Student Loan Blog : FAFSA

FAFSA Discourages Students From Applying for Federal Loans

Student Loan Girl — Wed, 10 Jun 2009 21:10:00 GMT

A large proportion of students who only take out non-federal private student loans to finance their education aren’t applying for federal financial aid at all, and it’s the application itself that may be culprit, a new study suggests (“Nightmare Application May Be Driving Students to Costly Loans,” Forbes, June 9, 2009).

In his study of 250,000 students, Mark Kantrowitz, publisher of FinAid.org, a website that offers information on financial aid and student loans, found that since 1999, among those students who relied exclusively on private student loans, 60 percent of undergraduates and nearly 90 percent of graduate students didn’t complete the FAFSA, the Free Application for Federal Student Aid.

The number of students who only take out private student loans has increased 27 percent over the last 10 years. Between 2007 and 2008, the private loans taken out by students who forwent their federal financial aid options amounted to $6.2 billion — nearly 30 percent of the $22.5 billion in new private student loans originated that year.

Proposed Changes Would Eliminate FAFSA

The study’s findings come at a pivotal time in the FAFSA’s history, as the U.S. Department of Education weighs two proposals to overhaul the federal financial aid application process, one of which would carry out President Obama’s campaign promise to eliminate the FAFSA completely.

The FAFSA — currently the only way for families to apply for federal financial aid for college and graduate school — advertises itself as requiring only one hour to complete. But the six-page application calls for families to provide information about their adjusted gross income, marital status, value of their personal property, and taxable income — hurdles, Kantrowitz says, that “may deter students from applying for federal aid.”

A revamp of the FAFSA or of the application process itself could encourage more students to apply for federal student loans, which are typically less costly than private student loans, generally offering lower, fixed interest rates and more flexible repayment terms.

One proposal being considered would simplify the financial aid application form to require only adjusted gross income figures and tax exemption numbers. The other plan that’s been suggested would eliminate an application form altogether and allow the Internal Revenue Service to pass on information from financial aid applicants’ tax returns directly to the Department of Education.

Kantrowitz says a change in the financial aid application process may, in particular, help students from low-income families. His study found that low-income students have been more likely to end up turning to private student loans, which will generally cost them more than federal college loans would: Students from families who earn less than $50,000 a year accounted for two-thirds of those borrowers who financed their education solely with private loans.

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Students Increasingly Choosing Private Student Loans

Student Loan Girl — Wed, 22 Apr 2009 22:39:00 GMT

According to analysis of Department of Education data released last week, the number of college students taking out private student loans over the last five years has risen sharply. Analysis by student advocacy group The Project on Student Debt revealed that the percentage of all undergraduates who took out private student loans last school year jumped to 14 percent from 5 percent during the 2003–04 academic year (“New Data Show Big Increases in Private Student Loan Borrowing,” The Project on Student Debt press release, April 21, 2009).

The data showed that students attending schools that charge more than $10,000 in tuition and fees were more likely to use private student loans than were students attending less costly institutions. In fact, these for-profit colleges and universities saw the percentage of students who took out private student loan skyrocket to 42 percent last year compared to 13 percent five years ago.

The Project on Student Debt also found that slightly more than a quarter of private student loan borrowers didn’t take out federal student loans: 14 percent didn’t even apply for federal financial aid, and 12 percent filled out the Free Application for Federal Student Aid but chose not to take out a federal Stafford student loan.

These federal student loan statistics are particularly concerning, said Laura Asher, acting president of the Institute for College Access & Success, which runs The Project on Student Debt, because federal loans are available to nearly all students, regardless of their income, and because federal loans tend to have more favorable interest rates and repayment terms than private student loans.

“Too many students,” Asher said, “are missing out on federal loans and going straight to one of the riskiest borrowing options.

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Number of Students With Unpaid Tuition Bills Growing

Student Loan Girl — Tue, 13 Jan 2009 23:24:00 GMT

Colleges and universities all across the country are seeing larger numbers of students who may soon be forced to drop out of college due to unpaid bills, according to a recent survey (“Unpaid College Tuition Bills Rise, Survey Finds,” U.S. News & World Report, Jan. 9, 2009).

The American Association of Collegiate Registrars and Admissions Officer s found that of the 43 college registrars it surveyed, more than 65 percent said that they’d experienced an increase in unpaid bills over the previous year. At Spelman College in Atlanta, for example, nearly 25 percent of the student body — a record-breaking 500 students — is behind on their bills by an average of $3,000; nearly double the number of students who fell behind last year.

5 Things Cash-Strapped Students Can Do to Stay in School

In order to avoid being kicked out of college, students may take the following five steps to resolve their unpaid tuition bills:

Contact the registrar.
Some schools are willing to work with students to bring their accounts up to date. Schools may offer students an “emergency” loan, or give them the option of using a payment plan that allows a student to pay off the total amount they owe in small payments over a period of time.

Stop by the financial aid office.
There may be several school-sponsored scholarships available to students that schools didn’t offer before. To help students affected by the recession, some schools have raised additional funds to expand or create new financial aid programs, although aid may be limited.

Complete last year’s FAFSA.
Students who fill out the Free Application for Federal Student Aid could still retroactively receive college grants and low-cost loans that they would’ve qualified for last year. If nothing else, by filling out the FAFSA now, students may qualify for a federal student loan that could get help them get through the next semester.

File a “PJR”
If a student’s or a family’s financial circumstances have changed, such as a job or income loss, a student may request a PJR, a “professional judgment review,” from their financial aid office. During a PJR, the financial aid office may determine that a student needs more funds for college and could award them emergency or other aid.

Try peer-to-peer lending.
Once all other options are exhausted, students may want to explore borrowing money from extended family members, friends, or even strangers through social lending sites like GreenNote or LendingClub. But students should read the fine print on any loan documents to ensure they understand their rates and terms before borrowing.

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Colleges Step Up, Help Students With Extra Financial Aid

Student Loan Girl — Thu, 08 Jan 2009 23:13:00 GMT

If recent data is any indication, families are struggling to come up with the cash they need to send their children to college, and schools across the country are doing something to help those who’ve come up short, reports The Chronicle of Higher Education (“Colleges Offer Extra Aid to Strapped Students,” Jan. 9, 2009).

During the first few days of the new financial aid season that began Jan. 1 — the first day college students could submit their FAFSA (Free Application for Federal Student Aid), the application required for students seeking federal aid — 40 percent more families over the previous year had already sought out financial assistance (“Families Face Fierce Competition for Student Aid: Season Starts With Sharp Increase in Demand,” Business Wire, Jan. 6, 2009).

“The demand for student aid has been climbing as the recession batters family budgets, parents’ jobs are eliminated, and self- employed parents experience business downturns,” said Craig Carroll, CEO of Student Financial Aid Services, a financial aid advisory company.

Schools Create New Aid Programs or Beef Up Existing Ones

In response to the growing number of families facing limited options to pay for college, some schools are offering families an extended grace period to pay tuition bills, and other schools are meeting the growing demand for aid by expanding existing financial aid programs or creating new ones.

At Northern Illinois University, for instance, school administrators recently introduced the Huskie Advantage, a new aid program that meets tuition costs not covered by state and federal aid. The program, which the school will subsidize by shifting financial funds away from upperclassmen to underclassmen, who usually don’t qualify for as much federal aid, is only available to freshmen who qualify for Pell Grants and need-based state grants, according to Brent Gage, the school’s assistant vice provost for enrollment services.

Agnes Scott College in Georgia also recently announced a new program, the Agnes Solution, targeted at students who are eligible for the state’s Hope Scholarship. The school hopes that by providing qualified students with a $13,500 Agnes Solution scholarship and a $3,000 grant each year, combined with the $3,000 Hope Scholarship, the program will be able to cut the cost of attendance almost in half.

As part of a Saint Mary’s University of Minnesota plan to lower the cost of attendance for low- and middle-income students to match the average cost of the nation’s Big Ten universities, the school is expanding its Brother James Miller Program for Access. The program originally only covered students who met certain academic qualifications and whose families made less than $75,000, but due to the economic downturn, the institution has raised the income qualification to $100,000, and is currently collecting private funds so that it may provide aid for the school’s most financially needy students.

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Experts Recommend: Fill Out Your FAFSA Early

Student Loan Girl — Fri, 02 Jan 2009 23:37:00 GMT

Students who want to maximize their federal financial aid for the 2009–10 academic year should fill out their FAFSA (Free Application for Federal Student Aid) this week — the first week applications are accepted, reports The Baltimore Sun (“Ringing in the New Year With FAFSA Might Be a Good Move for 2009,” Dec. 30, 2009).

“The sooner you get [the FAFSA] done, the better,” says Mark Kantrowitz, publisher of FinAid, a financial aid website.

Since many states and colleges use the FAFSA to determine how to allocate their funds and some schools have early admissions deadlines, students who complete their application sooner rather than later may have a better chance of getting federal financial aid. Schools often have two separate financial aid funds, each with their own deadlines, and make more money available to families who met the earlier deadline, Kantrowitz says.

He recommends that families should always fill out the FAFSA even if they think they make too much money to qualify for need-based financial aid; a family making $100,000 or more could still qualify for federal and state aid to attend an expensive institution.

Resources to Get Started

Find out how to fill out your FAFSA online.

Use the FAFSA4caster at www.fafsa4caster.ed.gov to calculate how much financial aid you may qualify for and to get tips on how to reduce the time it takes you to complete your FAFSA.

Call the Federal Student Aid Information Center for free at 1-800-433-3243 if you need help with your application.

Go to www.finaid.org for tips on how to maximize the need-based aid you could receive.

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Nearly Half of All Community College Students Skip FAFSA, Lose Out on Financial Aid

Student Loan Girl — Wed, 22 Oct 2008 00:16:00 GMT

Nearly 40 percent of full-time community college students don’t receive federal financial aid because they don’t bother to fill out the FAFSA (Free Application for Federal Student Aid), according to a new report released by the federal Advisory Committee on Student Financial Assistance.

The September 2008 report, "Apply to Succeed: Ensuring Community College Students Benefit From Need-Based Financial Aid," revealed that among both two-year and four-year dependent students, a full 29 percent of those from the lowest- income families —whose annual earnings are less than $9,999 and who would likely qualify for significant amounts of federal aid — don’t fill out the FAFSA form.

Students don’t apply for financial aid because they think they’re ineligible or that they can cover the cost of college on their own, according to the ACSFA report. Some students even said that the FAFSA is simply too complicated to fill out.

Other students may not apply for aid because they see themselves as workers first, and students second, says Alicia Dowd, who studies community college students and is co-director of the Center for Urban Education at the University of Southern California (“2-Year- College Students Miss Out on Aid — Because Many Don’t Apply,” The Chronicle of Higher Education, October 17, 2008).

The report reveals that about 33 percent of the lowest income community college students who attend school full-time work 30-plus hours a week — despite the fact that most of these students would qualify for federal Pell Grants.

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Number of Students Applying for Federal Financial Aid Goes Up Almost 20%

Student Loan Girl — Tue, 12 Aug 2008 23:21:00 GMT

While college enrollment is only expected to grow by 300,000 students this year, some 1.3 million additional college students have already applied for federal financial aid — an increase of 17 percent, according to an article in U.S. News World Report (“Financial Aid Applications Jump 17 Percent,” Aug. 11, 2008).

The U.S. Department of Education accepts the Free Application for Federal Student Aid (FAFSA) between January 1 and June 30 of every year. (Submitting the FAFSA is the only way undergraduates can apply for federal grants and student loans.) In the first six months of 2008, the Education Department received more than 9 million FAFSAs, up from 7.7 million in 2007.

Some financial aid experts are postulating that this increase is a sign that more students are unable to afford their school costs this year, as college tuition continues to rise, outpacing cost of living, and as high gas and food prices, along with the current credit crunch, leave families with tighter budgets and fewer financing options.

“What we are seeing is more people filling out requests for financial aid, and for those who do, more people are qualifying and the aggregate need is increasing,” says Richard Toomey, associate vice provost at Santa Clara University (“Student Aid Requests Soar as Economy Plummets,” San Francisco Chronicle, Aug. 11, 2008). “Students who haven’t needed assistance before are coming in. You had to expect that this was going to happen with all the news of companies laying off thousands of people.”

Donald Heller, director of the Center for the Study of Higher Education at Pennsylvania State University, has a different theory: He believes the surge in FAFSA submissions could simply mean that more eligible students are becoming aware of their federal financial aid options and are trying to take advantage of them.

Extensive press coverage of a potential student loan availability crisis and the news of elite institutions expanding their financial aid offerings to accommodate more low- and middle-income families may have helped encourage more students to apply this year, Heller says.

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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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‘Fear Factor’ Experiment Seeks to Aid Low-Income Students

Student Loan Girl — Thu, 22 Feb 2007 22:52:00 GMT

The Feb. 20, 2007 article titled “Lifeline to Low-Income Students” written by Doug Lederman that appeared in Inside Higher Ed proposes an intriguing if shaky reason why lower-income students “are far less likely to go to college than their peers.” The reason? According to the article, “But one oftcited explanation is that potential college students from lower socioeconomic groups are either unaware of how much need-based financial aid is available or intimidated by the process of applying for federal student aid.”

Premise of Study Questionable

I find that a bit hard to believe, and I fail to see the connection. I really do not think that just because one socioeconomic group (lower-income students and their parents) may be less educated than their higher-income “brothers” means that they necessarily are “intimidated” to apply for financial aid or “unaware” of their options. A more likely explanation that rings true is that the lower-income students and their families simply are not willing to take on the suffocating debt of higher education, and, therefore, either opt out or select a less expensive option, like community college. Since the higher-income, middle-upper class believes that they may more ably pay off their high debt, they attend college, even at exorbitant costs.

While I do not necessarily agree with the premise behind the experiment, it is a very original approach to simplifying the FAFSA (Free Application for Federal Student Aid) process. The underlying idea is to make the FAFSA application process easier for low- to mid-income college students. Those behind the study want to see if their methods significantly improve their “college-going rates.” If nothing else, it will be interesting to see what happens.

Program Outlined

The article outlined the program:

“Here’s how the project, which involves researchers at Case Western Reserve University and University of Toronto in addition to Long [Bridget Terry Long, a Harvard University associate professor of education and economics], works: Randomly selected taxpayers with incomes below $45,000 who seek help from their taxes from H&R Block offices in and around Cleveland, Ohio, will be offered help filling out their FAFSA forms (a control group will receive only a brochure with publicly available information about attending and paying for college).

“H&R Block’s tax preparers, working with software the company and the researchers jointly created, will help transport the applicants’ tax information into the federal financial aid form (more than half of the FAFSA information comes from the tax form), and help them collect the information for, and complete, the rest of the form. The hypothesis is that using tax data to automatically fill in a large number of answers to the 108 questions on the financial aid form, and offering personal help in filling out the rest, will make the FAFSA less daunting than it might otherwise be.

“Next, company representatives, trained by the researchers, will give study participants projections of how much state and federal financial aid they may qualify for, and how far that would go in covering the cost of attending selected colleges in the area. ‘When we finish that interview, we give them a piece of paper that says, based on the information we’ve gathered today, here’s the tuition and here’s the aid you’d be eligible for,’ says Eric P. Bettinger, associate professor of economics at Case Western.”

Regardless of why you believe that lower-income students are “opting out” of college, any plan to make the FAFSA application process simpler is a welcome one. Hopefully, the results of this targeted experiment will be made known and have a beneficial, far-reaching impact on the financial aid community.

The student loan advisors at NextStudent are helpful and knowledgeable about student loans. They are a trusted source in getting you the appropriate information about your student loan consolidation, student loan options and helping students get the college financing they need. Go to www.nextstudent.com for more information.

Be sure to tune in next Thursday for my next blog on student loan advice.

Student Loan Girl

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Give Yourself the Best Shot at Federal Student Aid: Submit FAFSA Soon After Jan. 1

Student Loan Girl — Mon, 11 Dec 2006 20:36:00 GMT

Students are winding down their winter term and starting to breathe a little easier knowing that finals soon will be out of the way. Early January marks the beginning of a new term as students return to college after the holidays. Jan. 1, 2007 is an extremely important date, but it probably is not what you are thinking. It is not the excuse to find the best New Year’s Eve party and hang with the coolest people. Rather, it is the date after which you may submit your FAFSA (Free Application for Federal Student Aid).

Although the official deadline for submitting a FAFSA varies from state to state, it is a great idea to complete it well ahead of time, say during your winter break. That way, once Jan. 1 rolls around you will be adequately prepared. The reasoning is that the sooner you submit your application, the better your chance of receiving the financial aid you need. Since need-based financial aid is limited and a lot of it is on a first-come, first-serve basis, if you wait until the last minute you may not get what you need.

Get Prepared Early

Here are some things you can do that makes filling out your FAFSA much easier:

1. Complete a pre-application work sheet. Filling out this non-submittable form will help you to complete the FAFSA. Go to: http://www.fafsa.ed.gov/fafsaws78bw.pdf.

2. Get these documents together: Social Security number, driver’s license, W-2s, Federal Income Tax Return (dependent students only), untaxed income records, bank and mortgage statements, business and investment records, and alien registration card (if you are not a U.S. citizen).

3. Apply online: While you still can apply through the mail, it is best to do it online at www.fafsa.ed.gov.

Advantages to Completing Your FAFSA Online

· The answers you input are checked before you submit your application automatically by FAFSA on the Web. That way, it is less likely your application will be rejected because of conflicting or missing information.

· You can complete your application and make all the changes you need online. When you are ready, you hit a button to submit.

· You will get your SAR (Student Aid Report) more quickly than if you submitted through the mail.

What Happens Next

Once you apply online, you then will receive a confirmation that your application has been received. Shortly after that, say March or so, you will receive your SAR. Be careful to take your time reviewing this document, ensuring there are no errors, and make any changes online via FAFSA Corrections on the Web. Around May you will need to apply for specific federal aid, such as Stafford Loans, PLUS Loans for Parents or PLUS Loans for Grads. NextStudent, www.nextstudent.com, makes the application process simple and you can do it all online.

Get the NextStudent Advantage With Your Stafford or PLUS Loan

· Generous cash rebates and interest rate reductions. You can contact NextStudent at 1 (800) 299-4639 to find out the particulars.

· Personal service. You will be assigned a personal Education Finance Advisor (EFA) who will guide you through your college funding experience.

· Private loan solutions. When you have exhausted your federal fund options, your personal EFA can suggest the best way to cover your shortfall with a private student loan from NextStudent.

It is important to keep up to date on all the news regarding student loans and education.

Talk to the education financial advisers at NextStudent. They have all the information and advice you need on student loans. Check out www.nextstudent.com.

Be sure to tune in next Monday for my next blog on student loan issues in the news.

Student Loan Girl

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