Student Loan Blog : recession

Attention Freshmen and Transfer Students: Colleges Still Have Openings

Student Loan Girl — Thu, 07 May 2009 22:25:00 GMT

Almost 260 colleges and universities around the country still have openings for students, and most of these schools still have ample financial aid available, according to survey results from the National Association for College Admission Counseling (“NACAC Survey: Space and Financial Aid Still Available for Students On College Campuses,” May 2009).

Results from this year’s NACAC annual survey, Space Availability Survey: Openings for Qualified Students, indicated that schools still have spaces available for both freshmen and transfer students who may have not been accepted to their first choice schools or who have yet to apply to college. And, 97 percent of the institutions said they had housing space remaining.

The survey, conducted shortly after the May 1 “decision date” deadline, by which many schools require students to confirm their attendance and submit deposits, is designed as a tool for families, counselors, and teachers to help students who have not yet completed the college admissions process.

More than 70 percent of the 258 NACAC member schools that, in the survey, said they still had spaces available were private institutions. Many of these schools had anticipated lower enrollment numbers this fall after a separate survey found that the recession was forcing one out of six students to change their college plans (“Will the Economy Really Change Students’ College Plans? Signs Say Yes,” The Chronicle of Higher Education, April 24, 2009).

That survey, conducted by the College Board and the higher-education consulting firm the Art & Science Group, indicated that 41 percent of students were seriously considering a public college closer to home over a private institution.

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State Colleges Cut Staff, Programs as Budgets Slashed

Student Loan Girl — Fri, 20 Mar 2009 18:32:00 GMT

Michael Crow, the president of Arizona State University who seven years ago promised to make ASU “The New American University” and to grow the school’s enrollment to 100,000 students by 2020, could see his plans go unfulfilled because of state budget cuts, reports The New York Times (“State Colleges Also Face Cuts in Ambitions,” March 17, 2009).

Since last June, ASU has lost $88 million in state funding, which amounts to 18 percent of the university’s base budget.

“The New American University has died; welcome to the Neutered American University,” the Arizona school’s student newspaper editorialized last month after ASU announced it would be eliminating more than 500 jobs, closing 48 programs and requiring remaining employees to take 10 to 15 days of unpaid leave this spring.

While ASU students said they believe school president Michael Crow is doing his best to protect them from further funding cuts, they also said the state’s budget cuts will negatively affect the quality of their education.

ASU Not Alone, Colleges Struggling Nationwide

Public colleges across the country are experiencing layoffs, salary freezes, and even enrollment reductions as they grapple with shrinking state funding in the current recession.

The University of Florida recently eliminated 430 faculty and staff positions, the University of Nevada, Las Vegas, recently laid off around 100 employees, and the University of Vermont has eliminated 16 positions, left 22 faculty positions vacant, and frozen the salaries of certain staff, The New York Times reports.

And California’s higher education system, which serves 3.3 million students — nearly 20 percent of college student nationwide — is among the nation’s college systems hardest hit by this recession. Both the University of California system and the California State University system have lost hundreds of millions of dollars in state funding and have been forced to shrink their enrollment numbers.

“What’s happening, everywhere, is what’s happening to Michael Crow,” said Jane Wellman, executive director of the Delta Project on Postsecondary Costs, Productivity and Accountability, an organization that studies college spending. “The trend line is states disinvesting in higher education.”

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What’s Up Doc? Medical Schools Expand as Economy Retracts

Student Loan Girl — Thu, 19 Mar 2009 22:15:00 GMT

Looking at the growth of medical schools in the United States you’d never know America is in the middle of a recession.

Even as the economy continues its downward spiral, medical schools are expanding, says Dr. J. James Rohack, president-elect of the American Medical Association.

Whereas about 25 years ago medical schools were advised to cut or cap enrollment to help steady the field’s growing surplus of doctors and limit the high level of competition for medical services that was contributing to rising health care costs, new projections indicate that the nation may soon be facing a significant doctor shortage.

“Americans are living longer, and there are more of them,” Rohack says. “It's clear that the demographics of American society point to the need of having and expanding a well-educated medical work force” (“Boom Amid Bust: Med Schools Grow as Economy Tanks,” Associated Press, March 10, 2009).

Responding to this potential shortfall in physicians — especially in light of data that suggests the elderly population is living longer — more colleges and universities are expanding into the field of medicine education; four new accredited medical schools are scheduled to open this year, increasing the number of medical schools to 130. Another five medical schools have applied for accreditation and plan to begin accepting students no later than 2010 or 2011.

Admissions applications are also on the rise at existing medical schools, jumping 21.4 percent from 2003, when there were 34,786 applicants, to 42,231 medical student applications in 2008. Medical school enrollments were up just over 9 percent during that same period with 18,036 new medical students being accepted in 2008.

But even if medical schools continue at this impressive growth rate, the AAMC says they still won’t be able to meet the nation’s demand for doctors. The United States may have only about 750,000 doctors by 2025, approximately 159,000 fewer than the country needs, according to a report the AAMC issued in 2008.

These projections indicate that the actual doctor shortfall may be worse than originally believed, especially if U.S. population growth continues to outpace the number of doctors being trained and if more doctors retire than expected.

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Students Could Save $40,000 by Completing College Degree in 3 Years

Student Loan Girl — Fri, 27 Feb 2009 20:31:00 GMT

Students attending Hartwick College in New York may now be able to save over $40,000 on their education by enrolling in a new three- year college degree program, according to a recent news release from the college (“Hartwick College Announces Three-Year Bachelor’s Degree,” Feb. 24, 2009).

The new initiative will reduce colleges costs for the school’s students and their families by 25 percent at a time when the country remains deeply mired in a recession, but, Hartwick officials contend, the program will maintain the “rich educational experience” that is characteristic of the school.

“This three-year program will deliver the same educational opportunity to qualifying students as our four-year program,” said Dr. Margaret Drugovich, Hartwick’s president. “We believe it is imperative for the higher education community to preserve the option of a top-quality education for any student who seeks it, regardless of the prevailing economic challenges or personal circumstances.”

To qualify for the three-year college degree program, students must have graduated high school with at least a 3.0 GPA. Once enrolled, students must take 40 credits each academic year instead of the usual 30, and take classes during a special January term each year in order to complete the standard 120 credits needed to graduate. The required extra winter session will allow students to keep their summers free for study abroad, internships, research practicums, or spending time with family.

Increased Interest in Three-Year Programs

Drugovich is anticipating a great deal of interest in the three-year degree program, but her students aren’t the only ones taking notice of these types of programs. With the skyrocketing cost of college continuing to squeeze families often already hard-pressed to come up with money for school, the concept of a cheaper three-year degree may be gaining favor.

At the American Council on Education’s annual meeting held earlier this month, Sen. Lamar Alexander, R-Tenn., a former university president, urged more college presidents to consider three-year college degrees at their institutions, the Associated Press reports (“Some Colleges Offering Degrees in 3 Years,” Feb. 24, 2009).

And lawmakers in Rhode Island are drafting legislation that would encourage three-year college degree completion. Their bill would create standardized college-level classes for the state’s high schools that would be intended to enable all students to complete college in only three years.

Three-Year Degrees Face Uncertain Future

But prior to the country’s recession, three-year degrees had largely failed to catch on.

At Upper Iowa University, only five students have chosen to pursue the school’s three-year degree program over the five years it has been in existence and every one of those five students ended up taking four or more years to complete their degree. The school has not had a single student interested in the program since.

Educators attribute the lack of participation in these accelerated programs to the fact that students may still prefer the full four- year college experience, academically, socially, and athletically, Joy Newcom, spokeswoman of Waldorf College, told the Associated Press about her Iowa school that is just now phasing out its last three-year program due to lack of student interest.

Newcom said, “What we’re finding they’re saying is, ‘Why did I want to grow up so fast?’ .”

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Calif. Colleges Failing to Produce Workforce-Ready Students

Student Loan Girl — Mon, 23 Feb 2009 21:09:00 GMT

California is in danger of losing a large portion of its future workforce if the state education system continues to fail to adequately accommodate its college-age population, reports Gale Holland of the Los Angeles Times (“California Colleges Face ‘Serious Challenges,’ Report Says,” Feb. 12, 2009).

A new report issued by the Institute for Higher Education Leadership & Policy at California State University in Sacramento shows that a large portion of the state’s high school graduates are ill-prepared for college and that too many schools fail to make sure their students complete certificate or degree programs.

And with the state facing such a severe budget crisis and California’s two-year school systems enforcing freshman enrollment caps and contemplating tuition hikes, the state could see more students who generally attend two-year schools get “squeezed out” by students who are generally better prepared for college and who, pre-recession, would have attended a traditional four-year school, Holland writes.

This influx of new students to two-year colleges — whose relative affordability makes them more appealing during a recession than an often costlier four-year school — could create “a competition for scarce seats” at the state’s 100 community colleges, “and the fear is the less prepared will lose out,” said Nancy Shulock, coauthor of “The Grades Are In – 2008” report.

“We’re facing some really serious challenges and it has to do with not getting our younger generation educated at the same rate as other generations,” Shulock said. “We don’t think the budget crisis can be an excuse not to act.”

Currently, California ranks 40th in the nation for its rate of high school graduates who go directly to college and just 29th in the nation for the percentage of state residents ages 25 to 34 who attain at least an associate of arts degree, according to the report, suggesting that schools aren’t offering enough support for students to complete their degrees.

In the report, Schulock recommends that the state should reward schools not based on the number of students they enroll, but rather on the number of students that graduate or complete their degree programs.

Pat Callan, president of the National Center for Public Policy and Higher Education, said the state’s current “master plan” for higher education has been flawed for 20 years. “Every time we take a turn into recession, we hemorrhage students,” he said.

Callan laments that California, which was once regarded as a national and global education leader, is now lagging behind because “we have not responded well to the huge demographic and economic changes that are changing the face of California.”

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Students Brace for Largest Tuition Jump in Years

Student Loan Girl — Tue, 20 Jan 2009 23:18:00 GMT

Tuition increases at the nation’s colleges are inevitable.

However, in the current economic climate — where states are slashing budgets to the bone — public colleges are being forced to raise tuition at rates that haven’t been seen in years, reports The Associated Press (“Families Await Sharpest Tuition Increases in Years,” Jan. 15, 2009).

Public, state-supported institutions have hiked tuition fees by 8 to 10 percent during economic recessions of the past in order to make up for reductions in government contributions, according to Nick Johnson of the Center on Budget and Policy Priorities in Washington.

“This recession is worse. This state fiscal crisis is worse than last time, so we would expect state tuition increases to be larger than in past years,” Johnson said.

With severe budget cutbacks in the governor of California’s new budget proposal, for example, university fees are expected to rise by at least 10 percent at California state schools. And the New York state government’s recent announcement of an unusual midyear increase to state public college tuition made it clear that the state’s budget crisis was so severe it couldn’t afford to wait until fall to impose a 14-percent tuition hike.

John Hayek, interim vice president of finance for the Kentucky Council on Postsecondary Education, says although the state announced it will hold tuition increases below last year’s, which ranged from 6 to 10 percent for in-state students, the state still plans to raise tuition by about 5 percent at community colleges and between 7 and 10 percent at public universities.

Families Uncertain How to Cover Extra Costs

For the four out of five American college students who attend public schools, these tuition increases have become a cause for concern, particularly in regard to their families’ ability to afford their college education.

Since many families lost savings in the stock market or can no longer tap home equity loans due to the real estate crash, says Jim Boyle, president of advocacy group College Parents of America, paying for college next year may be a particularly painful process with fewer means of financing college available.

“We’re probably going to have to take some options off the table (for the other children) unless things change,” said Donna Kopec, whose daughter’s college mutual fund lost a third of its value.

Kopec says that the drop in the market has created a funding challenge for all three of her college-bound daughters. She hopes President Barack Obama will follow through on campaign promises that include increasing Pell Grant amounts and implementing programs that award college grants in exchange for community service.

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Down Economy May Be Driving Students to Online Education

Student Loan Girl — Thu, 15 Jan 2009 21:05:00 GMT

As jobs continue to disappear and unemployment soars, large numbers of adult learners may soon be enrolling in online programs, particularly at two-year colleges and for-profit institutions, according to a new online education survey (“Recession May Drive More Adult Students to Take Online Courses,” The Chronicle of Higher Education, Jan. 9, 2009).

These two-year colleges and for-profit institutions, which offer programs tailored to working adults, will likely see the biggest boost in enrollment, but all types of colleges could experience an enrollment surge as more people turn to higher education to gain marketable skills in the recession, revealed the 2008 online education survey by the Sloan Consortium, a non-profit organization working to improve online education.

“A lot of people want to increase their skill levels or get that degree they didn’t have,” said I. Elaine Allen, one of the report’s authors. The threat of losing their job can be as big a motivator for people to get a degree as actually losing their job, Allen told The Chronicle.

She said that the primary motivator for adults turning to online education over a traditional classroom-based education may be one of convenience. “Time-wise, you have the flexibility of logging online and taking the course whenever you want,” Allen said. With Internet -based courses, “you don’t have to leave your house. If you have a family, that’s going to make things much easier for you.”

Over 20 percent of all U.S. students enrolled in higher education were taking at least one online course in the fall of 2007, according to data from the Sloan Consortium. And, The Chronicle suggests, if the recession were to drive more students to take courses online as expected, the percentage of online education students is likely to rise sharply.

Most of that growth will likely come from the two-year and for- profit colleges that have not yet maximized their potential for online enrollment, Allen predicts, while public institutions likely won’t see “huge growth” in Web-based learning. Of all the colleges surveyed, 58 percent said that online courses were critical to their enrollment strategies, and a full 70 percent reported that competition for the growing number of students pursuing an education online is increasing.

Allen said, “For the first time, [schools] are seeing students choose another college for its online program.”

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Number of Students With Unpaid Tuition Bills Growing

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

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

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

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

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

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

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

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

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

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

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Colleges Step Up, Help Students With Extra Financial Aid

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

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

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

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

Schools Create New Aid Programs or Beef Up Existing Ones

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

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

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

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

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College Student Finance Guru Blogs His Way to Book Deal

Student Loan Girl — Tue, 06 Jan 2009 21:04:00 GMT

Zac Bissonnette is living the blogger’s dream, getting paid to write for TheDailyBeast.com and AOL’s WalletPop.com, and now landing a book deal that may be just the ticket for helping him weather a dismal job market in one of the worst recessions in history (“Student Morphs Blog Into Book Deal,” Amherst Bulletin, Jan. 2, 2009).

Publishers Weekly recently announced that Bissonnette, a sophomore majoring in legal studies at the University of Massachusetts, is busy drafting a book for Portfolio, a publishing subsidiary of the Penguin Group, that will chronicle how parents and their children pay for college.

Scheduled for publication in 2010, the same year Bissonnette will graduate, the book will compare the value of a public versus a private college education, and, as Bissonnette explains, will critically examine what happens when students take on too much debt from student loans.

Bissonnette, who is paying his own way through college, says he began blogging in high school from a library computer.

Since then, his personal interest in finances has spiraled into a successful side business; after his blogs were picked up by WalletPop, for which he is now an editor, and The Daily Beast, he was featured on CNN’s “American Morning” for an editorial he wrote concerning President-elect Barack Obama’s economic policy and its effect on student loans.

He got his book deal shortly after his November CNN appearance. Bissonnette said, “I came up with this idea, got an agent, and he put this together.”

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Ohio State Commits to Helping Students in Financial Turmoil

Student Loan Girl — Wed, 24 Dec 2008 00:30:00 GMT

The largest university in the nation, Ohio State University, has taken steps to ensure that its students who rely on financial aid will still be able to complete their degree program in spite of the economic recession, the school announced in a press release this week (“Ohio State Assisting Students Facing Economic Difficulties,” Dec. 22, 2008).

The initiative, called “Students First,” is aimed at ensuring that currently enrolled students, as well as those admitted for the upcoming 2009 academic year, will have access to additional financial aid, as well as short-term emergency loans, if they or their families experience economic hardship.

The university will also be personally contacting all first-year students who didn’t re-enroll for classes this winter quarter to check whether financial hardship was the reason.

“Now more than ever, we must assure that young people are able to pursue their dreams, earn a degree, and use their talents to enhance our economy, our state, and our world,” said university president E. Gordon Gee.

The Students First plan proposes an array of measures designed to protect student’s access to financial aid funds during any budget cuts and to insulate the school’s financial aid system from changes in the economy:

Doubling the existing short-term emergency loan fund by $1 million
Providing short-term loans of up to $500 for students with temporary cash-flow problems
Guaranteeing to increase financial aid proportionally to correspond with any tuition increases
Offering students assistance in securing financial at any point throughout the academic year if their financial situation worsens
Encouraging donors to give toward financial aid, student loans, and scholarships

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Economy Takes Its Toll: Some Small Colleges to Shut Their Doors

Student Loan Girl — Wed, 19 Nov 2008 22:59:00 GMT

Americans could see more college closures, particularly among small schools with shrinking enrollment numbers as the slowing economy continues to claim more victims across every sector, The Associated Press reports (“College Closings Rare, but Could Rise in Downturn,” Nov, 17, 2008).

While the American Council on Education reported that only four out of 4,400 colleges closed in all of 2007, this year alone, four schools have announced they will either shut down certain branch campuses or close entirely by next school year.

Tuition costs that far exceed what state schools charge, diminishing enrollment numbers, and mounting debt loads have made it increasingly difficult for some small colleges, most notably those with religious affiliations, to stay afloat in recent years.

And now the same effects from the mishaps that took down the mortgage industry have bled into the higher education sector. Some schools may be discovering, much like many American consumers and homeowners, that the allure of low-interest loans caused them to take on more debt than they should have. The median debt of private colleges has increased 50 percent in the last five years, according to Moody’s Investors Service.

But now, like homeowners with variable-rate mortgages, some schools have seen their once low debt payments skyrocket to unmanageable proportions.

“Instead of holding long-term debt at lower interest rates, they have gotten stuck with short-term obligations at higher rates — a scenario [colleges] knew existed on paper but never expected to happen,” writes Justin Pope of The Associated Press.

Faith-Based Schools Hardest Hit by Economic Decline

Cascade College, a small Christian school in Portland, Ore. with just 280 students, announced it will be shutting down after the current academic year as it continues to struggle with a $4 million debt load. as will Pillsbury Baptist Bible College in Owatonna, Minn. and Vennard College in University Park, Iowa. Vennard, with just 80 students, will close its doors two years shy of its 100-year anniversary.

Taylor University in Indiana, another Christian institution, will shut down the undergraduate program at its Fort Wayne branch.

Paul Corts, president of the Council for Christian Colleges & Universities, said the financial crisis has become a “very serious” problem. “I think people are sensing that this is not short-term. It’s something that’s going to take a couple of years to play out.”

Enrollment at the council’s 102 member schools grew 71 percent between 1990 and 2004, and Corts said he doesn’t foresee that many of its schools will be closing.

He adds, however, that school closures may be difficult to predict because, “Nobody knows what the ultimate extent of this whole financial crisis is going to be.”

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College Students May Be Sheltered From Down Economy, for Now

Student Loan Girl — Fri, 14 Nov 2008 22:01:00 GMT

Regardless of how long the economy remains in crisis or whether or not this crisis becomes a recession, the effect on students will likely be minimal, at least in the short-term, says Fred Ruppel, economics professor at Eastern Kentucky University (“Student Body May Be Safe From Economic Crunch for Now,” The Eastern ProgressOnline, Nov. 6, 2008).

“Students should be well insulated,” Ruppel told The Eastern ProgressOnline, especially financially independent students who tend to finance their college education with student loans or rely on financial aid to pay for school. “The best place to be during a recession is in school.”

Ruppel points out, however, that students who rely heavily on their parents for financial support could be adversely affected by the downturn in the stock market, now that families’ portfolios may have taken a hit.

Jay Adkins, a sophomore at Eastern, still fears that the $700 million government bailout may be a sign that financing for education is in trouble. “If Freddie Mac and everything else is falling apart in the market, who knows if my student loans are going to be secure?”

Ruppel refutes Adkins’ concerns that the credit crisis will significantly impact student loans any time soon, but he says it may make getting a car loan more difficult for first-time buyers, which could be particularly problematic for students who rely on automobile transportation to get to school. “There’s less money for loans, with a lot more qualifications,” he said.

However, Ruppel does caution that the longer the economy falters, the more it will impact students and graduates. Whitnee Centers, a junior at Eastern, says while gas prices have declined, making her commute cheaper, less people are eating out, and, as a server, her tips are currently down 20 percent.

The economic crisis may have the greatest long-term impact on college graduates, Ruppel says. If the economy fails to create jobs, graduates may begin their professional career with bleak job prospects.

Adkins says, “If my parents know people who are getting laid off and are losing their jobs, who knows what jobs there will be available when I graduate?”

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Paying for College Gets More Challenging For Families

Student Loan Girl — Thu, 23 Oct 2008 00:42:00 GMT

Paying for college definitely isn’t getting any easier.

“It just seems like it’s really hard, because it is,” says Diana Jacobs, a mother of twin, college seniors, whose husband recently lost his job, forcing the family to go from borrowing modestly to maxing out their student loan amounts (“In Downturn Families Strain to Pay Tuition,” The New York Times, Oct. 16, 2008).

To meet her sons’ college expenses this year, Jacobs pressured the twins’ schools to increase their financial aid offers — each school offered $3,000 more in aid. And for the first time, Jacobs told her sons that she wouldn’t be able to assume their student loan debt, leaving the twins to take out their college loans in their own names.

“We all came to that consensus, but I hate it,” Jacobs said. “I hate for them to come out of school with $20,000 in student loans.”

The Jacobs family is not alone. The current economic conditions have made it even more difficult for families to afford the continually rising cost of college: unemployment is rampant, the cost of living is increasing, and home values are declining, making it more difficult for families to get home equity loans to help fund college expenses.

Slow Economy Causing Widespread Financial Challenges

Economic times have become so challenging that a recent survey of nearly 3,000 parents found that 62 percent of families plan to use student loans to help pay for college expenses this year, up from 53 percent just a year ago, according to Fidelity Investments’ College Savings Indicator.

The survey also revealed that parents may meet only 21 percent of the total cost of their children’s college education this year, down from 24 percent last year.

Families’ financial challenges have led to a 10-percent increase in financial aid applications this year. Aid administrators are concerned that this increased demand for federal financial aid — from 12.3 million applications last year to 13.5 million this year — may be too much for the government and schools to handle, now that more than 100 private, third-party lenders, citing reduced profit margins and increased difficulty finding investors, have left the federal student loan program.

Making the federal financial aid problem worse, states are facing widespread budget shortages and cutting back on the financial aid funding they give to colleges and universities, and schools’ own financial aid funds are dwindling due to disappointing returns on their endowments.

The economic downturn has also forced private student loan lenders who offer credit-based private student loans, which help families fill the gap between federal financial aid and the total cost of attendance, to rapidly adapt to changes in the credit markets. In recent months, these lenders, to avoid having borrowers default on their loans, have tightened their credit criteria, causing students who had previously borrowed on their own to need cosigners this year.

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

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

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

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

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

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

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

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

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