Note to Families: Financial Aid More Competitive, But Not Out of Reach
With more families applying for financial aid — applications are
already up 10 percent above last year’s record — and lending for private student loans drying up, families’ ability to find available
financial aid is becoming more difficult, reports the Associated Press (“College Financial Aid System Facing Stiff
Test,” Jan. 25, 2009).
Traditional sources of college funding are no longer available: Home values are dropping, making it difficult for families to get a home
equity loan, college savings accounts are dwindling, and private lenders are leaving the student loan market.
Currently, only 21 of the 60 third-party student loan lenders who issued $19 billion in federal and private student loans last year are
still lending, and most of the lenders still issuing loans have severely tightened their credit criteria, according to Finaid.org, a college funding resource
site.
Families face limited financial aid options at a time when state funding shortages have forced numerous state colleges to cut their
financial aid budgets and replace grants and scholarships with student loans in their financial aid offers. Colleges are also increasing
tuition, in some cases, by double digits.
“There are no sure answers because we’re in new territory,” said Bruce Hammond, a college admissions consultant based in Washington, D.C.
“But students with high need and lesser credentials are going to have to brace themselves for less aid.”
Financially Needy Students Should Know Their College Funding Options
While the financial atmosphere for college students and their families may seem more dismal this year, things “are not as scary as people
might think,” says Lauren Asher of the non-profit California-based Institute for College Access and
Success.
Students and parents can take advantage of expanded federal financial aid offers. The U.S. Department of Education has already made $95 billion in
grants, loans, and work-study assistance available to nearly 11 million students and families and Congress has increased annual borrowing
limits for unsubsidized Stafford student loans, which are not tied to financial need, by $2,000. And President Obama’s proposed stimulus
package could offer families even more financial aid.
Cash-strapped families and students could consider attending lower-cost public schools and community colleges to avoid taking on large
amounts of debt. On average, tuition and fees at a two-year public school cost about $2,300, while tuition and fees at a four-year public
school cost about $6,000, according to the College Board.
And while a number of the nation’s top colleges and universities, including Harvard, Yale, and Duke, have seen their endowments take a huge hit this year,
none of these schools have gone back on their commitment to offset their high tuition costs by extending financial aid offers to a greater
number of low- and middle-income families.