Skip Navigation Links

Academics Suggest "Failure Insurance" Could Keep More in School

January 12, 2010

by Scholarships.com Staff

What if those worried about whether they can handle the rigors of college had an option to ease their worries about whether they were making a good investment? Would "failure insurance" get more of these hesitant students onto college campuses? How would students pay into such a program if they're already struggling to come up with the funds to cover college costs?

An academic paper called Insuring College Failure Risk put together by Satyajit Chatterjee, an economist at the Federal Reserve Bank of Philadelphia, and A. Felicia Ionescu, an assistant professor of economics at Colgate University, looked at the benefits of failure insurance, or policies that would reimburse students or offer forgiveness of some of their student loans if they flunked out of school. The paper concluded that the policies would be most useful to students from low-income backgrounds, a population that has been found to have higher college drop-out rates than other groups of students.

So how would it all work? The authors put forward a series of mathematical models that looked at both students' decisions to go to college and their decisions to drop out, finding that most any decision students make about college is a financial one. An insurance policy that offered students an amount that was high enough to make sense for them to continue taking classes, and often taking on more debt, but not so high that it would be an easy decision to drop out for the financial incentive, would be most successful. Students would be eligible for some loan forgiveness if they met the criteria for failing grades. Because students would still bear some of their student loan burden, that total would go toward something of a deductible, and could potentially work to keep more students in school so that they can avoid paying those fees to whatever insurance carriers would be offering these policies. Students would only have one shot at such an insurance policy, meaning they'd be on their own if they returned to school later in life after having flunked out.

Obviously something needs to be done to address high college dropout rates and the number of former students out there saddled with student loan debts but no degrees to speak of. According to the Federal Reserve Bank’s Survey of Consumer Finances, on average about 47 percent of those not in school with student loans to repay report that they don’t have two- or four-year college degrees. An article this week in The Chronicle of Higher Education suggests there's no way to tell whether the academic paper has any legs outside of academic circles, and also points to other researchers' suggestions that offer students an incentive to stay in school - lowering tuition and fees and increasing access to and amounts of financial aid assistance, as examples.

Comments

Williams College Ends "No-Loan" Policy

February 2, 2010

by Scholarships.com Staff

As a response to "operating in unsettled and ... unsettling times," Williams College has decided to stop offering its no-loan student-aid program and to reintroduce modest student loans to students' financial aid packages.

In an open letter to the Williams community released over the weekend, the school's Interim President Bill Wagner said the change would not affect current students, but beginning with the class that enters in the fall of 2011. Families below a certain income will still not be expected to borrow at all, and other students will be offered loans on a sliding scale up to a maximum size that the school says will still be among the lowest in the country.

Student loans were eliminated at Williams in the 2008-2009 academic year, joining more than 30 private colleges that had adopted similar policies, such as Amherst and Claremont McKenna colleges. (There have already been rumors that Amherst College may join Williams in amending its own policy.) The decision to cut loans out of students' financial aid packages came at a time when the school's endowment had grown so large that there were demands to spend more. But at the same time, more students were applying for and qualifying for financial aid.

Williams isn't the only college to renege on a promise to students, nor is it the first. Lafayette College raised the loan limit it pledged to students from $2,500 a year to $3,500 a year if they had family incomes of between $50,000 and $100,000. Dartmouth College has been requiring loans again for those at certain levels now exempt from borrowing. Endowments across the country have plummeted, suffering their worst losses since the Great Depression. According to an article in The Chronicle for Higher Education published last week, the value of college endowments declined by an average of 23 percent from 2008 to 2009. An endowment student sponsored by the National Association of College and University Business Officers found that of the 654 institutions that reported carrying long-term debt, the average debt load grew from $109.1 million to $167.8 million.

Are "no loans" policies feasible at all? Some critics explain that there are students currently exempt from taking out loans who could easily be able to pay them off once they graduate. Students with family incomes of more than $120,000 have the resources to borrow less than other students, critics say, and the focus instead should be on helping low-income students keep their loan debts at a minimum. Williams hasn't been clear as to what the family income cutoff would be for its new policy, but it will undoubtedly hit the middle class hard.

Comments

Students and Families Unprepared for College, Financial Aid Application Process

February 10, 2010

by Scholarships.com Staff

Despite recent trends of more students across the country enrolling at institutions of higher learning, many students and their families remain mostly uninformed and unprepared to navigate the college and financial aid application process, according to a report issued yesterday called "Planning for College: A Consumer Approach to the Higher Education Marketplace."

The report, from MassINC, a think tank in Massachusetts, looked at decisions students and families need to make when applying to and paying for college, and the information they need to make those decisions. It found that students and parents currently have great difficulty "getting the most out of their col­lege dollar," as the price of higher education only continues to rise.

Perhaps even more alarming is that families have started borrowing more to pay for college, without considering risk and the rate of their return. Related to increases in student borrowing amounts, an article in The Chronicle of Higher Education yesterday looks at the idea that doctoral students finish faster if they take out large loans. The most obvious answer why is that taking out more student loans allows the students to take more classes, and quit part-time jobs that may have been reducing their college costs. It's a choice students must make every day - should you sacrifice some comfort to reduce your student loan debt, even if it means taking longer to complete your degree? It's a personal decision, but students should be aware that they'll be expected to start repaying any debt once they graduate.

The Massachusetts study also found that students and families had little knowledge of tax benefits and college savings plans, and how to compare them. For example, there are 118 different 529 Plans, and the resources out there do little in the way of pointing consumers to the advantages and disadvantages of each. Families and students also admit to knowing little about the actual sticker price of colleges, as that often depends on the funds available to assist incoming students, an unknown when those students first apply.

The report's authors suggest families and students must become more like "savvy consumers" who are able to understand and successfully manipulate the college and financial aid application process to their advantage. The process should also be made less complex, an idea that is already being explored by federal legislation such as the Higher Education Opportunity Act. Finally, families need reliable measures about the educational experience that colleges and universities offer beyond the annual rankings we see in the Princeton Review, for example. According to the report, while the U.S. Department of Education is providing increasingly consistent and accessible indicators, such as graduation rates, this branch of the college-bound decision remains the weakest.

Comments

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.
Comments

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?

Comments

eBay Removes Purdue Diploma Listing

June 1, 2010

by Scholarships.com Staff

Internet auction site eBay has removed a recent listing from a Purdue alum, citing a terms of use violation in his attempt to sell his bachelor’s degree in psychology.

Nick Enlow, a 2008 graduate from Indiana University-Purdue University at Indianapolis, set the starting bid for his diploma at $36,000, plus $3.50 for shipping. His justification for the listing was that the student loan debt he accrued to complete his bachelor’s wasn’t worth the degree. While he wasn’t confident that he’d get any bids—he thought perhaps a wealthy eccentric might take pity on him and his student loan burden—he was fairly confident that the move would strike up a dialogue on the value of a liberal arts degree. The listing was removed by eBay last week “due to the sensitivity and nature of the item,” according to a recent article in the Journal and Courier.

In that article, Enlow said he felt universities should be held more accountable, as they are “handing out too many degrees that have zero real-world application.” A main complaint was that he felt unprepared to face the $470 monthly payments to his loan provider Sallie Mae; the only job he’s been able to find is one substitute teaching, work that barely allows him to make ends meet. Enlow admits that he was somewhat naïve as a college student at Purdue, assuming that his degree would land him automatic employment in an area he loved. His college’s response has been sympathetic, but realistic. Irwin Weiser, interim dean of Purdue’s College of Liberal Arts said in the Journal and Courier that a liberal arts degree “is not an automatic ticket to a job, but then again, no degree is.”

This isn’t the first time a recent graduate has been unhappy about job prospects post-graduation. Last August, Monroe College graduate Trina Thompson tried suing her alma mater to recoup the $70,000 she spent on a degree that she says left her jobless and with few options for employment. In response to students’ worries that they would complete school only to be met with student loan debts and increased competition in the job market, Lansing Community College introduced a plan earlier this year where students would be guaranteed jobs if they completed training in high-demand fields.

If you find yourself struggling to cover student loan payments as a recent graduate, know your options. If you can’t find a job, you may defer your loans until you’re on better financial footing. And if you’re just starting your undergraduate degree, remember that the fewer student loans you take out, the better. Check out our tips for borrowing responsibly and making the most of your financial aid package.

Comments

NYU Looks for New Ways to Address High Cost of Attendance

June 16, 2010

by Scholarships.com Staff

It’s rare for a college to tell a prospective student that their school may not be affordable enough for them to attend come fall. For a year, New York University did just that, calling admitted students and their parents and families to talk about the debt they could get themselves into if they chose to attend the pricey college. Citing little effect on enrollment rates, however, the school will not be pursuing a similar effort this summer, according to a recent article in The Chronicle of Higher Education.

The purpose of the calls was to make sure students and parents were aware how much an education at the school cost long-term. NYU doesn’t offer as much “free money” in scholarships and grants as many other schools, leaving students no choice but to take out student loans to cover the more than $50,000 annual tuition, fees, and room and board bill. According to previous articles on the school’s efforts in The Chronicle, the 58 percent of students who carry debt loads once graduating from NYU do so with an average of more than $33,000 in student loans. (The national average hovers around $20,000.)

NYU won’t be abandoning all efforts to inform students and parents about the costs of attending the college. Administrators say they’re now looking for ways to make sure those admitted know of ways to finance the “significant investment” that is NYU, according to The Chronicle, and that these efforts need to start sooner rather than later when students are still deciding where to enroll. The college also plans to give students a more “general financial education” rather than giving them advice based on their specific circumstances. However, Randall C. Deike, NYU’s vice president for enrollment management, said in the Chronicle article that he has already told some students it may be better for them to start out at a less expensive college and then transfer to NYU later on.

NYU has gotten quite a bit of criticism lately from students graduating with mountains of debt, degrees in the humanities, and limited job prospects. One article last month in The New York Times took a look at Cortney Munna, a 26-year-old graduate of NYU with nearly $100,000 in student loan debt. Munna is saying she wasn’t counseled properly about the true cost of college and what it would be like to repay a loan that high once she was done at NYU. According to The New York Times article, it was NYU that suggested she take out an additional $40,000 private loan when she and her mother found that the lower-interest student loans didn’t cover all of the costs of attendance. The college has since said it would have been inappropriate for them to counsel Munna out of NYU, or to counsel her out of taking on more debt to remain at the school. Who is to blame here? Were Munna and her mother naïve in assuming they could handle the loan? Should private lenders consider students’ existing loan totals when doling out funds? Should the college have been more forthright?

Comments

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.

Comments

Save the Perkins!

Proposed Amendment Will Keep This Loan Alive

September 23, 2010

by Alexis Mattera

The Perkins Loan Program has played a vital role in the quest for higher education (mine included) since 1958 but in two years, it could end up just as extinct as dinos and dodos. Can it (and the dreams of countless students) be saved?

The Perkins, or as one supporter affectionately calls it, “the David among the Goliaths of other aid,” is used by 1,800 colleges across the country yet Congress hasn’t provided any new money for the program since 2004. In 2009 alone, colleges awarded 495,000 new Perkins loans at an average of $2,231 per student and its demise would shut out college access to low-income students and eliminate the jobs of campus officials and loan servicers who help distribute the funds. Representative John Spratt clearly understands the importance of the Perkins and is sponsoring an amendment to delay the program’s cancellation – so much so that he held a hearing in Washington yesterday discussing the Perkins’ significance; though it probably won’t pass this year, Spratt is optimistic that with the support of the House Budget Committee and the schools relying on the loans, the amendment has a shot at approval next year.

“By its very nature, the Perkins Loan Program provides schools the flexibility to provide additional aid to needy students. The importance of this flexibility cannot be overstated,” said Sarah Bauder, assistant vice president of enrollment services and student financial aid at the University of Maryland at College Park, in her testimony during the hearing. “Financial aid administrators work where the rubber meets the road and have a unique perspective that allows them to assess students’ and families’ ability to pay for college in ways that aid applications will never be able to assess. When aid administrators see students and families struggling with unique circumstances, they need some flexibility to deliver funds to ensure the success of these students.” One such student, Joseph Hill, also testified. The Georgetown senior stated that though he received $26,000 in scholarships, the Perkins was what made it possible for him to attend the school of his dreams. “Last week, I was talking to my mother, and without hesitation, she said, ‘It still wouldn’t have worked without that Perkins Loan,’ ” Hill revealed.

There’s a lot more to the history of the Perkins and the fight to save it (get the details here) and as a former Perkins recipient, I can’t help but root for this little amendment that could. I'm definitely making a t-shirt.

Comments

Student Loans Leave Student $200,000 in Debt

Northeastern Grad Starts Website to Help Make Payments

November 23, 2010

Student Loans Leave Student $200,000 in Debt

by Suada Kolovic

Figuring out how to pay for a college education can be complicated, but what happens once you’ve graduated and your loans become so overbearing that even with a full-time job, monthly payment are implausible? A few weeks ago, we blogged that the average college student leaves school with $24,000 in debt, but what about the student who’s debt is about eight times that amount? Northeastern alum Kelli Space, 23, found herself in that exact predicament: With $200,000 in debt, Space was unable to pay her stifling student loans – her monthly payments to Sallie Mae are $891 and by next November that figure will nearly double – so she started a website, Two Hundred Thou, in order to solicit donations from the public.

The site is devoted to sharing her story about the naivety of an 18- year-old, who was the first in her family to attend college and her reliance on readers to foot the bill. Space explains, “At the moment, I like to think I have great things going for me! A job, an accommodating family, loyal friends, etc... but these loans are crippling my ability to enjoy these things – or pay rent. Can I live?” She goes on to explain that by donating to her cause, you’ll also be helping the country as a whole.

Two Hundred Thou also tracks Space’s progress and so far she’s raised $1,726.50, leaving a mere $198,273.50 to go. Space ends with the notion that once her student loans are paid off she’ll spend her money elsewhere, “probably single-handedly spurring the economy.” To think you’re just a click away from cleaning up the mess of a recent college graduate, while fixing the economy and helping the country as a whole – and at $200,000, that’s a bargain.

However, we should point out – before you lend a helping hand – that we really don’t know who this person is or even whether this story is embellished or even entirely fabricated. The domain is registered privately, hiding the identity of the registrant, and the email address is just a gmail account anybody could have created. Sure, maybe this is on the up-and-up, but there’s really no way of knowing. It wouldn’t be shocking to see a bunch of these sites spring-up if this idea gains traction and exposure.

Comments

Recent Posts

Tags

ACT (19)
Advanced Placement (24)
Alumni (17)
Applications (81)
Athletics (17)
Back To School (73)
Books (66)
Campus Life (456)
Career (115)
Choosing A College (52)
College (997)
College Admissions (240)
College And Society (302)
College And The Economy (374)
College Applications (145)
College Benefits (290)
College Budgets (214)
College Classes (445)
College Costs (491)
College Culture (594)
College Goals (386)
College Grants (53)
College In Congress (88)
College Life (560)
College Majors (220)
College News (583)
College Prep (166)
College Savings Accounts (19)
College Scholarships (159)
College Search (115)
College Students (448)
College Tips (113)
Community College (59)
Community Service (40)
Community Service Scholarships (27)
Course Enrollment (19)
Economy (120)
Education (26)
Education Study (29)
Employment (42)
Essay Scholarship (38)
FAFSA (55)
Federal Aid (99)
Finances (70)
Financial Aid (415)
Financial Aid Information (58)
Financial Aid News (57)
Financial Tips (40)
Food (44)
Food/Cooking (27)
GPA (80)
Grades (91)
Graduate School (56)
Graduate Student Scholarships (20)
Graduate Students (65)
Graduation Rates (38)
Grants (62)
Health (38)
High School (130)
High School News (73)
High School Student Scholarships (184)
High School Students (309)
Higher Education (110)
Internships (526)
Job Search (177)
Just For Fun (115)
Loan Repayment (39)
Loans (47)
Military (16)
Money Management (134)
Online College (20)
Pell Grant (28)
President Obama (24)
Private Colleges (34)
Private Loans (19)
Roommates (100)
SAT (22)
Scholarship Applications (163)
Scholarship Information (179)
Scholarship Of The Week (271)
Scholarship Search (219)
Scholarship Tips (87)
Scholarships (403)
Sports (62)
Sports Scholarships (21)
Stafford Loans (24)
Standardized Testing (45)
State Colleges (42)
State News (33)
Student Debt (83)
Student Life (511)
Student Loans (139)
Study Abroad (67)
Study Skills (215)
Teachers (94)
Technology (111)
Tips (506)
Transfer Scholarship (16)
Tuition (93)
Undergraduate Scholarships (35)
Undergraduate Students (154)
Volunteer (45)
Work And College (83)
Work Study (20)
Writing Scholarship (18)

Categories

529 Plan (2)
Back To School (357)
College And The Economy (513)
College Applications (251)
College Budgets (341)
College Classes (564)
College Costs (749)
College Culture (930)
College Grants (133)
College In Congress (132)
College Life (953)
College Majors (330)
College News (911)
College Savings Accounts (57)
College Search (390)
Coverdell (1)
FAFSA (116)
Federal Aid (132)
Fellowships (23)
Financial Aid (705)
Food/Cooking (76)
GPA (277)
Graduate School (107)
Grants (72)
High School (539)
High School News (259)
Housing (172)
Internships (565)
Just For Fun (223)
Press Releases (1)
Roommates (138)
Scholarship Applications (223)
Scholarship Of The Week (347)
Scholarships (596)
Sports (74)
Standardized Testing (58)
Student Loans (225)
Study Abroad (61)
Tips (833)
Uncategorized (7)
Virtual Intern (532)

Archives

< Mar April 2015 May >
SunMonTueWedThuFriSat
2930311234
567891011
12131415161718
19202122232425
262728293012
3456789

< 1 2 3 4 5 > >>
Page 2 of 5