Student Loan Blog : National Association of Independent Colleges and Universities

Despite Down Economy, College Student Aid Still Thriving

Student Loan Girl — Tue, 24 Mar 2009 00:18:00 GMT

In economic downturns, colleges and universities become flooded with students of all ages looking to better prepare themselves for an increasingly competitive job market. But these schools haven’t been immune to the effects of today’s recession.

Fortunately, for every recent economic downturn in higher education — tuition hikes, state budget cuts, scholarship and grant cutbacks, and a fluctuating student loan market — there’s also been a tangible upside (“Glimmer of Hope for Student Aid in a Bad Economy,” USA Today, March 19, 2009).

Tuition Assistance

Downside: Public colleges have increased tuition by 4 percent per year over the past 10 years, and many schools are set to bump up tuition even more this year as they face unprecedented state budget cuts.

Upside: Federal stimulus money should help some public colleges to better cope with the loss of state funding and to minimize any increases in tuition. The state of Maryland is hoping to go a fourth-straight year without in-state tuition increases. Other colleges are offering one-time deals to students; Kent State University in Ohio is offering laid-off workers a one-time tuition and application waiver at its Trumbull campus, and Manchester College in Georgia is offering to refund one year of tuition for students who aren’t able to secure a job or admission to grad school within six months after graduation.

Institutional Aid

Downside: Trouble in the stock market has caused colleges’ endowments to drop 25 percent in value this year, which has severely hampered schools’ ability to offer scholarships.

Upside: Despite their endowment losses, more than 90 percent of the nation’s private colleges and universities will be increasing financial aid next year by 9.8 percent to make up for 4-percent tuition increases, according to the National Association of Independent Colleges and Universities.

Government Grants

Downside: Aid for merit scholarships has taken one of the biggest hits this year, primarily due to state budget cuts.

Upside: The federal stimulus package has increased the maximum award for Pell Grants — federal financial aid for low-income students — from $4,731 to $5,350 for the coming academic year and to $5,500 for the 2010–2011 academic year. And, an additional 800,000 students are expected to receive Pell Grant funding this year.

Federal Student Loan Programs

Downside: The $50 billion Federal Family Education Loan Program — the government program that provides federal student loans to more than 10 million students through third-party lenders — has been the larger of the two federal student loan programs. But over the past two years, the FFEL program has lost business to the Direct Loan Program, the government’s other federal student loan program through which the U.S. Department of Education provides federal student loans directly to families, as hundreds of cash-strapped FFELP lenders have been forced to exit the program.

Upside: The FFEL program has still managed to increase its student loan volume this year, and some lenders are returning to the student loan market now that the federal government has bought nearly $25 billion in lenders’ student loan securities, providing them with the capital to make new loans. The Direct Loan Program has picked up the slack, providing an additional $7 billion in lending this year.

Private Student Loans

Downside: The overall supply of capital for private student loans is estimated to have decreased by one-third — a decrease of between $6 billion and $7 billion — due in large part to the fact that lenders have made it harder for families to qualify for private student loans.

Upside: Increased government funding for federal Stafford student loans has helped to reduce students’ reliance on private student loans. And more students are maxing out their federal financial aid before turning to private student loans, which the USA Today suggests has helped students avoid over-borrowing in private student loans.

Share this post: email this | del.icio.us | reddit

In Declining Economy, Student Loans May Be More Difficult to Secure

Student Loan Girl — Tue, 04 Nov 2008 22:27:00 GMT

Students are finding it increasingly challenging to find the money they need to pay for college as the credit crisis continues to hamper student loan providers’ ability to fund new loans, reports MustangDaily.net, the college newspaper of California Polytechnic State University (“Student Loans Harder to Come By in Uncertain Economy,” Oct. 30, 2008).

In 2007 alone, Cal Poly lost almost 25 percent of its student lenders, leaving many families scrambling to find a new student loan provider.

“Last year (Cal Poly students) borrowed through 76 different lenders,” said Lois Kelly, the school’s director of financial aid. “Nineteen of those lenders are now declining to make any student loans. That is a substantial number of lenders no longer in the market.”

With fewer lenders serving the school, Kelly says students will have a harder time finding a student loan provider that will “be there for them” until they graduate.

To date, more than 100 lenders have stopped issuing federal student loans and 37 lenders have stopped offering private student loans due to a reduction in federal subsidies and a lack of funding to make new loans.

Lending Problem Affecting Students Nationwide

A recent study conducted by the National Association of Independent Colleges and Universities revealed that out of the 500 institutions surveyed, nearly 50 percent reported that some of their students were dropping out of school or switching to part-time status because students couldn’t get college loans and couldn’t afford tuition costs without them.

“We lost a large portion of our freshman class who were unable to secure a private loan and whose parents were either denied a PLUS loan or could not take one,” said an unidentified NAICU survey respondent.

Of the students who were denied a student loan and chose to remain in school, many turned to credit cards, which are generally more costly, to help pay their tuition expenses.

Share this post: email this | del.icio.us | reddit

Student Loan Crunch Affected Some Private Schools, But Crisis Largely Avoided

Student Loan Girl — Tue, 28 Oct 2008 20:59:00 GMT

The student loan crunch that began this past spring failed to become the widespread crisis that experts predicted, according to the results of a survey by the National Association of Independent Colleges and Universities. Still, the NAICU reports, some of the private colleges surveyed have had to scramble to help their students get the loans they need to pay for school (“Student-Loan Crunch Sets Back Some Private Colleges, but Most Manage,” The Chronicle of Higher Education, Oct. 22, 2008).

More than 500 NAICU member institutions responded to the survey, including 450 private colleges and universities that participate in the Federal Family Education Loan Program, the federal student loan program that relies on private, third-party lenders to provide the majority of federally backed loans to students. Of those schools, 85 percent found that their students were dropped by at least one private lender, and 27 percent of the schools said that their students had struggled to find a replacement lender.

Schools reported that their students who weren’t able to get a private student loan often had to take time off from school, drop down to part-time status, work additional hours, or use a credit card to make up the difference in their college expenses.

Three-quarters of the colleges surveyed saw an increase in demand for student aid, but 67 percent reported no negative impact on their enrollment. This is “a good sign,” said David Warren, president of NAICU, even though he speculates that many families may had not yet felt the full impact of the downturn when they were surveyed on Sept. 10., only days prior to the Lehman Brothers bankruptcy filing.

“On the one hand, we avoided anything we’d call a crisis,” Warren said. On the other, we see some clear signals of what may be in store for families right on the edge.”

Only 18 percent of respondents said they had fewer returning students than anticipated, while 19 percent reported having a smaller freshmen class than expected, which came as a surprise to Sarah Flanagan, NAICU’s vice president for government relations and policy. “I thought our sector was going to be OK.”

Share this post: email this | del.icio.us | reddit

Struggling Colleges’ Predicted Dilemma: Merge or Close Up Shop

Student Loan Girl — Tue, 26 Aug 2008 22:58:00 GMT

Over the next few years, more small, private colleges may be faced with the decision to either merge with another school or close their doors as rising energy costs, increased competition for students, and the lingering credit crisis eat away at these private colleges’ profit margins, according to an article in Inside Higher Ed (“Will More Colleges Merge?,” Aug. 25, 2008).

The economic downturn that is threatening both families’ ability to pay for college and donors’ ability to continue financially supporting schools to the same extent they have in the past, may mean that “colleges in difficulty are going to be willing to try more ambitious solutions such as mergers,” says Richard Ekman, president of the Council of Independent Colleges. This month, Woodbury College in Vermont announced it would merge with fellow state school Champlain College. In July, California schools John F. Kennedy University and National University joined together.

Ekman wonders if other small colleges, which have typically “found amazingly imaginative ways to thrive” under financial hardship, may also be on the verge of merging or closing. Other industry experts contend that the private sector of higher education has always been in some degree of flux with colleges constantly having to adapt to demographic changes and students’ shifting interests.

“There will be a handful of colleges opening, closing or merging [every year],” says David Warren, president of the National Association of Independent Colleges and Universities. But Warren sees “no compelling evidence that we are entering a new era of consolidation in private higher education.”

Private Colleges Experiment With New Ways to Stay Afloat

Still others argue that the number of colleges officially merging may understate the extent to which small colleges are considering radical changes in order to survive, writes Inside Higher Ed reporter Scott Jaschik. More colleges are turning to collaborative partnerships with other universities to keep their doors open.

Last year, Shimer College, a small independent liberal arts school that bases its education model on small class seminars and emphasizes the study of classical literature, relocated 40 miles away to the Chicago campus of the Illinois Institute of Technology. This year, Shimer also started a joint B.A./J.D. program with the Chicago-Kent College of Law.

The moves were needed, Shimer officials say, to help the “great books” college, which was struggling to keep enrollment at 100, attract new students. This year, enrollment at Shimer is up by 25 students.

Robert Zemsky, CEO of the Learning Alliance for Higher Education, an organization that advises colleges and universities on market strategies, predicts that mergers may grow in their appeal among both small, cash-strapped colleges and financially secure schools that see merging as a better way to grow enrollment and diversify their offerings.

This merger trend could be a blow to the U.S. system of higher education, Ekman says. “The diversity of the types of American colleges and universities has always been the wonderful strength of the American system,” he says. “To me, it’s a shame when any college goes out of business or needs to sacrifice its distinct identity.”

Share this post: email this | del.icio.us | reddit