Student Loan Blog : Department of Education

Students Could Wave Goodbye to Merit–Based Federal Aid

Student Loan Girl — Thu, 25 Jun 2009 16:41:00 GMT

In another move to restructure the federal financial aid system, President Obama has proposed ending the government’s five-year foray into merit-based student aid and redirecting those financial aid funds to the need-based Pell Grant program, reports The Chronicle of Higher Education (“An Experiment in Merit-Based Student Aid Is Likely to End,” June 26, 2009).

The Academic Competitiveness Grant and the National Science and Mathematics Access to Retain Talent Grant programs were created by Congress in 2006 to encourage students to take academically “rigorous” coursework in high school and then choose college majors in fields with labor shortages.

Only students who are eligible for need-based Pell Grants can qualify for the Academic Competitiveness Grants, which provide $750 and $1,300 to college freshmen and sophomores respectively, and for the SMART grants, which provide $4,000 to college juniors and seniors who major in science, math, and certain foreign languages.

But so far both grant programs have fallen short of their participation projections, due in large part to the Department of Education’s failure to promote the programs, as reported by the department’s own inspector general in 2008.

The other major problem has been the programs’ vague qualification criteria, which has made it difficult for financial aid officers’ to determine award recipients. The American Council on Education, in a 2006 letter to the Department of Education, called the grant program’s guidelines “unworkable” and defined them as placing a “breathtaking administrative burden” on colleges’ financial aid officers.

Obama’s Proposal Receives Support From Education Officials

Education Department officials support the president’s proposal to make the Pell program an entitlement with annual increases tied to inflation and to raise the maximum Pell awards by $200 to $5,500 by the 2010–11 academic year because, they say, the Pell Grant program better serves low-income students than the competitiveness grant programs.

This proposal “would benefit the vast majority of the nearly six million Pell Grant recipients worldwide,” even though the annual increases amount to significantly less funding for the one in 10 students who qualify for the Academic Competitiveness and SMART grants.

Even former Secretary of Education Margaret Spellings, who crafted the merit-based programs under the Bush administration, backs the proposal.

“Do higher education officials and K-12 officials prefer free money with no strings attached? Absolutely,” Spellings said. “But if we’re trying to move the needle, putting resources behind our policy goals is a more powerful and prudent way to go."

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More Schools Offering Direct Student Loans

Student Loan Girl — Fri, 13 Mar 2009 21:25:00 GMT

The direct student loan program — which President Obama wants to establish as the sole provider of federal student loans by 2010 — is swiftly gaining ground on the Federal Family Education Loan Program.

In the past year, the number of college and universities originating loans through the Direct Loan Program has increased by more than 50 percent, reports USA Today (“Government’s Direct Student Loan Program Gets a Boost,” March 10, 2009). More than 1,600 schools are offering direct loans, up from 548 schools in 2007, according to the Department of Education, while the number of schools offering FFELP loans fell by 3.6 percent during the same time period.

Currently, students are able to get federal student loans from one of two government programs: the Federal Family Education Loan Program, through which students borrow money from private third- party lenders that are subsidized by the government, or the Direct Loan Program, through which families borrow money directly from the Department of Education.

Direct Loan Program: The Future of Federal Student Loans

However, President Obama recently announced a plan that would eliminate the proven 44-year-old FFEL program, which is responsible for making three out of every four federal student loans. The move would transform the Direct Loan Program from a minority player in the student loan industry to the nation’s only originator of federal student loans.

The president’s plan could reduce the government’s student loan costs and save the government $4 billion, Obama administration officials suggest.

Critics of the president’s proposal — which include private student loan lenders — contest the government’s $4 billion savings estimate and fear that the Department of Education won’t be able to handle the surge in loan volume that would occur if the Direct Lending Program became the only originator of federal student loans. Families could be forced to endure poor customer service from an overburdened system, and could encounter difficulties in getting the funds they need for school, critics say.

Besides excellent customer service and a long-running track record of success, private lenders have another advantage over direct lending, says Barry Feierstein, executive vice president of Sallie Mae.

“Private lender and loan guarantors have a system to help borrowers avoid defaulting on their loans,” he says. “That level of outreach doesn't exist in the federal direct loan program.”

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Defaulted Student Loans Stuck in Credit-Freeze Induced Limbo

Student Loan Girl — Tue, 10 Feb 2009 18:52:00 GMT

Thousands of student loan borrowers who have defaulted on their student loans — including 15,000 additional borrowers each month — are being forced to remain in default despite their efforts to bring their loans back into good standing, The Chronicle of Higher Education reports (“Credit Freeze Leaves Thousands of Student Borrowers Stuck in Default,” Feb. 13, 2009).

“I’ve done what I’m supposed to do, and they’re holding me hostage,” says Judy Ellis, a borrower who has made nine on-time payments to bring her student loan out of default. “I want to make this right, and I want to move on.”

But Ellis can’t move forward because the stagnant credit markets have made it harder for student loan guarantors to sell these “rehabilitated” loans back to lenders. A borrower must wait for the guarantor to find a lender to buy the defaulted loan before the loan, and the borrower’s credit, can be restored to good standing.

Currently 19 of the nation’s 35 student loan guarantee agencies, the companies who insure student loans against default, have no buyers for the rehabilitated student loans they hold. The market for rehabilitated loans has been effectively shut down for months due to the credit crisis, and in November, SunTrust, the only commercial bank that was still buying rehabilitated loans, exited the market.

Now, says Timothy Fitzgibbon, vice president for debt-management services at the National Council of Higher Education Loan Programs, nearly $150 million in debt is piling up every month on top of an existing backlog of loans awaiting rehabilitation.

Guarantors Awaiting Legislative Action

Consumer advocates say changes need to be made quickly before borrowers get so fed up with being “stuck” in default that they stop paying their student loans altogether, which could lead to more defaults and re-defaults.

“The last thing we want is for people to pack it in and say, Oh, never mind,” says Michael Ryan, vice president of borrower services for American Student Assistance, the student loan guarantor in Massachusetts.

Legislation passed by Congress last year authorized the Department of Education to buy up student loans from guarantors, but the legislation only approved the department to purchase loans made after 2003, and most rehabilitated loans that guarantee agencies hold predate that.

Guarantors believe that with creative interpretation of the law, allowing almost-rehabilitated loans to be considered “new,” the Education Department could use its authority from the bailout to buy up more loans. But Fitzgibbon argues that “it would be much cleaner to get a legislative fix,” which could come as part of a proposed spending bill or as part of revisited legislation from the previous session of Congress, than for the Education Department to reinterpret its purchasing authority.

“While this is being sorted out,” says Deanne Loonin, a staff attorney with the National Consumer Law Center, guarantors should stop collecting on the loans — a step guarantee agencies aren’t likely to take. Guarantors are encouraging borrowers whose student loans are currently frozen in default to continue making payments until buyers can be found.

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Auditors Accuse Bank of Illegally Getting Student Loans

Student Loan Girl — Fri, 09 Jan 2009 21:20:00 GMT

A recently completed audit of Fifth Third Bank — the 20th largest lender of federal student loans in the country according to college financial aid site FinAid — found that the bank violated federal law by illegally paying three companies for loan applications (“Audit Slams Fifth Third Student Loans,” The Enquirer, Jan. 9, 2009).

According to the law, lenders may not provide inducements in the form of “points, premiums or payments” in exchange for loan volume, reports The Chronicle of Higher Education (“Fifth Third Bank Offered Inducements for Loan Volume, Audit Finds,” Jan. 7, 2009).

The bank had agreements with Law School Financial, MSA Solution Inc., and Pacific Loan Processing Inc. to solicit loan applications that allowed these third-party companies to participate in the federal student loan program through Fifth Third, which acted as a trustee on their behalf. These arrangements allowed the third-party companies to make or purchase federal student loans.

As a result of the audit’s findings, the Department of Education’s Inspector General recommended terminating the bank’s participation in the Federal Family Education Loan Program. The audit also recommended imposing penalties that range from a fine to removing government subsidies on more than $3 billion of improperly obtained loans, which would require more than $300 million in reimbursements.

Fifth Third said that the audit’s findings represented a new, stricter interpretation of the law which authorizes a bank to buy and sell loans, but doesn’t allow lenders to pay another company to market loans or solicit applications. “The payments at issue were for the sale of actual loans, and not for the marketing of loan applications,” the bank said in response to the Inspector General’s audit.

Although the dispute won’t affect current Fifth Third borrowers who already have loans with the company, it could affect the way student loan companies do business and make it much more difficult for students to obtain loans in the future.

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Student Loan Providers Get More Help From the Government

Student Loan Girl — Thu, 13 Nov 2008 22:39:00 GMT

In a move intended to avoid a shortfall in student loans next year, Congress has expanded the government program to buy federally guaranteed student loans from private lenders.

Under the updated loan-purchase plan, the Education Department can now buy lenders’ student loans with origination dates between Oct. 1, 2003, and July 1, 2009, The New York Times reports (“U.S. Buying More Loans to Students,” Nov. 8, 2008). The original buyback parameters only allowed lenders to purchase loans made for the current academic year and for the 2009–10 academic year.

Federal officials say that as much as $60 billion in student loans may be eligible for purchase under the new expansion.

“We were able to provide stable, reliable funding for students this school year,” said Education Secretary Margaret Spellings. Now the government is taking action to avoid problems in student loans for next year, she said.

Expanded Program May Solve Liquidity Problem

Many lenders were initially unable to participate in the student loan buyback program because the original version of the program only allowed lenders to sell loans on the secondary market that were generated prior to 2008.

The economic conditions during the current academic year have made it difficult for lenders to secure the financing needed to make new student loans that would be eligible for sale through the buyback program. Unable to sell their loans, lenders were then forced to carry their loans on their books.

“They have these government-guaranteed loans and nobody wants to fund them,” said Sameer Gokhale, a financial analyst for Keefe, Bruyette & Woods in New York. “The government is agreeing to buy more of the loans to give more liquidity.”

The Education Department hopes that the new initiative will provide lenders with the required funds to generate new federal and private loans next year, as lenders may be more likely to participate in the program once they can free up billions of dollars in loans under the new requirements of the buyback program.

“We need to do everything we can to prevent students from becoming the next victims of the financial crisis,” said Sen. Edward Kennedy, chairman of the Senate Education Committee. “Next year, we need to take a closer look at these programs to insulate them from fluctuations in the market so students’ ability to access loans is not threatened.”

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Changes to Student Loan Repayment Programs Not Enough, Advocates Say

Student Loan Girl — Thu, 30 Oct 2008 18:34:00 GMT

Despite 1,500 individuals and a dozen national organizations pushing for further changes to legislative provisions that help low-income college students repay their student loans, the Education Department recently issued the provisions’ final regulations without first making modifications to problematic language (“Low-Income Student Borrowers May Miss Some Intended Benefits,” The Chronicle of Higher Education, Oct. 26, 2008).

One issue involves the rules of a new student loan forgiveness program that would allow college graduates to have their federal loans forgiven in return for at least 10 years of public service in specific professions. Advocates of the program say that language in the program’s regulations fail to establish procedures that would inform college graduates ahead of time about which specific positions qualify for loan forgiveness.

Robert Shireman, executive director of The Project on Student Debt, a California-based advocacy group, believes that there may still be a way for the Department of Education to resolve this issue without having to backtrack through the regulatory process.

Education Department spokeswoman Samara Yudof, on the other hand, says that regulations for the loan forgiveness program “are clear, and provide a broad list of eligible occupations.” Department officials prefer to identify the eligible occupations in paperwork they give to applicants, instead of detailing the occupations within the regulations themselves, she says.

The other major regulatory issue creates a “double-counting penalty” for married couples under a new income-based repayment plan for student loans. If both partners are eligible for income-based repayment and they file joint income tax returns, supporters of the program say, the regulation’s language could be interpreted in such a way that the couple’s total joint income would be used to determine how much each spouse pays individually. This “double- counting” effect may require them to pay twice as much as two unmarried borrowers in similar financial circumstances.

“This is obviously unfair and inappropriate,” Shireman said, “and needs to be changed by Congress.” Yudof concedes that, in this case, Congress may need to take action to resolve the “double-counting” penalty problem.

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FBI Investigates California College That Overpaid Financial Aid to Some Students, Underpaid Others

Student Loan Girl — Tue, 14 Oct 2008 01:32:00 GMT

A California community college is being investigated by the FBI and the Department of Education for overpaying students more than $327,000 in financial aid during the 2005–06 school year, reports the Contra Costa Times (“Berkeley City College Overpaid Financial Aid,” Oct. 8, 2008).

Berkeley City College, under former financial aid director Robert Vergas, was also found to have underpaid Pell Grant recipients by nearly $40,000.

The federal government has ordered Berkeley City College to repay the Department of Education for the funds it overpaid to its students. The school has already repaid $40,000 and will pay about $37,000 per quarter until the balance is paid off.

The school must also pay the affected Pell Grant recipients the remainder of the grant awards that they should have originally received.

An independent audit of Berkeley City College found, in all, more than 400 mistakes in the files of 1,135 financial aid recipients.

Vergas, who retired in April shortly before he was to be fired by the community college district for “negligence and incompetence,” has denied any wrongdoing and said he is being blamed for deficiencies in the school’s financial aid process.

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Government Warns: Pell Grant Program in Trouble

Student Loan Girl — Mon, 22 Sep 2008 21:47:00 GMT

Without additional taxpayer funds next year, the government’s “most important” federal financial aid program may be unable to provide Pell Grants to millions of eligible low-income students, likely pricing these students out of a higher education, according to an article in The New York Times (“Pell Grants Said to Face a Shortfall,” Sept. 17, 2008).

In a memorandum issued last week, the Department of Education warned that it predicts a $6 billion shortage for the federal Pell Grant program next year, stemming from continuous budget shortfalls and compounded by the record-high number of students qualifying for the federal Pell Grant program.

Rising tuition costs, shrinking state aid to colleges and universities, and a growing number of adults who are reenrolling in college are all putting a strain on federal financial aid resources, particularly on Pell Grants, which don’t have to be repaid. This school year alone, six million students out of the nine million who applied for federal financial aid received Pell Grants, some of the highest numbers the program has seen since its inception in 1972.

“It’s the mother of all shortfalls,” said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. “There’s more unmet need than anyone predicted.”

Last year Congress appropriated nearly $14 billion for the Pell Grant program, but as the troubled economy continues to force adults out of the workforce and back into the classroom, the Department of Education said it will either need to allocate more taxpayer money to the Pell Grant program or decrease the grant award amounts students can receive next year.

Should the Education Department decide to reduce Pell Grant awards, it would make an announcement detailing its decision sometime in February 2009, according to the memorandum.

“If [the Pell Grant program] is threatened, you’ll hear about it,” said Edward M. Elmendorf, senior vice president of the American Association of State Colleges and Universities. “The decibel level will be deafening.”

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Student Loan Providers May Get Government Help for One More Year

Student Loan Girl — Thu, 18 Sep 2008 00:08:00 GMT

With problems in the credit markets continuing to plague student loan providers, the U.S. House of Representatives overwhelmingly approved a year-long extension of the Ensuring Continued Access to Student Loans Act, which allows the secretary of education to buy student loans from cash-strapped lenders.

If approved by the Senate, the measure, which Congress originally passed last spring, would extend the education secretary’s loan purchasing power through July 1, 2010 to help ensure that students have access to federal student loans for the 2009–10 academic year. The bill was set to expire July 1, 2009.

The act gives the Department of Education the authority to buy student loans from third-party private lenders in the Federal Family Education Loan Program who have been unable to sell their loans to investors following fallout from the subprime mortgage crisis.

“Our rough economy is already dealing a huge blow to American families and we can’t allow trouble in the credit markets to further price students out of a college degree,” said Rep. George Miller, D-Calif., chairman of the Committee on Education and Labor (“House Moves to Protect Student Loans,” Associated Press, Sept. 15, 2008).

“With market conditions showing no signs of letting up,” Miller added, “it’s only prudent to make sure that students have every assurance that the federal student loans they need will be there next year.”

The measure would also extend the secretary’s authority to advance federal funds to guarantee agencies so those agencies can make loans, if necessary, as a “lender of last resort” for the nation’s colleges and universities.

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State Approves $50-Million Bridge Loan, Kentucky Students Will Finally See Their Student Loans

Student Loan Girl — Fri, 05 Sep 2008 00:26:00 GMT

Students attending colleges and universities in Kentucky, many of whom have already begun their fall semester, will soon receive their federal student loans now that the state has finalized its $50 million bridge-loan deal with the state’s nonprofit student loan provider, according to an article in the News-Democrat Leader (“Public, Non-Profit Student Loan Provider to Get Proper Funding,” Sept. 2, 2008).

Under the deal, which was approved last Friday, the state will buy a $50 million bond from Kentucky’s federal student loan agency, the Kentucky Higher Education Student Loan Corp., also known as The Student Loan People.

Kentucky Gov. Steve Beshear proposed the bridge-loan deal in August after the state loan agency announced it had run out of money to issue new student loans. The $50 million loan will provide the student loan lender with the short-term bridge financing it needs to participate in a Department of Education program designed to help struggling lenders.

With the bridge financing in place, The Student Loan People will be able to finish disbursing the remaining $35 million in federal student loans it has originated.

So far, Kentucky is the only state in the nation to buy a private bond from a student loan provider under the Education Department’s loan purchase program, which allows lenders holding federal student loans that they have already originated and dispersed to borrow money from the Education Department. The Student Loan People can use these borrowed funds to begin repaying the $50 million bridge loan from the state.

Edward Cunningham, CEO of The Student Loan People, has assured borrowers that his agency will work closely with the schools it lends to in order to minimize further disruptions in the student loan disbursement process.

“The process should be transparent for most students, Cunningham said, “and we expect our student loan processes will be back to normal by September.”

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Government’s Direct Lending Program Sees 43-Percent Increase in Volume

Student Loan Girl — Wed, 03 Sep 2008 00:36:00 GMT

As cash-strapped lenders continue to drop out of the Federal Family Education Loan Program, the number of student loans originated for the 2008–09 school year through the government’s Direct Loan Program has increased by 43 percent, reports The Chronicle of Higher Education (“As ‘Crisis’ Deters Loan Companies, Direct Lending Sees 43-Percent Jump,” Sept. 2, 2008).

Lenders in the FFEL Program — through which borrowers take out federal student loans through private, third-party lenders including banks, state agencies, and nonprofit lenders — have generally accounted for 80 percent of all federal student loan volume, according to the House Committee on Education and Labor (“The College Loan Landscape,” March 2008).

But the Direct Loan Program, which provides loans to students and parents directly from the Department of Education, is gaining ground. As of August 8, the Direct Loan Program had already originated more than $10.84 billion in federal student loans at 1,156 colleges and universities. At this time last year, the direct-lending program, had originated just $7.55 billion in loans at 851 institutions.

And although the exact figures have yet to be released, the Education Department estimates that the Direct Loan Program, which has generally made up 20 percent of all federal college loan volume, will soon be comparable in size to the FFEL program. FFELP lenders have only issued $13 billion in federal student loans at 3,230 colleges and universities this academic year, compared to the $55.8 billion in student loans they originated at 4,612 schools last year.

So Far, A Smooth Transition to Direct Lending

Government subsidy cuts to FFELP lenders enacted by the College Cost Reduction and Access Act last September, as well as continued fallout from the subprime mortgage crisis, have led more than 100 lenders to suspend their participation in the FFEL program.

By April of this year, some 5.8 percent of lenders remaining in the FFEL program had switched over to the direct-lending program and another 19.3 percent said they were considering the switch, according to Student Lending Analytics, a company that provides financial aid administrators with data about lenders (“Drift Toward Direct Lending (Update),” Inside Higher Ed, April 30, 2008).

Although some lenders questioned the Education Department’s ability to handle an increase in loan volume through its Direct Loan Program, some financial aid administrators say the Department of Education has done well in handling the influx of business.

Anna Griswold, executive director of student aid and assistant vice president for undergraduate education at Penn State, says she has been “pretty pleased” with the Direct Loan Program and has not experienced any glitches. Penn State, the 10th-largest FFELP lender last year, became a direct-lending school this year after its FFELP lender, the Pennsylvania Higher Education Assistance Agency, stopped offering federal student loans in February.

Penn State borrowers have already taken out $100 million in student loans this year through the direct-lending program.

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Technical College May Lose Ability to Offer Federal Financial Aid For Violating Newly-Relaxed Aid Rule

Student Loan Girl — Wed, 20 Aug 2008 20:05:00 GMT

Star Technical Institute, a technical college in New Jersey, may not be able to offer federal financial aid to students at two of its seven campuses for allegedly violating a federal law that requires colleges to obtain 10 percent or more of their revenues from nonfederal sources in order to participate in the federal student-aid program, reports The Chronicle of Higher Education (“Just as Congress Eases Aid Rule, College Is Accused of Violating It,” Aug.18, 2008).

A recent audit conducted by the U.S. Department of Education’s Inspector General found that from January 2004 to December 2006 the technical college relied on federal funds for 93 to 96 percent of its revenues at the two campuses, known as Star Upper Darby.

Since the college received more than 90 percent of its funds from the federal government, auditors recommended that both of the institute’s campuses located in Philadelphia, Pa., and Egg Harbor Township, N.J., have their eligibility for federal financial aid revoked.

Auditors also said that the school should return almost $10-million in federal grants and loans it received between 2004 and 2006.

New Legislation Seeks to Relax 90-10 Rule As Student Loan Borrowing Limits Increase

The allegations and recommendation to revoke federal aid are at odds with provisions in the College Opportunity and Affordability Act of 2008, just signed into law by President Bush, which seeks to ease the 90-10 requirement.

Legislators feared that earlier legislation passed by Congress, which raised the loan amount of subsidized federal Stafford student loans by $2,000 per student, would cause some institutions to run afoul of the 90-10 rule. With students’ ability to borrow more in federal financial aid — increasing the likelihood that they could pay for their college costs solely through grants and student loans — colleges run the risk of receiving more than 90 percent of their revenue from federal sources.

To account for the increased limits in student loans and to help institutions maintain their federal funding below the 90 percent threshold, the College Opportunity and Affordability Act allows schools to temporarily treat the extra $2,000 in federal student loan funds as part of their 10 percent, and enables them to work with the Department of Education to resolve violations within a two -year time period.

Resolution, Federal Funding Uncertain

It remains to be seen whether the Department of Education will work with Star Technical Institute to resolve the issues raised by the department’s inspector general under the new provisions of the law or if the department will proceed to revoke the college’s federal funding.

Star’s president, Karen Manin, disputes the audit’s findings and defends her position that the school received only 90 percent of its revenues from federal sources. In a formal letter to the Education Department, Manin noted that the Department of Education appeared to accept formulas her institution used in audits conducted prior to its current audit of 2004 to 2006.

Based on the department’s perceived approval of its previous formula calculations, Manin said, “Star Upper Darby reasonably relied on the DOE’s acceptance of these audits and made decisions about its business.”

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New Law May Simplify College Financial Aid Form

Student Loan Girl — Wed, 06 Aug 2008 00:55:00 GMT

Students and parents could spend less time filling out the Free Application for Federal Student Aid under a new provision of The Higher Education Opportunity Act of 2008, according to an article in The Austin American-Statesman, (“New Law to Trim College Financial Aid Form,” August 2, 2008). The legislation was approved by Congress last week but has yet to be signed into law by the president.

Currently, in order to qualify for federal financial aid, families are required to complete the lengthy 11-page FAFSA separately from their yearly tax forms even though the 100-question federal financial aid form is based on tax information families are required to report to the Internal Revenue Service each year. The proposed legislation would allow the IRS to share these figures with the Department of Education, eliminating the need for families to report the information twice.

Requiring the agencies to share data could eliminate the need for as many as 31 questions from the FAFSA, according to a 2007 study by the Institute for College Access and Success.

The current FAFSA, which is used by federal and state governments and most colleges to determine eligibility for financial aid, is so cumbersome to fill out that it represents a roadblock for many students who otherwise might be college bound, the Chronicle of Higher Education reported last year, (“Congress and the Education Department Move to Simplify the Student-Aid Process,” March 30, 2007).

At that time, Rep. George Miller, who is the chief sponsor of the U.S House of Representative’s version of the bill to simplify the FAFSA, told the Chronicle the FAFSA needed to be changed because “It’s long and complicated. It’s over 100 questions. We now see the situation that the form itself can impact the decision about whether students go to college.”

Legislators have not laid out a specific time frame for when the shortened FAFSA would be introduced, leaving the agencies involved to decide when to implement the new FAFSA and the other proposed revisions to the financial aid process:

A simplified process for re-applying for financial aid
Clearer explanations regarding student borrowing options
Requirements that schools and lenders adopt new codes of conduct
Increased transparency and disclosures regarding federal student loan programs

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Education Department at Fault for Low Participation in Grant Programs, Audit Shows

Student Loan Girl — Tue, 05 Aug 2008 00:58:00 GMT

In an audit of the Department of Education, the department’s own inspector general blames the lack of participation in the government’s Academic Competitiveness and National Smart Grant programs on his department’s failure to effectively promote the programs, according to an article in The Chronicle of Higher Education (“Education Dept. Blamed for Not Doing Enough to Promote Grants,” August 4, 2008).

Low-income students who completed their state’s rigorous coursework requirements in high school are eligible for Academic Competitive Grants, otherwise known as ACG, during their freshmen and sophomore years of college. Smart Grants are awarded to low-income college juniors and seniors who are taking classes toward the completion of specific majors, including math, engineering, or technology, and maintain a 3.0 GPA.

The audit, released Friday, suggests that the Education Department hasn’t done enough to “follow-up with nonparticipating schools to ensure those [schools] required to participate” in the two programs were doing so, the inspector general said.

Although Congress approved $790 million in grants for the two programs during the 2006–07 academic year and up to $4.5 billion through 2010, the Education Department only awarded $242 million in Academic Competitiveness Grants to 310,000 students, and only $206 million in Smart Grants to 64,000 students.

Secretary Spellings Justifies Programs’ Shortcomings

Last month, Education Secretary Margaret Spellings suggested that the low participation in the grant programs was due to the fact that not enough high schools were teaching courses that meet the academic standards of the program.

While Spellings lays the blame on high schools, the inspector general’s report showed that the department had a list of 640 nonparticipating colleges and universities that were potentially eligible for the ACG program.

More than half of the schools did not respond to the department when it attempted to contact them. In a random sample of 75, or 23 percent, of these 330 nonparticipating schools, however, the report found that more than 83 percent were considered eligible.

And among the 310 schools that did respond to the department’s outreach, administrators at 23 percent of these schools said they didn’t know their schools were eligible. The inspector general found that more than 73 percent of these school were, in fact, eligible for the programs.

To improve participation in the programs, the inspector general recommends that the Education Department do a better job of reaching out to colleges and universities with eligible students. The department should also consider fining schools or taking away their eligibility to participate in the federal Pell Grant program if they have qualified students enrolled but don’t participate in the ACG or the National SMART Grant programs.

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Unfinished Business: Congress May Break Before Higher-Ed Bills Reviewed

Student Loan Girl — Thu, 03 Jul 2008 23:08:00 GMT

While Congress is heading home for its annual Fourth of July recess, there are still many higher-education bills and pieces of legislation that need to be addressed before they break, according to an article in The Chronicle of Higher Education (“Higher- Education Bills Are Among Congress's Unfinished Business,” June 30,2008).

Chief among Congress’ “unfinished business” is the reauthorization of the Higher Education Act, which hasn’t been renewed for five years due to the inability of Congress to reach a consensus on the 1,200-page bill. Key components of the act that still need to be ironed out include:

Whether to punish states that cut their higher-education budgets
If colleges and textbook publishers should have to disclose more information about textbook costs
Whether colleges should be required to contact students and employees within 30 minutes of an emergency

While legislators are still working out the final language of the bill, political aides believe that a compromise could be reached shortly, with a vote in both houses expected to take place in late July.

The spending bill that funds Department of Education programs, the National Institutes of Health, and seeks to increase Pell Grant funding, is also up for review. The House version of the bill would increase the maximum Pell Grant award by $169 to $4,900, whereas the Senate version would increase Pell awards by only $69 to $4,800.

Congress may also tackle Higher Education tax breaks set to expire this year prior to their recess including those that would allow:

Families to deduct up to $4,000 from their taxable income for tuition and related expenses
Individuals to make tax-free charitable contributions to colleges from their retirement accounts
The government to contribute tax credits to businesses for research and development

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