Student Loan Blog : tuition increases

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.”

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

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

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.

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

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.”

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

College Tuition, Student Borrowing On the Rise In Down Economy

Student Loan Girl — Mon, 03 Nov 2008 08:50:00 GMT

A new report has found that last year’s increases in college tuition were more on pace with rises in the Consumer Price Index — the measure of the average price of consumer goods and services. But despite the relative steadiness of college affordability, students still received record amounts of financial aid and borrowed more in student loans, according to findings of the College Board’s 2008 Trends in Higher Education Series.

The 2008 Trends in College Pricing report, which covers this academic year’s college costs, found that while the CPI rose nearly 5.6 percent this year, the average in-state tuition and fees at public four-year institutions increased by 6.4 percent to $6,585. Average tuition and fees at two-year public colleges jumped 4.7 percent to $2,402, and increased 5.9 percent at private four-year colleges and universities to $25,143.

“College prices are doing what other prices are doing. They’re not going up more rapidly; they’re just keeping pace,” said Sandy Baum, a senior policy analyst for the College Board and a Skidmore College economics professor (“Downturn Expected to Drive Tuition Up,” The New York Times, Oct. 30, 2008).

Lagging Economy Could Spark Increased Demand for Financial Aid

The concern among education experts is that while tuition increases were milder and closer inline with the CPI this year, these numbers may already be out of date. Since the data was gathered before the economy began its downward spiral, students at both public and private institutions may be in for even larger tuition hikes and even more borrowing next year.

The current economic crunch has led many states to slash their higher education budgets. In order to compensate for the loss of state funds, public colleges and universities in more than 12 states have been forced to raise their tuition costs.

But the flagging economy hasn’t just affected state schools; private colleges and universities have had difficulties raising funds from private donors — their largest source of financing — and have had to push any increased costs onto students.

“Private colleges face a real quandary,” Baum said. “Everybody’s going to have more people applying for financial aid, and it could really be that they’re going to lose enrollment if they can’t meet the need.”

According to the 2008 Trends in Student Aid report, part of the College Board’s Trends in Higher Education Series, graduate and undergraduate students received more than $143 billion in federal financial aid last year, and borrowed $19 billion from state and private lending sources — figures that are expected to rise as the cost of college increases.

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

Students Protest, Struggle to Meet California Schools’ Tuition Increases

Student Loan Girl — Fri, 23 May 2008 16:24:00 GMT

For the sixth time in seven years, California’s 670,000 public university students will pay more to attend schools in the University of California and California State University systems, according to an article in the San Francisco Chronicle (“UC, CSU Move to Hike Tuition Amid Protests,” May 15, 2008).

News of the tuition increase was met with protest. Sixteen students were arrested for “unruly behavior” and removed by force during a UC Board of Regents meeting held at the University of California Los Angeles, after a regents committee voted 7–2 to raise tuition by 7.4 percent for the 2008–09 academic year, the Chronicle reported.

UC San Diego sophomore Gracelynne West told the regents she struggles to put herself through school. She holds two jobs at nearly 30 hours a week and has already borrowed more than $20,000 in student loans.

“It is hard to find time to be a student and focus on academics while struggling to stay in this university financially,” she told the committee.

The UC system tuition hike — which regents could increase to 10 percent if the state makes more budget cuts to education this summer— raises the annual cost of undergraduate tuition to $7,126 from $6,571.

Students attending CSU schools will definitely see a 10-percent increase this year, pushing the annual cost of undergraduate tuition to $3,048 from $2,772.

The two institutions have raised tuition every school year since the 2002–03 academic year, the newspaper reported, except for the 2006–07 academic year when the schools avoided an 8–percent tuition hike after the state Legislature provided additional government funding.

Both universities, writes Chronicle reporter Tanya Schevitz, endorsed tuition increases May 14 despite Gov. Arnold Schwarzenegger’s restoration of $98.5 million to the UC system and $97.6 million to the CSU system in his proposed state budget.

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

Wesleyan University Student-Pioneered Endowment First of Its Kind

Student Loan Girl — Mon, 05 May 2008 17:25:00 GMT

The student government at Wesleyan University in Middletown, Connecticut, has established an endowment that it hopes will eventually eliminate the $270 activity fee required of all students, writes Charles Proctor of The Hartford Courant (“Wesleyan Students Pioneer Endowment Fund,” April 27, 2008).

This endowment may be the first in the country where college students will be solely in charge of making the investment decisions — college administrators will serve in an advisory capacity only, offering guidance on what companies or funds to invest in.

The Wesleyan Student Assembly members hope that in successfully managing the endowment, the student organization will be able operate fully off returns on investment and do away with the student activity fee, which currently pays for the student government’s operations and helps fund other student organizations, Proctor writes.

Wesleyan Assembly President Matthew Ball, the endowment’s brainchild, admits it may take quite a long time to accumulate sizeable returns, but he says that putting the money to use is much better than allowing unused funds to languish, as they have in the past.

Ball hopes that using the endowment to help reduce students’ costs will send a message.

“If we create a way for us to be sustainable without the students having to pay money, it might suggest that universities can do the same thing, or at least look into ways for students to save money,” Ball told The Courant.

The endowment’s creation comes after tuition increases at the school of at least 5 percent for each of the past three years. Tuition is set at $38,364 next year, not including $10,636 to $12,088 in fees for room and board.

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