Despite Down Economy, College Student Aid Still Thriving
In economic downturns, colleges and universities become flooded with
students of all ages looking to better prepare themselves for an increasingly competitive job market. But these schools haven’t been immune
to the effects of today’s recession.
Fortunately, for every recent economic downturn in higher education — tuition hikes, state budget cuts, scholarship and grant cutbacks, and
a fluctuating student loan market — there’s also been a tangible upside (“Glimmer of Hope for Student Aid in a Bad
Economy,” USA Today, March 19, 2009).
Tuition Assistance
Downside: Public colleges have increased tuition by 4 percent per year over the past 10 years, and many schools are set to
bump up tuition even more this year as they face unprecedented state budget cuts.
Upside: Federal stimulus money should help some public colleges to better cope with the loss of state funding and to
minimize any increases in tuition. The state of Maryland is hoping to go a fourth-straight year without in-state tuition increases. Other
colleges are offering one-time deals to students; Kent State University in Ohio is offering laid-off workers a one-time tuition and
application waiver at its Trumbull campus, and Manchester College in Georgia is offering to refund one year of tuition for students who
aren’t able to secure a job or admission to grad school within six months after graduation.
Institutional Aid
Downside: Trouble in the stock market has caused colleges’ endowments to drop 25 percent in value this year, which has
severely hampered schools’ ability to offer scholarships.
Upside: Despite their endowment losses, more than 90 percent of the nation’s private colleges and universities will be
increasing financial aid next year by 9.8 percent to make up for 4-percent tuition increases, according to the National
Association of Independent Colleges and Universities.
Government Grants
Downside: Aid for merit scholarships has taken one of the biggest hits this year, primarily due to state budget cuts.
Upside: The federal stimulus package has increased the maximum award for Pell Grants — federal financial aid for low-income
students — from $4,731 to $5,350 for the coming academic year and to $5,500 for the 2010–2011 academic year. And, an additional 800,000
students are expected to receive Pell Grant funding this year.
Federal Student Loan Programs
Downside: The $50 billion Federal Family Education Loan Program — the government program that provides federal student
loans to more than 10 million students through third-party lenders — has been the larger of the two federal student loan programs. But over
the past two years, the FFEL program has lost business to the Direct Loan Program, the government’s other federal student loan program
through which the U.S. Department of Education provides federal student loans directly to families, as hundreds of cash-strapped FFELP
lenders have been forced to exit the program.
Upside: The FFEL program has still managed to increase its student loan volume this year, and some lenders are returning to
the student loan market now that the federal government has bought nearly $25 billion in lenders’ student loan securities, providing them
with the capital to make new loans. The Direct Loan Program has picked up the slack, providing an additional $7 billion in lending this
year.
Private Student Loans
Downside: The overall supply of capital for private student loans is estimated to have decreased by one-third — a decrease
of between $6 billion and $7 billion — due in large part to the fact that lenders have made it harder for families to qualify for private
student loans.
Upside: Increased government funding for federal Stafford student loans has helped to reduce students’ reliance on private
student loans. And more students are maxing out their federal financial aid before turning to private student loans, which the USA Today suggests has helped students avoid over-borrowing in private student loans.