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.

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The New Financial Aid Landscape

Student Loan Girl — Sat, 26 Apr 2008 19:41:00 GMT

In the last few months, the media has been drawn to the potential student loan crisis, focusing on how students will be able to weather accessibility issues to get the funds they need for college next fall.

At the same time, many of the country’s top colleges and universities have been revamping their financial aid programs to better assist parents and students in covering their college costs.

Schools Modifying Financial Aid Programs

To date, about 50 schools have made substantial changes to their financial aid programs, writes Anne Marie Chaker of The Wall Street Journal (“The New Math of College Financing,” April 21, 2008).

Several schools have chosen to replace student loans with grant money that won’t need to be repaid, effectively lowering their tuition. Others have waived tuition costs altogether for families that fall below a specific income. Some have capped the amount of money a family is required to contribute toward college costs at a certain percentage of the family’s yearly income.

Student Loans Being Replaced with Grants

Undergraduates attending Stanford, Dartmouth, Harvard, M.I.T., Yale, or Cornell next fall now have a better chance of graduating with less debt from student loans, thanks to a significant shift in the financial aid programs at these schools.

Under pressure from Congress, with legislators questioning growing student debt levels and skyrocketing tuition costs that outpace inflation even as the wealthiest schools report endowments of $500 million or more, colleges and universities with sizeable endowments are tapping into those endowments to replace student loans with grants in their financial aid awards.

Although Harvard is using grant awards to eliminate student loans from its financial aid packages entirely, other schools are reserving these loan-replacement grants for families at qualifying income levels, Chaker notes.

Cornell, for example, in the 2009–10 academic year, will only replace student loans with grants for families making less than $75,000 annually. (The threshold was $60,000 for the current school year.) Students from families earning between $75,000 and $120,000 a year may still be awarded student loans, but those loans will be capped at $3,000 for 2009–10.

Tuition Waivers for Middle-Income Families

A handful of the nation’s top schools have also implemented programs that eliminate tuition charges completely for middle-income and even upper-middle-income families, with qualifying income levels as high as $100,000.

At M.I.T. and Dartmouth, families who make less than $75,000 a year will be able to send their children to college at zero tuition cost (although they may still have to cover room and board, books, and other living expenses). At Stanford, the income cutoff for a tuition waiver is $100,000 (with assets typical for that income level).

Family Contribution Capped Even for $100K+ Incomes

Last year, Harvard announced “one of the most ambitious [financial aid] plans out there,” writes Chaker, allowing families earning between $120,000 and $180,000 a year, with standard corresponding assets, to put just 10 percent of their annual income toward their child’s cost to attend — in other words, paying only between $12,000 and $18,000 of the 2008-09 sticker price of roughly $50,000.

Yale followed on Harvard’s heels with its own 10-percent policy that went even further up the income bracket, applying to families who make up to $200,000 a year.

As part of these new financial aid plans, both Yale and Harvard require that students contribute between $2,500 and $4,000 of their own funds, earned through a part-time or summer job or both, in addition to their parents’ 10-percent contribution.

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Student Loan Blog : tuition waivers

Despite Down Economy, College Student Aid Still Thriving

The New Financial Aid Landscape