Student Loan Blog : college financing

Students Left Holding the Bag as Loan Forgiveness Programs Vanish

Student Loan Girl — Wed, 03 Jun 2009 22:30:00 GMT

College graduates who were lured into high-need fields, including teaching, nursing, and public service, by programs that would forgive a portion or all of their student loans are receiving this sobering news: The cavalry isn’t coming after all.

These graduates, who in some cases were enticed by the loan forgiveness programs to take out student loans that exceeded their earning potential, are now discovering they’re on the hook for their large debts — and are struggling to pay them — because the state agencies originally offering the loan forgiveness can no longer afford to do so.

“We’d gotten married in June and bought a house, pretty much planned our whole life,” said Travis Gay, a special education teacher in Kentucky (“Recession Imperils Loan Forgiveness Programs ,” The New York Times, May 27, 2009).

Gay and his wife, Stephanie, also a teacher, thought they had a handle on repaying the $100,000 they owed in combined student loans. They were under the impression that a portion of their college loans would be forgiven each year over the next five years under a state program offering loan forgiveness for schoolteachers.

Then the Gays received a letter from the Kentucky Higher Education Student Loan Corporation, the lending agency that offered the program, “saying that our forgiveness this year was next to nothing.”

The student loan agency contends that it never promised the thousands of indebted public school teachers and nurses who have been affected by cuts to the program that their loans would definitely be forgiven. Financing for the loan forgiveness program was never actually guaranteed, says Ted Franzeim, vice president of customer relations for the student loan agency.

And it’s not just Kentucky borrowers who are being hurt by program cuts. Student loan forgiveness programs are on the chopping block throughout the country as the state agencies and nonprofit student loan organizations that sponsor these programs reel from dwindling government aid and strained market conditions.

The New Hampshire Higher Education Loan Corporation, for example, suspended its loan forgiveness program for teachers, and the Pennsylvania Higher Education Assistance Authority has put the brakes on its loan forgiveness program for nurses and people called to active duty in the military.

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Colleges Receive $70 Million in Anonymous Donations

Student Loan Girl — Wed, 29 Apr 2009 22:21:00 GMT

An anonymous donor is playing secret Santa with at least a dozen colleges and universities nationwide, but instead of giving $5 trinkets this Santa has left schools with $1 million to $10 million gifts, The New York Times reports (“Anonymous Donor Gives Millions to Colleges,” April 24, 2009).

Over the past two months the donor has given away $70 million to select schools. To remain anonymous, the donor employs a bank to contact the schools either with a call or letter that relays sentiments similar to what was written in one letter: “It is hoped that this will make a substantial difference to your students during these challenging times… enabling a more confident, sharper focus on their studies with improve career and life prospects.”

None of the school officials at the selected schools know whether the donations are coming from a man, woman, or organization, and no one seems to want to jeopardize their gift by speculating too much about the reasoning behind the donor’s selections. There’s a pretty clear consensus, however, that the schools share one common trait: they’re all led by women.

Lois DeFleur, president of Binghamton University in New York, is more than fine with this reasoning, if it is indeed the case, “The actions say, ‘I’m investing in an institution because it has achievements and I believe that with women leaders it will have future accomplishments.’ That’s pretty powerful in my view.”

The donations, which at some schools have been the single largest donation in the school’s history, have ranged from the $10 million given to Michigan State University, to the $1.5 million given to the University of North Carolina in Asheville. In return the donor has asked for complete anonymity and for the majority of the donation — 50 percent to 80 percent of the total donation in each case — to be used for financial aid.

The schools say they are extremely grateful for being chosen, particularly since higher education institutions across the country have seen an increasing demand for financial aid at the same time that state funding and endowments are drying up.

“In the best of times we never have enough scholarship money for students who have financial need,” said Susan Cole, president of Montclair State University in New Jersey. “In these difficult times, that is multiplied. The gift is incredibly important to us. I cannot adequately express the depth of our gratitude.”

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House Dems Get Second Crack at Higher Education Appropriations Bill

Student Loan Girl — Wed, 25 Feb 2009 23:23:00 GMT

Just days after President Obama signed a $787 billion economic stimulus bill into law, House Democrats have reintroduced a $410 billion overdue appropriations measure that would finance dozens of federal agencies and programs, including many related to higher education, whose budgets went unapproved during the last session of Congress, reports The Chronicle of Higher Education (“Delayed Appropriations Bill Would Increase Pell Grant and Research Funds,” Feb. 24, 2009).

During the tail end of the Bush administration, democratic lawmakers chose to put the original appropriations bill on the back burner after President Bush threatened to veto any measure that would exceed his fiscal budget. Instead, legislators passed a “continuing resolution” to fund the budgetless organizations at fiscal 2008 levels through March 6, so that legislators could revisit the appropriations bill under a new administration.

Lawmakers, after being delayed by work on the stimulus bill, are finally taking a second look at the appropriations bill just days before the continuing resolution’s termination date and President Obama’s scheduled release of his fiscal year 2010 budget.

The proposed spending bill will “keep the government running and finish last year’s business,” said David Obey D-Wis., head of the House Appropriations Committee, as wells as complement the Obama administration’s economic recovery package.

While the proposed budget measure will provide expanded funding to a variety of agencies and programs, it currently offers few specific financing details. The Fund for the Improvement of Postsecondary Education could get $133.7 million to fund projects intended to model improvements to college education and accessibility, the Gear Up program could get $313.2 million to help financially needy middle and high school students prepare for college, and the government’s student financial aid programs could get a $19.2 billion boost.

The House Appropriations Committee bill would also expand research funding for the National Institutes of Health by $938 million, and provide an additional $347 million in funding to the Federal Pell Grant Program, drawing on the budget previously allocated for the underutilized, and Bush administration-supported, Academic Competitiveness and National Science and Mathematics Access to Retain Talent grant programs.

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Note to Families: Financial Aid More Competitive, But Not Out of Reach

Student Loan Girl — Tue, 27 Jan 2009 00:09:00 GMT

With more families applying for financial aid — applications are already up 10 percent above last year’s record — and lending for private student loans drying up, families’ ability to find available financial aid is becoming more difficult, reports the Associated Press (“College Financial Aid System Facing Stiff Test,” Jan. 25, 2009).

Traditional sources of college funding are no longer available: Home values are dropping, making it difficult for families to get a home equity loan, college savings accounts are dwindling, and private lenders are leaving the student loan market.

Currently, only 21 of the 60 third-party student loan lenders who issued $19 billion in federal and private student loans last year are still lending, and most of the lenders still issuing loans have severely tightened their credit criteria, according to Finaid.org, a college funding resource site.

Families face limited financial aid options at a time when state funding shortages have forced numerous state colleges to cut their financial aid budgets and replace grants and scholarships with student loans in their financial aid offers. Colleges are also increasing tuition, in some cases, by double digits.

“There are no sure answers because we’re in new territory,” said Bruce Hammond, a college admissions consultant based in Washington, D.C. “But students with high need and lesser credentials are going to have to brace themselves for less aid.”

Financially Needy Students Should Know Their College Funding Options

While the financial atmosphere for college students and their families may seem more dismal this year, things “are not as scary as people might think,” says Lauren Asher of the non-profit California-based Institute for College Access and Success.

Students and parents can take advantage of expanded federal financial aid offers. The U.S. Department of Education has already made $95 billion in grants, loans, and work-study assistance available to nearly 11 million students and families and Congress has increased annual borrowing limits for unsubsidized Stafford student loans, which are not tied to financial need, by $2,000. And President Obama’s proposed stimulus package could offer families even more financial aid.

Cash-strapped families and students could consider attending lower-cost public schools and community colleges to avoid taking on large amounts of debt. On average, tuition and fees at a two-year public school cost about $2,300, while tuition and fees at a four-year public school cost about $6,000, according to the College Board.

And while a number of the nation’s top colleges and universities, including Harvard , Yale, and Duke, have seen their endowments take a huge hit this year, none of these schools have gone back on their commitment to offset their high tuition costs by extending financial aid offers to a greater number of low- and middle-income families.

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