Student Loan Blog : college grants

Students Could Wave Goodbye to Merit–Based Federal Aid

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

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

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

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

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

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

Obama’s Proposal Receives Support From Education Officials

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

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

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

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

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Students Reach Record-High Levels of Credit Card Debt

Student Loan Girl — Wed, 15 Apr 2009 23:00:00 GMT

College students are piling up alarming amounts of credit card debt, according to a recent survey by student loan company Sallie Mae, which suggests that not only are more students relying on credit cards to pay for their rising college costs, but that more students are charging more frequently (“Average College Credit Card Debt Rises With Fees, Tuition,” April 13, 2009, USA Today).

“The message is clear,” said Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research Group. “Students are carrying more debt on credit cards, and more students are paying for education on credit cards.”

Sallie Mae’s survey of 1,200 private student loan applicants found that 84 percent of undergraduate students had at least one credit card, a 76-percent increase from 2004 when the survey was last conducted. The survey also revealed that students are carrying an average $3,173 in credit card debt — the highest level seen since the data was first collected in 1998.

Financial aid experts attribute these increases, in part, to the fact that college tuition and fees have increased 439 percent over the past 25 years and that the average median family income has not kept pace, rising only 147 percent by comparison, according to the National Center for Public Policy & Higher Education (“Study: Undergrads Relying on Credit at Record Levels,” Creditcards.com, April 13, 2009).

In fact, students in the survey cited not having enough “savings or financial aid to cover all the costs” of college as their number one reason for taking out a credit card, a problem that has been exasperated by the fact that private student loan lenders have scaled back lending and tightened their credit standards due to the waning credit markets.

Because lenders have severely limited students’ access to private student loans, students have more often been charging textbooks, room and board, and schools supplies to credit cards. In 2008, students charged an average of $2,200 in educational expenses on their cards, a 134-percent increase compared to four years ago.

Once considered the “lender of last resort,” says Kalman Chany, president of Campus Consultants, a college funding advisor, credit cards are now higher up in the hierarchy of students’ college funding sources. “If (students) can’t get private loans, they turn to credit cards.”

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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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Bill Gates To Give Low-Income Students $70 Million In Grants

Student Loan Girl — Thu, 11 Dec 2008 00:16:00 GMT

To help ensure that low-income students can afford a college education in the midst of a recession, the Bill & Melinda Gates Foundation is committing nearly $70 million in grants toward its goal of doubling the number of low-income students who earn a college degree or vocational credential by age 26, The New York Times reports (“Gates Grants Aim to Help Low-Income Students Finish College,” Dec. 5, 2008).

Anthony Carnevale, director of the Center on Education and the Workforce at Georgetown University, says the foundation’s latest efforts to assist low-income students couldn’t come at a more opportune time since college-educated employees are more likely to get jobs during a recession. The unemployment rate for people without a college education is generally four times as high as for those with a two- or four-year degree, he says.

Low-income students are already at a disadvantage, graduating from college at only a 25-percent rate. And a majority of the 560,000 high school students in the U.S. who graduate in the top of their class, Carnevale adds, don’t earn a degree within eight years of their high school graduation and come from families that earn less than $85,000 a year.

“We console ourselves that we’re going to be fine in the world because we have this great higher education system and all our kids are going to college,” said Hillary Pennington, who will direct the Gates Foundation’s postsecondary effort. “But [low-income students are] not finishing. That is enormously debilitating for young people.”

Foundation Proposes Far-Reaching Initiative

While the Gates Foundation — the world’s largest philanthropy — has given almost $2 billion to help U.S. high schools make needed improvements over the last eight years and dedicated another $2 billion for minority college scholarships, this is the foundation’s first endeavor into postsecondary education reform and it hopes to gain the support of other groups and organizations.

“The Gates Foundation can’t address the financial burdens by itself, but its focus on what types of programs work best may help spur action by the federal government,” said Richard Kahlenberg, a senior fellow with the Century Foundation.

If the foundation meets its goal, the number of U.S. college graduates each year would increase by 250,000.

The foundation will dedicate $33.2 million of its $70-million grant initiative to help prepare postsecondary education students to better succeed in college and $13 million in grants to assist the MDRC, a nonprofit education research organization, in expanding its performance-based scholarships for low-income college students.

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Concerned About College Costs, Texas Board Considers Changes to State Financial Aid

Student Loan Girl — Wed, 23 Jul 2008 00:13:00 GMT

The Texas Higher Education Coordinating Board is considering restructuring the state’s financial aid programs amid growing concerns about college affordability.

Proposed changes would raise the academic standards students must meet to qualify for the Texas Grant program, which helps low-income students pay for college, and would merge two of the state’s lesser-known financial aid programs with the Texas Grant. The board would also consider raising the income level at which students qualify for the Texas Grant, according to an article in the Houston Chronicle (“Financial Aid Fix Raises Concerns About Poorer Students,” July 21, 2008).

The Texas Grant program currently serves students who come from families that earn $39,000 a year or less and who have completed the recommended high school curriculum for Texas students, which includes four years of English, math, and science.

Changes Could Negatively Impact Low-Income Students

Some legislators are concerned that if enacted, the proposed changes would benefit middle-income students and widen the financial aid gap for low-income students. They also say raising the academic criteria for students who hope to qualify for a Texas Grant — requiring students to earn a 1350 on the SAT or an 18 on the ACT — would be detrimental to the most financially needy students who the grant program is designed to help.

“The changes will effectively cut off many of these students,” said Max Castillo, president of the University of Houston’s downtown campus.

Even under the current criteria, only about half of the students who qualify for the Texas Grant program receive a grant because there isn’t enough money, says state Senator Rodney Ellis, one of the original sponsors of the Texas Grant. Texas ranks last in per-capita spending for college grants among the 10 most populous states, according to the National Association of State Student Grant and Aid Programs.

If approved by the education board, the new merit criteria would apply for students entering high school in fall 2009.

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Massachusetts Shortchanges College Students on Financial Aid

Student Loan Girl — Thu, 17 Jul 2008 23:04:00 GMT

Although Massachusetts is known as a hub for higher education, the state lags behind other states in awarding financial aid to college students, a shortfall that many educators say is limiting access to a college education for low-income and minority families, according to an article in The Boston Globe (“State Lags on Student Grants,” July 13, 2008).

For the upcoming 2008–09 academic year, Massachusetts will only award about $83 million in college grants, an amount that trails the grant budgets of comparable states. Indiana will award $331 million in grant aid to students, while South Carolina, which has about 2 million fewer residents than Massachusetts, has dedicated $273 million.

With little money awarded in state grants, Massachusetts students often need to take out student loans, particularly private student loans — which tend to be more costly than federal college loans — to cover the remainder of their college costs.

“There’s simply not enough money in the system,” said Massachusetts Senator Robert O’Leary, chairman of the Joint Committee on Higher Education. “It just hasn’t kept pace with the growth in costs and the increasing number of students who need financial aid. Every year, we’re losing ground.”

The escalating cost of tuition at public and private colleges and universities makes this funding shortage more acute. Massachusetts state grant aid covers less than 5 percent of college costs compared with the national average of 19 percent. Educators say the problem has been magnified by the state’s reliance on its deep-pocketed private colleges like Harvard and MIT to provide the bulk of financial assistance.

Low-income students who qualify for Massachusetts’ main grant program are awarded an average of $780, an amount that doesn’t even cover the total cost of textbooks, which cost students an average of $900.

Governor Deval Patrick is expected to sign a bill that would increase financial aid by $3 million.

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States Increase Financial Aid Funding for Student Loans and Grants

Student Loan Girl — Mon, 23 Jun 2008 21:29:00 GMT

State spending on financial aid for undergraduates increased 6 percent or by a total of $9.3 billion in 2006-07 academic year, after growth slowed to 3.4 percent during the 2005–06 academic year, according to a recent report by the National Association of State Student Grant and Aid Programs.

States spent the majority of their financial-aid funds, or $5.29 billion, on need-based grants and student loans for undergraduates this year.

However, state spending on non-need-based aid for undergraduate students has eclipsed the amount of money states have devoted to need-based aid over the past decade, increasing 5.6 percent during 2006–07 to $2.08 billion, The Chronicle of Higher Education reports (“States Spend More on Student Aid,” June 27, 2008).

Funding for student loans received the biggest jump in state spending this year, by nearly 29 percent or $653 million, following a 17-percent increase in spending between the 2004–05 and 2005–06 academic years, according to NASSGAP data.

The report listed South Carolina, Indiana, Georgia, Kentucky, and West Virginia as the top spenders in grant-aid, per capita, for their 18-to-24-year-old population in the 2006-07 academic year.

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Pennsylvania Student Loan Agency to Cut Grant Aid, Offer Employee Buyouts

Student Loan Girl — Thu, 01 May 2008 00:06:00 GMT

Pennsylvania’s student-loan agency will cut college grant amounts for the 2008–09 academic year by up to $750 and will offer voluntary buyouts to some of its nonunion employees in an effort to keep the company afloat.

The Pennsylvania Higher Education Assistance Agency will determine the adjusted grant amounts based on a recipient’s college costs, family size, and the number of children from the family enrolled in college. Next year’s awards will range from $2,100 to $3,948, compared to this year’s awards which ranged from $2,500 to $4,700.

The agency expects to save $12.5 million annually with the nonunion buyout agreements, after losing more than $37 million in the nine months leading up to March 31, agency spokesman Keith New said in an Associated Press article, (“Pa. Student-Loan Agency to Cut Aid, Offer Employee Buyouts,” April 24, 2008).

During the same period last year, the agency earned nearly $113 million in operating income.

Employees eligible for buyouts will receive two weeks’ pay for each year of service at the agency for up to 16 weeks. The number of buyouts needed to steady the company has yet to be determined and is dependent on the salaries of departing employees.

The agency, which New said has “never before experienced more difficult or severe economic conditions,” will only impose layoffs as a last resort.

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