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FAFSA Moves Toward Simpler Form

January 5, 2010

by Scholarships.com Staff

It's January, which means it's time to start thinking about completing a new FAFSA (Free Application for Federal Student Aid) for the 2010-2011 school year. This can be a long, complicated process for parents and students, but the Department of Education has begun taking steps to make the form easier to complete.

In a presentation to high school students and school counselors in Washington, DC today, Education Secretary Arne Duncan and other officials demonstrated the 2010 FAFSA, which went online January 1. While the paper form remains roughly the same length, at 107 questions, changes have been made to the online application to allow applicants to skip several questions that don't apply to them. A few other changes have also been made to make the website easier to navigate and the form easier to complete. These steps will hopefully speed up students' application processes and reduce confusion.

Progress is also being made on syncing the FAFSA and tax information from the IRS. In late 2009, the Department of Education announced that beginning in 2010, some students would be able to access a new tool that would allow them to import their 2008 tax information into a 2009-2010 FAFSA. The tool is expected to go live later this month, with work continuing on making the feature available to everyone.

According to Nextgov, one of the main barriers still remaining is a conflict between state FAFSA deadlines and the dates 2009 tax information will be available on the IRS website. Currently, previous year tax information goes online in the middle of the year, after many state deadlines have passed for FAFSA filing. The Department of Education and the IRS are working to find a solution to this problem to make the data transfer tool more widely useful. Other tweaks are likely to be made once the pilot program gets underway.

Legislation currently in Congress may further simplify the FAFSA by eliminating additional questions that many deem unnecessary. While the financial aid application process is likely to remain long and complicated for the foreseeable future, concrete steps are being taken to make it shorter and simpler, and it appears the movement is gaining momentum.

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White House Proposes Federal Budget Freeze

January 27, 2010

by Scholarships.com Staff

Immediately on the heels of an announcement that President Obama would be calling for additional assistance to college graduates struggling to repay student loans, the administration also unveiled a proposal to hold federal discretionary spending to current levels for the next three years, a move that could potentially have serious implications for colleges and students.

Currently, most federal education spending, including student financial aid, is discretionary, not mandatory, so it would fall under the umbrella of the budget freeze. This makes it possible that students will see limited increases to federal grants, work-study, and subsidized student loans in the coming years. The White House has pledged to make education a funding priority, but with states and colleges also struggling financially, it’s quite possible that financial aid programs will see an end to the boost in financial support they’ve received in the last few years.

It’s possible one federal aid program, at least, may be spared from the budget freeze. Last year, President Obama proposed making the Pell Grant an entitlement, putting it in the category of Medicare and other programs that would be exempt from the budget freeze, but the bill to do so still has not passed the Senate. If the bill passes, Pell funding will be mandatory and increases in Pell Grants will be tied to inflation, guaranteeing students a small, but steady, increase in available aid. If not, it’s up to Congress to allocate limited resources for any increases in grant amounts, and with increases in the numbers of college attendees, applications for financial aid, and Pell Grant recipients, it may be all Congress can do to hold funding levels steady for the next three years.

As details of federal and state budgets emerge, and emergency legislation that temporarily boosted funding to schools and student aid begins to be revisited and possibly phased out, exact changes to college funding will become clearer. Already, though, many families are finding paying for college increasingly challenging, even with the aid of college scholarships and grants. There’s a possibility that a federal budget freeze could mean that students in the next few years will see a situation similar to the one that faced students at the start of the last decade, where tuition increased rapidly while federal aid held steady and more and more students came to rely on private student loans.

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Know Your Tax Benefit Options This Filing Season

February 3, 2010

by Scholarships.com Staff

Whether you're an independent filing your own taxes, or a dependent whose parents or guardians are covering a good portion of your tuition, it's a good idea to be aware of the tax credits and tax benefits you and your family members could be eligible for this filing season.

The federal government has estimated that up to 2 million tuition-paying Americans will receive as much as $2,500 back on their taxes when they file in both 2010 and 2011 by taking advantage of the American Opportunity Tax Credit. That credit was established through the American Recovery and Reinvestment Act. The American Opportunity Tax Credit, which can be claimed for tuition and certain fees you pay for higher education in 2009 and 2010, is targeted at low- and middle-income families, and isn't available to single filers earning more than $90,000 a year or couples earning more than $180,000. Even those who owe no taxes due to how little they make may receive refunds of up to $1,000.

The American Opportunity Tax Credit expanded (and renamed) the already existing Hope Credit. How did the two compare? 

  • The Hope Credit applied only to the first two years of college. The American Opportunity Tax Credit can be claimed for expenses for the first four years of post-secondary education.
  • The American Opportunity Tax Credit is a $700 increase over the Hope Credit.
  • The term "qualified tuition and related expenses" has been expanded to include expenses used for "course materials," which means books, supplies, and equipment needed for a course of study.
  • A qualified, nontaxable distribution from a Section 529 plan during 2009 or 2010 now includes the cost of the purchase of any computer technology, equipment, or Internet access and related services, if such purchases will be used by the beneficiary of the plan and the beneficiary's family during the time those beneficiaries are enrolled in an institution of higher education.

Other important facts before you file for an American Opportunity Tax Credit:

  • The credit is claimed using Form 8863, attached to Form 1040 or 1040A.
  • You have to choose between tax credits. You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the lifetime learning credit. (You should choose which one will offer you the best refund. It's fine to take advantage of all of your options.)
  • 60 percent of the American Opportunity Tax Credit is nonrefundable, so if your credit exceeds your tax, the difference isn't refunded to you.

Make sure you and your family are prepared this tax season, because the federal government does offer perks to going to - and paying for - higher education.

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Student Loan Bill May Become Part of Health Care Package

March 12, 2010

by Scholarships.com Staff

To compensate for stalled negotiations on both health care legislation and a bill that would overhaul the country's student loan program and improve college students' access to federal aid, Democratic leaders proposed a solution yesterday that would move both of those hot-button issues forward—combine them, and pass them as one.

Both the comprehensive health care bill, which would guarantee health insurance to 30 million uninsured Americans, and the student loan bill, which would replace private lending with direct lending through the government and increase Pell Grant maximums, have faced opposition as Democrats work to pass both through Congress before the November mid-term elections. To kill two birds with one stone, Democratic legislators proposed bundling the two bills into one last night, not only to give the proposals a better chance at passage, but to keep them alive long enough for a vote by the full Senate and House.

An article in the New York Times yesterday describes the strong support a dual measure already has among the Democrats, suggesting that adding the student loan bill to the more expansive health care legislation would improve the health care bill's chances at passage. (Providing college students with more access to federal aid is undoubtedly more popular and less controversial than crafting a reasonable health care bill.)

The student loan bill had already passed in the House. Recent predictions have the government saving about $67 billion by going to direct lending; that new funding would go toward Pell Grants and other education programs. (A rise in the number of people attending college and seeking aid in the weak economy has raised the projected cost of new Pell Grants to $54 billion from $40 billion, according to the New York Times.) The student loan bill has been a consistent goal of President Obama's, as lenders have come under fire for a lack of oversight,  rising student loan default rates, and contributing to excessive debt among college students. Effectively, the bill would put an end to direct-to-student private loans, which students can borrow without even informing the financial aid office, and which can be taken out for more than the student’s cost of attendance for the academic year.

The private student loan industry has obviously not been very supportive of the bill, and Republicans have questioned whether giving the government control over the student loan industry is really a wise choice.

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Making the Choice: Tips for Comparing Financial Aid Packages

April 15, 2010

by Scholarships.com Staff

As students begin evaluating their offers of acceptance from colleges, one factor may weigh more heavily than any other on the tough decisions of choosing the right school - financial aid. The financial aid opportunities School A offers to incoming freshmen that School B does not may be what makes or breaks the decision on where a student will enroll, even if School B is the student's "dream school." Comparing financial aid offers is then an integral process in the decision-making process, and unfortunately you don't have a lot of time to send your notice back to each school you've been accepted to. Here are some tips to navigate the process, and help you determine how to find the "best value":

  • Compare the scholarships and grants available at each school. Have you already been offered either, or has the school simply notified you of your eligibility for more free funding?
  • Compare student loan amounts. What may seem like the best offer at first may actually be anchored by a significant amount of student loan debt. Student loans should be your last resort as far as covering college costs.
  • Compare your expected family contributions. Schools may handle this piece of information differently, and may even accept more information about your family's financial situation after you've received your financial aid package. It's fine to question a school's offer, especially if there are big discrepancies between what each school is offering you.
  • Compare the tuition and fees of each school, and what that financial aid package covers. Some schools may offer you what appears to be an impressive amount of aid based on the cost of tuition alone, and you already know college costs include a lot more than that base price - fees, books and supplies, and room and board, for example.
  • Be aware of what you're eligible to receive next year. Some schools may offer a more impressive financial aid package to incoming freshmen, and pad students' offers the following year with more student loans. Do your research. Compare average student loan debts at each school, talk to students already attending each school, and be frank with your financial aid administrator.
Some students may have been lucky enough to have been accepted into a program that has offered them a tuition-free education. A recent article in USA Today took a look at colleges that offer to pay the tuition of all new students, despite all you've already read about tuition and fee increases across the country. Some are military schools that require a commitment from you to serve in the military post-graduation, but others are schools where there exists a need for new graduates, either due to the school's locations or lack of graduates in certain fields of study. Webb Institute, the Cooper Union for the Advancement of Science and Art, and the College of the Ozarks, for example, all offer tuition-free educations to students. Do you know of more? Tell us about them!

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New Student Debt Report Looks at Those Who Borrow Most

April 27, 2010

by Scholarships.com Staff

While many students – and their parents – will say no amount of student loan debt is ideal, a new report has zeroed in on those at the top of the pile, those who borrow most and may be most at risk for defaulting on their loans and running the risk of hurting their credit scores.

The newest student debt story comes from a report released yesterday by the College Board Advocacy and Policy Center, which looked at data from 2007-2008 graduates who participated in the “National Postsecondary Student Aid Study.” It paid particular attention to the 17 percent of all bachelor’s degree recipients in that year who graduated with at least $30,500 in student loans. Of those, one in six had average student loan bills of $45,700, with much of those loans coming from private lenders who typically lend to students at higher interest rates.

An article in The Chronicle of Higher Education focused on one particular detail included in the report – that those who borrow more are disproportionately black. Although the sample size was small, and the report’s researchers were hesitant to place too much importance on any breakdowns based on race, the numbers did show some differences in that category. According to the study, 27 percent of black bachelor’s degree recipients borrowed $30,500 or more, compared to 16 percent of white graduates, 14 percent of Hispanic students, and 9 percent of Asian students. Those numbers have little to do with income, however. Middle-class students tended to borrow more than those coming from low-income households, perhaps suggesting that those are the students who are more likely to attend private colleges rather than public institutions.

How else did the report describe those students who borrowed most?

  • The frequency of high debt is higher among independent students than among dependent students (24 percent graduated with at least $30,500 in debt).
  • Students who graduated from for-profit institutions are much more likely to have high debt levels than other students.
  • Private loans are most prevalent among students with family incomes of $100,000 or higher.
  • Although black graduates have the highest debt totals, Asian students rely more on private loans. About 12 percent of Asian graduates had no federal loans, with 68 percent of their student loan debt coming from non-federal sources.
  • Higher-income parents of bachelor’s degree recipients are more likely than those with incomes below $60,000 to take out PLUS Loans, and borrow more when they do. Thirty percent of the lowest-income parents borrowed an average of $22,400 in PLUS Loans, while 47 percent of those with incomes of $100,000 or higher borrowed an average of $41,500.
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Should More Changes Follow Switch to Direct Loans Program?

May 14, 2010

by Scholarships.com Staff

July 1 marks the official date that colleges, if they haven’t already, must transition to the recently approved Federal Direct Loans Program. Schools will no longer offer students the option of having private banks or credit unions handle their federal loans; federal loans will now be coming directly from the U.S. Department of Education. Advocates of the student loan bill have said this will make the process more seamless and fair, with the government taking responsibility for keeping interest rates manageable. And private loans will still be available via the traditional channels, although those loans are typically offered at higher interest rates.

The student loan debate has been a constant in the world of higher education, as legislators and administrators look for ways to reduce the debt of graduates. This week, The Christian Science Monitor considered student loans in a different way. Is it ethical to send students out into the world with all this debt, especially when they may not be making enough in their chosen careers to pay back those loans in a timely fashion? Are student loans moral?

The Christian Science Monitor piece looks at the history of the student loan industry, questioning whether it was ever right for Congress to increase borrowing amounts to current levels, or to offer students described as “in need” much easier access to federal loans through the re-authorization of the Higher Education Act in the 1990s. According to the Project on Student Debt, student loan totals only continue to rise. The average national debt for graduating seniors with loans rose from about $18,650 in 2004 to $23,200 in 2008. Meanwhile, employment prospects have not increased at comparable levels; by 2009, the unemployment rate among new graduates hovered near 11 percent, the highest on record.

It isn’t just a case of telling college students not to borrow so much. Student loans are often a necessary evil, and while debt can be minimized some through scholarships and grants, most students will end up taking on some amount of debt. The Monitor questions whether there should be more strict limits on borrowers that exist in other scenarios where credit checks and expectations that borrowers will be able to pay back what they borrow are enforced. There is no guarantee of a job after college, after all, so why shouldn’t the fact that a student is unable to pay off more than the minimum on their credit cards be taken into account more when they take out loans? (On that note, the U.S. Senate has approved an amendment that would lower “swipe fees” that banks charge college bookstores when students use their credit cards for purchases.)

Student loans are a hot topic, and will continue to be. What do you think? What else can be done to reduce graduates' debt, especially among those graduates who are not entering high-paying fields?

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Legislators Ask for Analysis of For-Profit Colleges

June 22, 2010

by Scholarships.com Staff

For-profit colleges have been the talk of the town in Washington over the last week, with legislators concerned by their rapid growth and what they consider a resulting lack of oversight. 

Yesterday, a group of Democratic lawmakers called for a federal review of for-profit colleges, their recruitment strategies, and the value of what they provide students. In the letter they sent to the Government Accountability Office, the lawmakers were especially concerned about the fact that the for-profit sector accounts for less than 10 percent of total enrollments but about 25 percent of federal financial aid disbursements. According to an article in The New York Times this week, for-profit colleges collected $26.5 billion in federal funding last year, compared to $4.6 billion in 2000.

The letter came just after the U.S. Department of Education’s proposal that for-profit colleges be more forthright about students’ potential loan debt relative to their incomes, even going so far as to propose limiting federal aid to those colleges with the most uneven debt-income ratios. The for-profit colleges themselves have said that they would be comfortable with disclosing graduation- and job-placement rates and median debt levels, but that limiting federal aid would certainly force many of them into insolvency.

One case in Illinois serves as a cautionary tale, and an example of what is so troubling to legislators. The Illinois State Board of Education has launched an investigation of the Illinois School of Health Careers’ patient care technician program in Chicago after a group of students decided to file a class-action lawsuit against the institution. The students say they were misled into thinking that they would be able to take the state’s certified nursing assistant exams upon completion of the program. In fact, the program lacks the proper approvals from the Illinois Department of Public Health, leaving students with student loan debt and instruction in a field they say offers few, if any, job prospects.

Supporters of for-profit colleges say the schools are important in serving a population looking to learn a particular trade or get out into the workforce more quickly. Republican lawmakers on the other side of the issue have said Congress should be more concerned about looking for ways to monitor the bad eggs among the bunch and not be so skeptical of an entire industry, according to The New York Times article. Representatives for the Career College Association have said accredited institutions that focus on career-preparedness are critical in meeting President Obama’s goal of getting the United States on top in terms of higher education by 2020.

Most for-profit schools don’t report the kinds of dissatisfaction felt by those students at the Chicago school described above and are a good option for many students, especially those seeking flexible alternatives. The key is quality control. If you’re interested in a career college or an online degree university, do your own research. Make sure your intended school is accredited, as this means it meets a set of standards set forth by the U.S. Department of Education. Make sure the college you’ll be paying for—and may be paying for years down the line, even after graduation—is not only legitimate but worth paying for.

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Data Suggests More Default on Loans than Government Reports

July 13, 2010

by Scholarships.com Staff

An analysis of long-term data conducted by The Chronicle of Higher Education has found that the number of students who default on their loans is far greater than what the federal government has been reporting. According to the data, about one in every five federal student loans overall has gone into default since 1995; the default rate for student loans covering costs at for-profit colleges is even higher, at 40 percent. The default rate for community college students is about 31 percent.

The federal government’s numbers are much lower. The U.S. Department of Education reported default rates for federally guaranteed student loans at about 6.9 percent for fiscal year 2007’s cohort. Why the disparity? The Chronicle says the government’s numbers only show those students who defaulted on their loans two years after entering repayment. The Chronicle’s analysis looks at 15 years of data. According to their new analysis, default rates only worsened as time went on, increasing years after those borrowers had left college.

For-profit colleges have already been getting some negative attention lately, with legislators concerned about the share of federal financial aid the schools receive compared to their total enrollment numbers. (The for-profit sector accounts for less than 10 percent of total enrollments but about 25 percent of federal financial aid disbursements.) This new data certainly won’t help them. If the federal government moves to pass rules on student loan default rates, a number of those institutions could be at risk for losing federal aid if they cannot improve their numbers. According to the Chronicle, there are a number of for-profit colleges out there that have default rates even higher than 40 percent, including the Tesst College of Technology and Chicago’s College of Office Technology.

No matter how you skeptically you look at the numbers—critics of the data have already said the numbers don’t consider the economy and the demographics and total enrolled at community college and for-profit universities versus four-year institutions—default rates should be taken seriously. Defaulting on your student loan is never a good idea. It hurts your credit, and any wages you do have may be seized by the government that issued you that loan. It’ll then be harder to not only make ends meet, but to get other loans years down the line, including mortgages and new credit cards. You may also be faced with higher interest rates if you are able to land that car loan. You can see now how important it is to borrow responsibly and make sure that if you do need to take out student loans, you’re doing so to pay for the costs of an accredited program that will help you land a decent job after graduation.

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Senate Approves Bill to Protect Against Lending Abuses

President Obama Expected to Sign off On Overhaul Legislation

July 16, 2010

by Scholarships.com Staff

The financial overhaul bill approved last night by the U.S. Senate won’t only increase government oversight to prevent another economic collapse. Students who use debit and credit cards or who have taken out or plan to take out private student loans will also benefit.

The bill includes the creation of the Consumer Financial Protection Bureau, an independent entity that will exist within the Federal Reserve to protect borrowers. What does this mean for students? The bureau will be there to protect students from abusive lending, and gives students a point of resolution if they feel they have issues with their private lenders, according to an article on the measure in The Chronicle of Higher Education.

The bill also requires that debit and credit card companies lower the fees that colleges must pay when students use the cards. Currently, companies are charging “swipe fees” of 1 to 2 percent of transaction amounts, according to The Chronicle, putting quite a bit of pressure on struggling college bookstores. The legislation next goes to President Obama, who is expected to sign off on it. Also in the bill, the government will get more power to shut down companies that pose a threat to the country’s financial system. As the troubled economy has led to marked changes in higher education, including increases in tuition and fees, the introduction of wait lists at colleges that had never used them before, and, in worst-case scenarios, the shuttering of colleges, the bill could even give struggling schools some sense of hope.

Pell Grants could also see a boost if a spending bill approved by the U.S. House of Representatives’ Appropriations Committee yesterday continues to move through Congress. According to another article in The Chronicle, the bill would raise spending on Pell Grants by $5.7 billion for the 2011 fiscal year, keeping the federal grants at the maximum levels of $5,550 per eligible student. The Federal Pell Grant, which is available to those students with the highest unmet financial need, has increased significantly over the years; students were able to receive $4,050 in the 2006-2007 academic year. The panel also approved an additional $1 billion for the National Institute of Health. According to The Chronicle, legislators hope that funding could go toward “translating basic research results into practical and available cures and treatments.”

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