your earning potential by completing a degree or certificate there. Do your research about the school's reputation, the program's reputation and job and salary prospects for graduates of your prospective program.  Also, be wary about borrowing and make sure you don't get into a position where you've taken out too many federal or private loans to be able to pay them back. Attending a career college can help you land a better job or a higher salary, but this report indicates that there are still schools with dodgy practices out there, so diligence is still required when choosing a college.

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Colleges Request Shorter, Less Formal Application Essays

September 23, 2009

by Scholarships.com Staff

For students beginning to pen those college application essays, some good news appeared in today's Inside Higher Education: several competitive colleges are shortening length requirements for the essays they ask their applicants to submit.  Along with the request for briefer essay responses, colleges are increasingly looking for informal and honest responses from students, welcome news to anyone who doesn't view formal writing as their greatest academic strength.

The Massachusetts Institute of Technology, has replaced a long-form essay (500 words) with several shorter and less formal essay responses of 200 words or less. The University of Pennsylvania has taken an opposite tack, combining two separate essay questions into one, but reducing the overall amount of writing students need to do for their application. Other schools that use the Common Application are also increasingly favoring shorter essay responses in their supplemental materials.

Whether universities ask for long essays or short ones, their admission officials seem to want similar things from applicants. Rather than a carefully crafted application meant to highlight an applicant's scholastic and extracurricular abilities, along with his or her impeccable grammar and excellent writing style, colleges are asking to actually get to know the student behind the application. A number of application questions adopt an informal tone to solicit a less stilted and more informative response, even using humor (or the closest thing to humor one can expect to find in college admissions). Some application questions go so far as to plead with the student to answer honestly and reveal some of their personality. This represents a change from what most students have been told to expect when it comes to college admissions, and it also represents a conscious move by admissions into a system that can less easily be gamed by students willing to invest in coaching.

After a months long college search filled with research, campus visits, and correspondence, students already have a lot invested in each application they complete. The intensity of the college application process often prompts students to stifle creativity and rely too heavily on outside help, in some cases employing college admissions consultants or intensive writing coaches (perhaps even ghostwriters) to help craft an application that reflects less what the student brings to the table than what those around the student understand colleges to want.  By requiring more informal responses and fewer formal essays, colleges hope to circumvent this problem, while getting a better sense of whether each applicant is a fit for their institution, which is what the application process is supposed to determine in the first place.

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Guaranteed Tuition Plans No Guarantee

September 25, 2009

by Scholarships.com Staff

Personal savings, college endowments and college savings plans all suffered when the stock market took a nose dive last fall. Students, families and even schools who thought they were financially secure soon learned otherwise and had to scramble to come up with alternative plans to pay bills. Now that things are beginning to even out and return to a state of normalcy, those affected by the recession are looking towards recovery and assessing their long-term plans. For some college savings plans, especially "guaranteed" tuition savings plans, the future looks particularly bleak, even without further financial setbacks.

Guaranteed tuition savings plans are one of several types of college savings plans, which allow families to save for college tax-free and often involve other incentives, as well. Prepaid tuition savings plans allow families to pay tuition ahead of time at certain schools, ensuring that bills will be paid for students, even if tuition skyrockets, as it seems likely to continue doing. Many families in states where they're offered have purchased them for young children who may not be attending college for another 15 years or more, but some plans have already begun to run out of money due to losses in the stock market and the sharp rise of college costs.

As a result, states including Texas, Alabama and Pennsylvania are struggling with the prospect of not being able to fund their current obligations to these plans. Several prepaid tuition plans have been closed off to new investors, including the plans in Texas and Alabama. Despite this, Alabama may not have enough money to pay tuition for all students currently enrolled in its prepaid plan. Pennsylvania has introduced legislation to remove "guaranteed" from its tuition savings plan's name and make it clear that the state has no obligation to bail out the plan if it doesn't earn enough money to meet its obligations.

Texas has also announced a rule change for people who currently have money invested in its guaranteed tuiton plan. When they invested, families were told that if their children did not go to one of the state colleges whose tuition the plan will fully fund, they would be able to close their account and withdraw the full amount of tuition at those institutions at that time. Now, the Texas Prepaid Higher Education Tuition Board has said that families whose children do not attend one of the schools included in the plan can only withdraw the amount they invested, minus an administrative fee. State legislators have urged the board to reconsider, but so far it appears that those with money invested have three choices: they can pull their money out before the rule goes into effect on October 30, they can limit their children's college choices to those sanctioned by the tuition savings plan, or they can take a guaranteed loss on their "guaranteed" tuition investment.

To help you avoid the problems currently facing Texas parents, US News has a helpful article on questions to ask before investing in a prepaid college savings plan. Prepaid tuition plans, 529 plans, and other college savings vehicles can still be a good idea, even though they've been through difficult times. As with many things, the trick to being successful in your choice is first doing your research and figure out which plan is best for you and your family.

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Student Veterans May Finally Receive Fall Financial Aid

September 29, 2009

by Scholarships.com Staff

Student veterans still waiting on their financial aid this fall have finally gotten a bit of relief from the Department of Veterans Affairs.  The VA announced Friday that due to delays in processing requests for veterans' education benefits under the new post-9/11 GI Bill, they will be issuing emergency checks of up to $3,000 available to students whose benefits are still pending. These advances will be available through regional VA offices starting October 2, and students will need to bring a photo ID, a class schedule, and a certificate of eligibility to receive them.  The emergency funds will come out of future benefits checks due to the students.

The massive backlog at the VA office first began to make headlines in August and early September when it was revealed that the VA had made it through only a tiny segment of pending benefits requests. The VA has hired additional staff and ramped up processing since then and anticipates dispensing with the backlog entirely by November 1. However, as the weeks wore on, a clamor has been growing among veterans and the press as students went days, then weeks, and now potentially months without receiving payments for tuition and fees or, more importantly, monthly stipends that allow them to pay for living expenses while attending college.

Part of the delay is due to the massive popularity of the new benefits, with requests simply overwhelming the capacities of the VA office, especially since implementing new rules and procedures can also slow down processing. In addition, the procedures themselves make speedy processing difficult. The VA cannot issue benefits checks until schools have confirmed students' enrollment and tuition charges, which in some cases didn't take place until late summer. Between back and forth correspondence with schools and veterans, and the manual labor involved in processing each claim, a backlog built up quickly and veterans wound up having to borrow money or use credit cards to pay for rent, books, and other expenses.

Colleges have been working with veteran students to minimize the impact of delays, accepting late tuition payments without dropping students from their classes, allowing students to charge books to their bursar accounts, and issuing emergency loans where possible. Between schools' efforts and the new emergency aid through the VA, most student veterans should be able to make it through the next month until they--hopefully--begin receiving regular benefits checks.

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Research Shows Need for Simpler Financial Aid Process

September 30, 2009

by Scholarships.com Staff

Financial aid programs that are simple and transparent are most effective for low-income students when it comes to not only getting those students to apply for the aid, but getting them enrolled in college at all, according to a scholarly paper released this week.

In a review of more than a dozen studies looking at how to make college more affordable and attainable to the neediest students, the paper "Into College, Out of Poverty? Policies to Increase the Postsecondary Attainment of the Poor" from the National Bureau of Economic Research looked at the effectiveness of a variety of programs, including popular federal and private scholarships, Pell Grants and subsidized student loans. The paper concluded that the easier it is for students to apply, the more likely they will be to apply, and the more likely they'll be going to college as they wouldn't have the funding to do so without applying.

The information that students are intimidated by paperwork and financial aid information isn't surprising. A recent blog post showed the results of a recent study on how professional assistance while filling out the FAFSA boosts the number of students filling out the financial aid application and receiving generous funding. What was more surprising this time around was that certain programs lauded for their assistance of low-income students could be doing better, according to the paper.

An article in Inside Higher Ed today describes the authors' position on the Pell Grant in particular. While the program is effective in targeting low-income students who may not have had the opportunity to attend college otherwise, the amount of paperwork required to receive an award makes the program not as accessible as it could - and should - be. A piece of a recent bill passed in the House and now awaiting Senate action (the Student Aid and Fiscal Responsibility Act of 2009) would simplify the financial aid application process and potentially make low-income students more comfortable with the process.

The paper also concluded that programs tied to academic performance and that have a broad base when it comes to who can apply - even if the awards are not specifically tied to a student's financial need - are more desirable to low-income students. Why would the neediest students want to compete against a larger pool of applicants for merit-based scholarships? Perhaps the applications for these awards are less time-consuming or easier to manage. Inside Higher Ed gives the example of Georgia's HOPE program, which awards free public tuition to any student with a 3.0 GPA in high school.

The paper was written by David Deming of Harvard University and Susan Dynarski of the University of Michigan, with support from the Robin Hood Foundation. The Robin Hood Foundation is preparing to release a book on the topic: Targeting Investments in Children: Fighting Poverty When Resources are Limited. For more information on financial aid application strategies, including tips on filling out the FAFSA, browse through our site so that you're prepared when it's time to find money for college.

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Audit Reveals Problems with Colorado Scholarship Program

September 30, 2009

by Scholarships.com Staff

Colorado's CollegeInvest agency, an organization in charge of state loan forgiveness and scholarship programs, is facing criticism and increased scrutiny from the state's legislature after an audit revealed conflicts of interest and a surprisingly low number of scholarship awards being made by the board. The state legislature will now require the agency to report to them monthly to ensure proper oversight of the state's scholarship and student loan funds.

The audit found that the CollegeInvest Early Achievers Scholarship, a fund that awards high-achieving high school students with college financial aid, had only given out a tiny fraction of the awards it was expected to since it was established in 2005. Students opt into the scholarship program as 7th, 8th or 9th graders and pledge to take pre-college coursework in high school and maintain a GPA of 2.5 or better. The Colorado legislature estimated that the scholarship fund would award about $3.8 million in scholarships per year, but awarded only $91,000 this year. A volunteerism scholarship program and a student loan forgiveness programs managed by CollegeInvest also fell significantly short of goals and projections.

Meanwhile, the fund incurred over $12 million in administrative expenses beyond salaries and benefits for its employees. Reports on the audit note that the program has spent $10 on administrative costs for every $1 in scholarships awarded. The audit also found conflicts of interest with the board awarding funding to other organizations they were connected to and giving out large payments to financial advisors.

CollegeInvest officials say that the program is off to a slow start and that potential conflicts of interest were disclosed and didn't affect board decisions. For now, the state legislature has just asked for increased oversight of the program. But for Colorado students who were expecting to benefit from academic scholarships, community service scholarships, or loan forgiveness programs for which money is in place but funds aren't being awarded in large amounts, any change in these programs cannot come soon enough.

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