Student Loan Blog : Higher Education Act

‘Gap Loans’ at For-Profit Colleges Escape Proposed Legislation

Student Loan Girl — Tue, 27 Oct 2009 19:47:00 GMT

While acting last Thursday to approve the creation of a Consumer Financial Protection Agency, which will expand federal oversight of private student loans, a Congressional panel at the same time voted to reject a proposal that would have included school-sponsored “gap loans” under the authority of the new CFPA.

The House Financial Services Committee, in a vote of 39 to 29, approved the Consumer Financial Protection Agency Act of 2009 (H.R. 3126), a centerpiece of the Obama administration’s pursuit to overhaul the nation’s financial regulatory system. The approved legislation would create a new federal agency, the CFPA, which would have the authority to write new consumer protection rules in the arenas of lending and credit, including private student loans (“House Panel Moves to Regulate Private Student Loans,” Oct. 26, 2009).

Gap loans, however, could potentially be exempted from the CFPA’s oversight due to language included in the bill meant to shield small businesses and local merchants that extend credit to their customers. A proposed amendment to the CFPA Act that would have clarified that gap loans are subject to CFPA regulation was narrowly defeated in the House committee by a vote of 35 to 33.

Gap Financing on the Rise at For-Profit Schools

“Gap” student loans — so-called because they’re intended to cover students’ financing gaps, any college costs that aren’t covered by a student’s financial aid (scholarships, grants, federal student loans) — are increasingly being offered by for-profit colleges and vocational schools to boost enrollment as these institutions encounter a swelling influx of unemployed and low-income students looking to return to school to obtain a higher-earning degree, learn a new trade, or acquire additional training for their résumé.

“Because the economic meltdown has made it harder for students to get bank loans, several of these schools are increasingly stepping in, financing degrees in the same way a furniture store or used-car dealer might extend credit to customers,” explains Justin Pope, an education writer for The Associated Press (“For-Profit Colleges’ Increased Lending Prompts Concerns,” Aug. 15, 2009).

For-profit schools, also known as “proprietary” colleges, that provide gap financing, which include national heavyweights ITT Technical Institutes, Corinthian Colleges, and Career Education Corp., say that their financing programs allow students to attend school who wouldn’t otherwise be able to afford a college education.

But these gap financing programs are risky and expensive for students, consumer advocates maintain. Gap loans typically carry high interest rates, sometimes in the double digits, and large monthly payments that the schools’ generally low-income students often aren’t able to handle — all while allowing the schools to reap hundreds of thousands of dollars in federal money from the federal financial aid that students use to pay the bulk of their attendance costs.

“I believe we have an obligation to ensure that these schools are not allowed to continue to prey on students,” said Rep. Maxine Waters, D-Calif., who sponsored the defeated CFPA amendment. “By subjecting these schools to CFPA’s authority, the quality of the student loans these schools provide will improve” (“House Panel Approves Expanded Oversight of Private Student Loans,” The Chronicle of Higher Education, Oct. 22, 2009).

Consumer Groups Push for Regulation of Gap Financing

Consumer and student advocate groups, concerned about the potential for student loans made by proprietary schools to be exempted from the CFPA legislation under the bill’s small-business clause, had been lobbying in support of the Waters-sponsored amendment to explicitly bring gap loans under the authority of the CFPA.

“We just want to make sure that the risky financial products that some colleges, for-profits in particular, have been making to students are still covered by this agency, and not undercut by a well-intentioned suggestion of how to make sure that the neighborhood grocer isn’t unfairly and unduly impacted” by increased regulation, said Lauren Asher, president of The Institute for College Access & Success (“Regulating Private Student Loans,” Inside Higher Ed, Oct. 19, 2009).

Asher and TICAS joined a number of other consumer and student advocacy groups in drafting a letter earlier this month to Rep. Barney Frank, the Democratic chairman of the House Financial Services Committee, urging the committee to clarify that school-sponsored loans wouldn’t be shielded from the CFPA’s reach (letter to Rep. Barney Frank regarding H.R. 3126, Oct. 7, 2009).

“To effectively protect consumers, the CFPA must have full authority to regulate private student loans regardless of the institution offering them,” the groups wrote. “For consumers, a private student loan can pose the same serious risks whether issued by a financial institution or by a school. The CFPA should apply and enforce standards based upon the product and not the issuing institution.”

Gap Loans vs. Gap ‘Financing’: The Non–Student Loan

Proprietary colleges argued against the Waters amendment, saying that gap student loans are already regulated by the federal Truth in Lending Act.

New TILA rules, mandated under last year’s Higher Education Opportunity Act (H.R. 4137) and which will go into effect in February, will require student lenders to disclose more details about their private loan programs, including interest rates and estimated monthly payments, and to inform applicants for private student loans about federal student loan options.

Consumer advocates, however, hold that TILA regulations aren’t sufficient and that the stricter oversight of the CFPA is necessary in order to protect student loan borrowers.

In pushing for the Waters amendment, consumer and student advocacy groups pointed to the move being made by some schools to offer their gap funding under the auspices of “consumer financing” rather than as a student loan program. By structuring their gap funding programs as consumer financing rather than as private student loans, schools are able to skirt the student loan–specific requirements, regulations, and borrower disclosures mandated by the Higher Education Opportunity Act.

“It’s very alarming,” said Deanne Loonin, director of student loan borrower assistance project at the National Consumer Law Center. Schools “can structure the products in all kinds of ways — things like revolving credit lines, unsecured loans, even secured loans. It’s this new thing, and we’re worried about it.”

One for-profit school, Colorado-based Westwood College, is currently defending itself against a class-action lawsuit brought by students accusing the school of fraud in its student financing. The lawsuit charges Westwood with violating state banking laws. Westwood’s student financing program carries a relatively high interest rate of 18 percent, but the school doesn’t call its financing student loans.

The For-Profit Risk

Students at proprietary colleges are particularly vulnerable to the schools’ high-interest loans and financing programs, consumer and student groups say, because of who these students are: lower-income, higher-risk borrowers.

Low-income students, who tend to drop out of college in greater numbers than higher-income students, generally end up struggling to repay their student loans. And for-profit colleges, with their student populations that skew toward lower income levels, on average have lower graduation rates and higher loan default rates than other schools.

In 2007–08, students at proprietary colleges defaulted on their student loans at a rate of 11.1 percent, according to the Department of Education, compared to a default rate of 6.0 percent for students at public nonprofit colleges and universities and a rate of 3.8 percent for students at private nonprofit institutions.

Students at for-profit schools are also taking on increasingly higher debt loads: The percentage of proprietary college students borrowing at least $40,000 nearly tripled to 30 percent between 2003–04 and 2007–08, says Mark Kantrowitz, founder of the financial aid website, FinAid.org. The proportion of proprietary college students taking out private student loans has also come near to tripling, rising to 43 percent from 15 percent in that same time period, according to an analysis of federal data by the nonprofit group Education Sector.

Nonetheless, critics charge, as long as proprietary schools can continue to bring in significant federal funds with each student, the schools have little incentive to refine their lending practices to ensure that students aren’t taking on unmanageable debt.

“Consider, for example, a school charging $10,000, hoping to enroll a student who has lined up $9,000 in aid from the government and elsewhere,” writes Pope. “Even if the school loses half of the $1,000 it lends to get the student in the door, it comes out $9,000 ahead.”

And “for many of these students, if you don’t apply these thousand dollars, they’re not coming to school,” says Jeff Silber, an industry analyst with BMO Capital Markets.

From the school’s perspective, you’re realizing “all those other revenues,” he elaborates, “even if you write off $500 [of that $1,000] right away. … Financially it still makes sense to do this.”

And with last week’s defeat of the CFPA amendment, the stage is set for schools to press on with their gap financing programs, having sidestepped, at least for now, the impending shadow of the CFPA and increased federal oversight.

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Univ. of Phoenix Accused of Manipulating Its Default Rate

Student Loan Girl — Wed, 14 Jan 2009 23:39:00 GMT

Three former University of Phoenix students are suing the for-profit higher education giant for using a questionable loan repayment practice that skews the university’s default rate and takes away federal student loan repayment options from students who withdraw from the school, according to The Chronicle of Higher Education (“Lawsuit Accuses U. of Phoenix of Protecting Its Default Rate at Students’ Expense,” Jan. 14, 2009).

The lawsuit, which could soon reach class-action status, alleges that the university’s ”payback” policy is designed to manipulate the school’s default rate — the percentage of a school’s students who stop repaying their loans. Under the current policy, the school “pays off” students’ federal college loans without students’ knowledge or consent after they have withdrawn from the institution. The University of Phoenix then attempts to improperly collect on the paid-off loans directly from the students “under terms more onerous than those of the original federally guaranteed loans.”

By canceling the federal student loan debt of students who withdraw from the school, the University of Phoenix, which has one of the lowest default rates among the nation’s for-profit colleges, effectively prevents those loans from being considered in its default rate.

Statistics suggest that students who withdraw from school are more likely to default on their student loans, and the more borrowers a school has who go into default thereby increasing its default rate, the more likely the school is to lose its ability to participate in the federal student loan program, among other restrictions.

Students Lose Repayment Benefits Under ‘Payback’ Policy

According to the lawsuit, the university’s payback policy harms students by preventing them from being able to take advantage of generous loan repayment terms offered by the federal student loan program, which include below-market interest rates and longer repayment terms and grace periods.

Students who must repay the University of Phoenix directly are “routinely bombarded with calls, letters, and e-mails from [the university] to collect tuition along with threats that refusal to pay will result in referral to collection agencies and negative reports on their credit.”

The lawsuit seeks actual and punitive damages on behalf of thousands of borrowers affected by the university’s repayment practice over the past four years, as well as an injunction barring the university from continuing its current payback practice, which could affect numerous other for-profit colleges that use similar practices, the Chronicle reports.

In a statement, the University of Phoenix said that the students bringing the lawsuit have “misconstrued” the Higher Education Act, and that the U.S. Department of Education had determined in January 2008 that the school’s refund policies were compliant with federal student aid rules.

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Provision of Higher Education Act May Force Schools to Spy on Online Students

Student Loan Girl — Tue, 29 Jul 2008 04:24:00 GMT

Language in the bill, currently before Congress, to re-authorize the Higher Education Act could lead distance-learning institutions to use home-monitoring devices to police their students who take courses online, according to an article in The Chronicle of Higher Education (“New Systems Keep a Close Eye on Online Students at Home,” July 25, 2008).

The provision, contained within a single paragraph of the 1,200-page bill, is intended to prevent students enrolled in online programs from cheating. The clause requires providers of online postsecondary programs to prove that the person submitting the online classwork is the student who’s actually enrolled.

Hearing no objections from Congress to the provision, a handful of online colleges are now testing home-monitoring systems that authenticate online test-takers through fingerprinting, watch students in their homes via webcams, and record key strokes on students’ home computers.

Some colleges claim one chief advantage to these types of devices: Students will no longer be required to travel to a distant location where a proctor can oversee them taking the test in person. Instead, students will be able to take tests online in the comfort of their own home, with an installed approved monitoring system acting as an on-site proctor.

A few administrators, however, are concerned that these new technologies, which will are managed by third-party vendors, may not adequately safeguard students’ privacy. “This is taking a step into a student’s private life,” said Rhonda Epper, co-executive director of Colorado Community Colleges Online. “I don't know if we want to extend our presence that far.”

Debates about privacy and institutional intrusions aside, there may be at least one upside: The provision could bring online degrees a greater reputability since the schools would be verifying that their graduates had actually completed the coursework, said John Ebersole, president of Excelsior College, an online institution in Albany, N.Y.

“If it raises confidence and credibility in the eyes of regulators and traditional educators,” Ebersole said, “it’s worth it.”

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For-Profit Colleges Face Expulsion from Federal Student Aid Program for Awarding Too Much Aid

Student Loan Girl — Fri, 25 Jul 2008 18:50:00 GMT

Under new federal legislation, many students at for-profit institutions have seen the amount of their Pell and federal student loan awards increase and a larger number these students have been able to cover all their college costs with just these two types of federal financial aid, according to an article in The Chronicle of Higher Education (“For-Profit Colleges Seek Fix for Student-Loan Problem,” July 25, 2008).

However, school administrators fear that with the growing number of students able to take out larger amounts of federal student aid, these for-profit institutions may run afoul of the federal requirement that at least 10 percent of a school’s revenue come from non-federal sources.

If more than 90 percent of a for-profit institution’s revenue comes from federal sources, these colleges may become ineligible to participate in federal student-aid programs, and students may be required to pay for college with more costly funding sources like private student loans or credit cards.

Lobbyists for these for-profit institutions are working with Congressional leaders to alter and renew the Higher Education Act to resolve this issue so that students may still be able to receive greater amounts of federal aid without jeopardizing the federal student-aid programs in place at for-profit schools.

Though Congress is preparing to break before the 2008 elections, lobbyists are hopeful that their addendum will be added to the final version of the bill, which may be voted on before the end of the current legislative session.

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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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In Fight to Lower Tuition, Small Universities May Be Harmed

Student Loan Girl — Wed, 25 Jun 2008 22:43:00 GMT

Some small U.S. colleges and universities are concerned that they may be the target of a new bill that would force schools with multi -billion dollar endowments, like Harvard, to reduce their tuition costs, and place other high-tuition institutions without large endowments at a financial disadvantage when competing for students, according to an article on Bloomberg.com (“Kennedy’s Tuition List Targets Harvard, Wounds Bates” June 19, 2008).

This year President Bush is expected to review the portion of the reauthorized Higher Education Act that requires the Department of Education to maintain lists of schools that have the highest and fastest-growing costs of attendance. These lists would have rankings in six categories for nine different types of schools, including four-year private schools and for-profit two-year or technical colleges. If approved by the president, the lists would go into effect in 2011.

Sen. Edward Kennedy, D-Mass, who called the rankings a national “watch list” last July, is pushing for the legislation to hold schools “accountable for skyrocketing college costs.” College administrators counter that they’re being punished for expenses beyond their control, and smaller colleges, that don’t have huge endowments, may be the most affected.

“It is totally unfair and it is cheap politics,” said Leon Botstein, president of New York’s Bard College. “This is fighting the wrong people. Most colleges are being penalized due to the actions of a few wealthy ones.”

Watch Lists Portray Schools’ Costs Inaccurately

College officials like Terry Beckmann, vice president for finance at Bates College in Maine, believe that the lists, known in the industry as “the wall of shame,” have the potential to be embarrassing for schools and misleading for students.

He cites his college’s ranking as evidence: Bates is listed as having the most expensive tuition in the 2006—07 academic year among private four-year schools. While room and board are included in Bates’ $44,350-price tag, other schools listed lower on the list do not incorporate these figures, creating an inaccurate representation of actual costs.

Alternately, Rep. Buck McKeon, R-Calif. who originally proposed the watch lists, believes the rankings will “help parents and students make better decisions” for college.

McKeon commented that grocery stores have several different price options when selecting one type of apple over another. “In education, you don’t really get that kind of opportunity,” he said.

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Higher Education Act Likely to Hold Colleges More Accountable for their Spending

Student Loan Girl — Thu, 12 Jun 2008 17:53:00 GMT

Once Congress negotiates the latest reauthorization terms of the Higher Education Act, colleges will likely be required to report to the federal government on at least 300 new topics including tuition increases, transfer-of-credit policies, and file sharing, according to an article in The Chronicle of Higher Education (“Colleges Must Prepare for New Wave of Federal Oversight, Speaker Warns,” May 26, 2008).

The changes to the act mean colleges will have to steel themselves for a new era of intensive federal oversight, said Judith Eaton, president of the Council for Higher Education Accreditation.

Eaton made her remarks during an address in May at the annual meeting of the Association for Institutional Research, a 4,200 member organization of institutional research professionals — the people who will most likely compile and report colleges’ data to Washington.

While she expressed regret that the act’s new requirements for colleges and universities would transform the traditional relationships among schools, accreditors, and federal regulators, Eaton said she understood the public’s anxieties about college spending and affordability that have given rise to the new federal role.

“We ought to be accountable when we’re spending a hundred billion dollars or so in federal money,” she said. “We do have obligations here.”

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New Senator at the Helm of Higher Education Act Negotiations

Student Loan Girl — Tue, 03 Jun 2008 23:13:00 GMT

Sen. Barbara Mikulski, D-Md., will “pinch hit” for Sen. Edward Kennedy, D-Mass. — the chairman of the Senate Committee on Health, Education, Labor and Pensions who is recovering from surgery to treat a malignant brain tumor — in Senate and House negotiations to overhaul the Higher Education Act (HR 4137 and S 1642).

Mikulski, the third-most senior Democrat on the Senate committee, will handle the member-to-member negotiations between education leaders in the Senate and the House of Representatives, according to an article in CQ Politics (“Doctors Say Kennedy Brain Surgery Successful,” June 2, 2008).

Both sides are working to merge two Higher Education Act versions passed separately by the House and the Senate last year.

In mid-May the two houses had reached a compromise on college cost watch lists, college accreditation, and campus piracy, but that draft of the measure did not include provisions on graduate education, new programs, or private student loans.

It is unclear when Kennedy, who has worked to ensure undergraduates have access to student loans amid instability in the student loan credit market, will return to the Senate.

Kennedy underwent surgery June 2, for a malignant glioma, an aggressive tumor of the central nervous system, and will receive chemotherapy and radiation treatment over the next few weeks.

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Senator Proposes Penalties for Colleges That Hoard Endowment Funds

Student Loan Girl — Thu, 15 May 2008 18:58:00 GMT

In a recent letter to the U.S. House of Representatives Committee on Ways and Means, Rep. Peter Welch, D-Vermont, proposed restricting IRA rollover contributions to colleges that don’t use their endowments to help low and middle-income students pay for college, according to an article in The Chronicle of Higher Education (“Proposal Would Restrict Certain Gifts to Colleges That Hoard Endowments,” May 13, 2008).

Welch said wealthy colleges, which are among the biggest beneficiaries of those IRA distributions, should be ineligible to receive the perks if schools’ endowments aren’t used to contain college costs for needy students.

He urged the House Ways and Means Committee — which is currently drafting a new tax bill — to include penalties for schools that hoard their endowment assets.

Another proposal by Welch, that would require colleges to spend at least 5 percent of their endowments every year and to annually report how much of their endowment funds have been spent, is part of current House legislation to reauthorize the Higher Education Act.

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Credit Unions Offer Themselves as Partial Solution to Looming Student Loan Crisis

Student Loan Girl — Sat, 12 Apr 2008 10:19:00 GMT

In the last six months alone, since legislators eliminated over $21 billion in subsidies to student loan lenders in the Federal Family Education Loan Program, at least 44 FFELP lenders have stopped originating federal student loans.

This exodus of lenders from the federal student loan program, combined with the current credit and liquidity crunch resulting from an epidemic of defaulted mortgages, may leave many college students scrambling for money for school this fall.

In an effort to help avoid a student loan crisis before it starts, a group of credit unions serving students in California, Texas, and Wisconsin is lobbying for federal subsidies that would allow credit unions to provide significantly more loan capital for students.

Last September, federal legislation set two lender subsidy rates on federally guaranteed student loans, one rate that applies to for-profit lenders and a second for state-chartered nonprofit agencies, explains Paul Basken of The Chronicle of Higher Education.

When those rates were set, credit unions, which are essentially nonprofit banks, were left out of the picture, neither subject to the for-profit lender rate nor eligible for the nonprofit rate which is guaranteed only to state-chartered lenders.

Now, writes Basken, as more for-profit bank and nonbank lenders abandon the FFEL program each week, the credit unions seek legislation that would make them eligible for the nonprofit subsidy rate (“Credit Unions Will Lobby Congress for Loan-Subsidy Benefits Accorded to Nonprofit Lenders,” April 4, 2008).

A Viable Source for More Student Loans?

Credit unions currently provide less than 1 percent of all FFELP loans, according to Mark Kantrowitz, publisher of FinAid.org, a financial aid website.

However, credit unions could offer significantly more volume at some institutions, Michael K. Kim, vice president for student services at the USC Credit Union, told The Chronicle.

The USC Credit Union provided 30 percent of all federal student loans at the University of Southern California last year, and Kim believes the USC Credit Union could double its student loan lending to $200 million to provide financing for any students unable to find another lender.

Although Kim thinks the credit union might find a way to double its student loans even without the nonprofit subsidy, the nonprofit rate would help.

One of the key selling points in the credit unions’ lobbying efforts, Basken writes, may be the fact that credit unions have a ready pool of capital — their customer deposits — from which to lend. In contrast, nonbank lenders, who don’t hold funding capital, must find external funding sources for their student loans and thus have been more vulnerable to the liquidity crisis that’s followed the fallout in mortgage lending.

Joining Kim’s Southern California credit-union group in lobbying Congress next week for the nonprofit subsidy rate are the UW Credit Union, serving universities in Wisconsin, and the University Federal Credit Union, which serves more than 100 colleges and employers in central Texas.

More, but Still Not Enough

An advisor from Senator Edward Kennedy’s office recently expressed support for the credit unions’ request that their proposal for inclusion in the nonprofit subsidy rate be added to the legislation for reauthorization of the Higher Education Act currently before Congress.

Kantrowitz believes that the credit unions’ subsidy proposal is reasonable since they’re nonprofit entities whose earnings don’t benefit outside investors.

On the other hand, he says, the additional loan volume credit unions could provide for the federally backed student loan program will likely not be enough to staunch the tide of students that may potentially be unable to find lenders this fall.

Kantrowitz further points out that among the 100 largest lenders in the federal student loan program, only three are credit unions.

“If credit unions can double their volume, that’s a 5-percent solution,” Kantrowitz says. “It could be part of the solution, but not even close to the entire solution.”

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Congress Joins States and Colleges in Efforts to Reduce Soaring Textbook Costs

Student Loan Girl — Mon, 03 Mar 2008 07:09:00 GMT

With the average college student now shelling out between $900 and $1,000 each year for textbooks and supplies, according to the College Board’s latest Trends in College Pricing report, schools, states, and now Congress are getting involved in the crusade to control the spiraling costs of college textbooks.

Propelled by studies that show the prices of textbooks are rising faster than the rate of inflation, the House of Representatives included provisions in the recently approved College Opportunity and Affordability Act that are specifically targeted at making textbook costs more manageable, reports Elia Powers of Inside Higher Ed (“Different Tacks on Textbook Choice,” Feb. 19, 2008).

The House bill (H.R. 4137), which passed the House on February 7 and renews the Higher Education Act, would have colleges provide advance information in their course schedules about required books to give students time to plan for expenses and comparison-shop for the most cost-effective options.

Also approved by the House was an amendment (H.AMDT.951) proposed by Rep. Tim Ryan of Ohio that would create a pilot competitive grant program to assist a select number of colleges in setting up textbook rental programs.

States Enacting Their Own Textbook Legislation

H.R. 4137 would also require textbook publishers to provide more information about pricing and changes from previous editions, which follows bills already passed by some state legislatures, writes Powers.

Last April, for example, Washington state House Bill 2300 was signed into law, requiring textbook publishers to disclose retail prices and a history of revisions from edition to edition when presenting any materials to faculty.

In June, Oregon passed its similar Senate Bill 365 into law. In addition to charging publishers with providing retail prices and a list of all previous versions of a text to potential adopters, the Oregon measure requires publishers of textbook “bundles” (textbooks packaged with an accompanying CD-ROM or study guide, for instance) to make each component of the bundle available to students separately and to disclose the retail price of each piece.

In California, Assembly Bill 1548, known as the College Textbook Transparency Act, likewise calls for publishers to provide a list of revisions made to new editions, as well as for college bookstores to release the wholesale prices of textbooks. The California bill was signed by Gov. Arnold Schwarzenegger in October and goes into effect in 2010.

Changes at the College Level

In response to the increasingly vocal concerns of students, families, and legislators, not all schools are waiting on Congress or state officials to adopt changes to textbook pricing and marketing practices. Some schools, writes Powers, have already instituted book rental, buyback, or other programs in a move to extend textbook affordability.

At Rio Salado College in Arizona, for example, a partnership with Pearson Custom Publishing allows professors to “build” custom textbooks, drawing material from multiple sources. Administrators believe this program could save students up to 50 percent on reading materials.

The University of Virginia, in addition to expanding its textbook rental and guaranteed buyback programs, is increasing its selection of e-books, which can save students as much as 30 percent over print versions of new editions. And a growing number of U.Va. professors are choosing to purchase older editions of books in cases where the new material isn’t a necessity, a move the university says cuts an average of 75 percent off new book prices.

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Politicians Battle to Help College Students

Student Loan Girl — Wed, 20 Jun 2007 17:31:00 GMT

The last several years we have witnessed both the democrats and the republicans warring over the best way to make college more affordable for students. Often bills sponsored by one party in the House of Representatives would pass there, only to fail in the Senate, and vice versa. In either case, though both parties conceivably have the same end in mind, that of helping college students attend school without breaking the bank, it seems that we go back and forth regarding new legislation, changes to old bills and finger pointing regarding who really has college students’ needs at heart.

As reported in the June 14, 2007 article by Joe Smith, titled “The Competition to Aid Students,” by Doug Lederman that appeared in Inside Higher Ed, where the tenets of the Higher Education Act were debated, “This time, as the panel discussed a Democratic-drafted bill that would spend $5 billion to increase the maximum Pell Grant by $500 over five years (but spend twice that on cutting the loan interest rate for low-income and middle class borrowers and enhancing or creating other aid programs), Republicans argued that the Democrats were shortchanging needy students. Their proposed solution: spend more than twice as much money on Pell Grants as the Democratic bill would.

“This Pell Grant proposal will tip the balance back toward low-income students struggling to pay for their college education by increasing the maximum Pell Grant far more than the underlying bill,” said Rep. Howard P. (Buck) McKeon (R-Calif.), the senior Republican on the committee.

Republicans Versus Democrats for Best Aid

The article continued, stating that, “The Republican proposal, McKeon suggested, was more in line with the Democrats’ stated aims of helping students than their own proposal, which focuses much of its attention on cutting loan payments for borrowers after they’ve left college. (A statement issued by McKeon late Wednesday hit that theme even harder: ‘When Republicans provided them the opportunity to cast a vote for low-income students in the Pell Grant program, Democrats instead reaffirmed their desire to divert billions to new, unproven entitlement programs and to temporary interest rate cuts for certain college graduates.’)

“Whoa, Democrats said, finding irony in being accused by Republicans of not being pro-student enough. ‘Where you been?’ said a combative Rep. John Tierney (D-Mass.), arguing that when McKeon and other Republicans had ‘your shot [at cutting the loan programs] last time,’ they poured $12 billion of the $18 billion they slashed from the programs to ‘pay down a deficit created because you gave so many tax cuts…. The idea that this is going to be shortchanging students is ridiculous.’

“That moment, with the Republicans trying to ‘out-student’ Democrats, offered the latest evidence of how much the public policy environment for higher education has changed of late, largely because of the changeover in Congress wrought by November’s election. As the House committee approved ‘budget reconciliation’ legislation that would wring $19 billion from the student loan programs, the panel’s 27 Democrats (joined by three Republicans) voted to spend all but $750 million of those funds on enhanced financial aid, a fact cited by Rep. George Miller (D-Calif.), the chairman of the committee.”

Mixed Reviews

While many student advocate groups were quick to support the new legislation along with the proposed increases in “need-based aid,” others were not so enthusiastic. The article stated that, “most of them are also deeply troubled by other aspects of the measure approved Wednesday, especially provisions that aim to make higher education more affordable by attacking the other side of the equation: holding down what colleges and universities charge to students. Among other things, the House legislation would require significantly more reporting by colleges about their prices and their performance (including data on completion rates and faculty/student ratios), and put in place a series of steps institutions would have to go through if they increase tuition significantly, along with some carrots and sticks aimed at discouraging such increases.”

Other Features of Bill

As cited in the article, the bill also included the following provisions:

· “Increase the maximum Pell Grant to $5,200 by 2001-12 (at a cost of $5 billion).

· Cut the interest rate on federally subsidized student loans in half, to 3.4 percent, by 2012-13.

· Institute a system of “income-based repayment” for borrowers, in which their student loan payments would be capped at a manageable percentage of their income and their debt canceled after 20 years of repayment. (Total cost: $6 billion.)

· Raise the amount that working students can earn — through the “income protection allowance” — without reducing their financial aid awards.

· Lift the annual and aggregate limits on how much individual students can borrow from the federal loan programs, with the goal of reducing borrowers’ dependence on private (and typically more expensive) loans.

· Forgive up to $5,000 in loans, and otherwise easing the loan repayment burden, for students who enter public service fields and fulfill other national needs.

· Create a new grant program for students who are planning to be teachers.

· Create a new program ($500 million over five years) for institutions that serve large numbers of Hispanic,

· American Indian and other minority students. This new provision, added to the legislation very late in the game, just before committee members voted on it, would allow for the provision of funds to ‘predominantly black’ institutions — those that meet a variety of standards, including having at least 40 percent of their enrolled students be black.”

It is important to keep up to date on the effects of legislation and news on student loans and education. What goes on in government and in your state can have a great impact on your student loans and your college education.

For all the information you need about student loans, go to www.nextstudent.com.

Be sure to tune in next Wednesday for my next blog on student loan legislation in the news.

Student Loan Girl

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Teacher Prep Strategies Discussed by Congress

Student Loan Girl — Mon, 21 May 2007 22:00:00 GMT

Apparently, preparing quality teachers is something that Congress considers very important, as “Last year alone, Congress appropriated $2.89 billion through the No Child Left Behind Act and $59.9 million through the Higher Education Act to fund teacher quality and preparation initiatives nationwide,” according to a May 18, 2007 article by Elizabeth Redden, titled “Congress Talks About Teacher Prep” that appeared in Inside Higher Ed. The article reviewed the comments and recommendations “At a Congressional subcommittee hearing Thursday,” where “elected representatives and witnesses discussed strategies for getting the most out of that spending.”

Improving Effectiveness of Initiatives at Top of Agenda

“The reauthorization of the two acts ‘presents a unique opportunity to improve these laws so that they operate in a more integrated fashion,’ Rep. Rubén Hinojosa (D.-Tex.), chair of the House Subcommittee on Higher Education, Lifelong Learning and Competitiveness said at the hearing.

“‘In years past, there has been much discussion and scrutiny of the caliber of teacher education programs at institutions of higher education. Teacher preparation programs haven criticized for providing prospective teachers with inadequate time to learn subject matter; for teaching a superficial curriculum; and for being unduly fragmented,’ said Rep. Ric Keller (R.-Florida), the ranking member on the subcommittee.

“‘As we work to reauthorize the Higher Education Act this year, Congress will examine the most effective use of federal funding for teacher training, whether it is teacher education programs at colleges and universities or alternative routes for teacher certification.’”

Hearing Witnesses Make Recommendations

“Witnesses at Thursday’s hearing put forward a variety of recommendations Among them:

· “Daniel Fallon, the director of the program in higher education at the Carnegie Corporation of New York, offered recommendations including providing incentives to states and local school districts to construct comprehensive systems compiling school data, and establishing post-baccalaureate mentoring programs in which education schools maintain real or virtual connections with young graduates throughout their first few years of teaching. The latter strategy seemed to trigger some interest among subcommittee members. Rep. Timothy H. Bishop (D.-New York) asked Fallon whether he thought federal funding to help establish these post-baccalaureate mentoring programs at less wealthy education schools would represent a good investment, to which Fallon readily answered in the affirmative. Yet, while recognizing the need to help less wealthy institutions launch such programs, Rep. John F. Tierney (D.-Mass.), wondered aloud why public monies should go to finance such efforts at well-endowed education schools with high tuitions when producing good teachers is ‘their charge, is their job.’

· “Sharon P. Robinson, president and CEO of the American Association of Colleges for Teacher Education, offered a host of recommendations to incorporate in the two acts, among them investments in a new fellowship program that would provide service scholarships for teaching in high-need fields and high-need schools, investments in partnerships among schools of education, schools of arts and sciences and K-12 schools, and support for the development of teacher performance assessments. In her written testimony, Robinson describes a number of state assessments that measure ‘whether new teachers can actually teach’ before they become teachers. ‘A modest investment’ on the part of the federal government could enable the continued development of these teacher performance assessments, Robinson said – adding that the TEACH Act recently reintroduced by Rep. George Miller (D.-Calif.) calls for just such an investment. Like Fallon, Robinson also advocated for a targeted investment in the development of data systems and a need for ‘state-of-the-art’ mentoring programs.

· “Focusing, not surprisingly, on alternative certification, Emily Feistritzer, president of the National Center for Alternative Certification and National Center for Education Information, recommended shifting the focus on teacher preparation from ‘institutions of higher education exclusively to a wide variety of providers of recruitment and preparation programs,’ and providing incentives for states and school districts to expand alternative routes in areas with shortages of highly-qualified teachers. Rep. Michael N. Castle (R-Del.) questioned Feistritzer about variations in the quality of the various alternative routes programs and the teachers they produce, to which she responded with another of her recommendations: To encourage research about ‘What makes for truly effective teachers and how do they come by those qualities?’”

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

Talk to the education financial advisors 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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International Affairs for College Students?

Student Loan Girl — Fri, 30 Mar 2007 22:33:00 GMT

But not like you think. I am not talking about long-distance relationships, at least not in the dating sense. However, if the National Academies’ National Research Council has its way, more and more college students will be going international in the future. And why not? Imagine the glamour of exotic locales and the allure of fascinating foreign cultures.

Seeking to “dramatically expand Americans’ proficiency in foreign languages and knowledge of international affairs,” the National Academies’ National Research Council issued a report March 27, 2007 stating that the U.S. Department of Education needs to appoint an official to accomplish this purpose, according to a March 28, 2007 article by Sierra Millman titled “Education Dept. Should Have High-Ranking Official to Oversee Foreign-Language Study, Report Says” that appeared in The Chronicle of Higher Education.

Programs Examined

The article mentioned that the committee that generated the report “convened to review the ‘adequacy and effectiveness’ of the programs, which are supported under two federal laws -- Title VI of the Higher Education Act and the Fulbright-Hays Act.

“It generally defended the programs, and their long-term and broad-based approaches to training people highly skilled in foreign languages and with expertise on other cultures. But it also called for more support for their projects, which include university-based National Resource Centers and Language Resource Centers, saying those programs should not have to compete with or conform to more narrowly focused critical-language initiatives shaped by current foreign-policy goals.”

Members of the committee emphasized the need to plan ahead and affirmed that the Title VI and Fulbright-Hays programs encouraged universities to expand their foreign language and international affairs programs, the article stated. “‘You don’t know what the critical language is going to be 20 years from now, and you need a reservoir,’ Kenneth Prewitt, a member of the review committee, said at a briefing on the report, ‘International Education and Foreign Languages: Keys to Securing America’s Future’” according to the article.

Qualifications for ‘Language Czar’

Though the committee could not reliably access the levels of effectiveness and impact of the programs, they did have very specific ideas regarding the qualifications for the new “language czar” that will lead the expansion, as quoted in the article:

“This national language czar should be a Senate-confirmed, executive-level bureaucrat, someone with ‘clout’ in the Department of Education who reports directly to the secretary on whether the nation’s efforts in international and foreign-language studies are in step with its needs.

“The official should also be an academic, said Karin C. Ryding, president of the American Association of Teachers of Arabic and a professor of Arabic at Georgetown University. ‘I think most academics would be anxious to have someone with an academic background and a background in language teaching and linguistics,’ she said in a telephone interview. That person would be best equipped to understand the challenges that professionals in the field confront daily, explained Ms. Ryding, who was not on the committee.”

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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Budget Picture FY08

Student Loan Girl — Wed, 07 Feb 2007 20:43:00 GMT

As I reported earlier this week, President Bush released his FY08 Budget on Monday, Feb. 5, 2007. And although it promises to increase the maximum Pell Grant to $4,600 this year up to $5,400 by 2012, he will use funds from other grants for low-income students to support the increase. However, how much value do presidential budget requests really hold, and what do lenders thing about Bush’s budget?

According to a Feb. 6, 2007 article by Doug Lederman titled “The Bush Budget, 2008” that appeared in Inside Higher Ed, “Even in the best years, presidential budget requests are of uncertain value, because they mark only the starting point for a long and often tortured process of deliberation, negotiation and, sometimes, outright war. The value of the White House’s 2008 budget is diminished further because Congress has yet to finish its work on the final budget for the 2007 fiscal year. That reality renders the numbers in the Bush budget for 2008, if not meaningless, at least hazier and fuzzier than usual.”

Changing the Budget Could Mean Complications for Legislators

By earmarking funds that would go to other low-income grants to help solve the Pell Grant initiative, Bush seems to complicate the college funding crisis even further. Lederman reported, “The budget picture is complicated even further by the fact that the administration would seek to pay for some of its new initiatives with changes in mandatory spending programs that would require the kinds of major alterations in federal student aid law that legislators are loathe to make in the budget-setting process.

“The more than $2 billion that the department would try to squeeze from lender profits to pay for the 2008 Pell Grant increase, for instance, would be possible only if Congress were to include such changes in legislation to renew the Higher Education Act, or pass a complicated budget reconciliation measure, in conjunction with the annual appropriations bills. Those prospects are dicey, casting further doubt on the likelihood that the Bush budget numbers will come to pass.”

What the Lenders Say

The new budget also proposes to “cut the interest rate subsidiary” that private lenders receive for funding federal student loans “by 0.5 percentage points” in a bid to raise the additional 12.4 billion needed to increase the Pell Grant to $5,400 by 2012, the article said.

In the article, Lederman quoted Joe Belew, president of the Consumer Bankers Association, as saying “Student lenders cannot sustain cuts of this magnitude, which would cut margins by about 20 percent. Driving away banks from this program will leave students with either a government monopoly or an oligopoly of loan providers and few if any of the benefits currently provided by competition. These include lender-paid origination fees, financial literacy and default prevention counseling, rate reductions for timely repayments, and quality customer service. Without banks in the student loan program, graduates can look forward to IRS-style quality of service.”

For all the information you need about student loans, go to www.nextstudent.com.

Be sure to tune in next Wednesday for my next blog on student loan legislation in the news.

Student Loan Girl

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