December 15, 2009
Students who are interested in applying for private loans may soon see the process changing. The House of Representatives passed consumer protection legislation last week that would further regulate private student loans, ensuring that students interested in borrowing them are aware of rates, federal alternatives, and borrowing limits at their school.
The bill moves to further regulate Wall Street in the wake of the credit crisis and ensuing economic recession, and also creates a consumer financial protection agency that's responsible for overseeing consumer credit such as credit cards, mortgages, and other bank loans. An amendment introduced by Democratic Representative Jared Polis of Colorado ensures that private loans to students are also included under this umbrella, and sets up additional rules that lenders and colleges must follow in issuing and certifying private loans.
Under this legislation, all private loans will have to be certified by a student's college, verifying the student's enrollment and the amount he or she can borrow. Before a school can certify a private loan, it must also inform the borrower of the availability of federal student financial aid. This builds on rules that will go into effect in February that state that students must be informed of interest rates and repayment terms up front by banks, and must certify that they have been informed of federal student loan options.
Effectively, it puts an end to direct-to-student private loans, which students can borrow without even informing the financial aid office, and which can be taken out for more than the student's cost of attendance for the academic year. With rising student loan default rates, risky loans like these have increasingly come under fire. These loans can be a quick way for students to find themselves in excess debt, as they make it easy for students to borrow more than they need to pay for school without having to investigate alternatives first.
The bill still needs to pass the Senate and be signed by the President before it can be enacted. Whether the Senate introduces language similar to the Polis Amendment remains to be seen, as it's unlikely financial legislation will be debate until after they finish with healthcare.
December 16, 2009
A report released today examines what policy makers should be paying attention to when crafting educational policies that benefit all college students. The report also comes to the conclusion that many decisions regarding Latinos in higher education are based on misconceptions about that student population.
The report, "Taking Stock: Higher Education and Latinos," was put together by Excelencia in Education, an organization that looks at racial and ethnic trends to identify where the need exists for more effective educational policies. The Lumina Foundation for Education, Jobs for the Future, the Congressional Hispanic Caucus Institute (CHCI), and the National Association of Latino Elected and Appointed Officials (NALEO) supported the report.
In a preview of the report earlier this week, The Chronicle of Higher Education described conversations at a panel discussion on Monday morning with the report's authors and leaders from a number of Hispanic organizations. The panelists suggested that public policy is based less on facts and more on stereotypes that define Latinos as an immigrant population with high drop-out rates. A majority of Latinos, however, are native-born and want to succeed in higher education.
Other highlights of the report include the following:
According to the National Center for Education Statistics, the number of Hispanics enrolled in college rose from 20 percent in 1996 to 24 percent in 2006, a greater increase than seen among white students. Still, Hispanic students are still lagging behind other groups when it comes to college admission, retention and graduation rates. Studies looking into that attainment gap suggest that while most Hispanic students believe in the value of a college degree, their educations may be cut short for a variety of reasons. In data released in October by the Pew Hispanic Center, about 74 percent of respondents said they had to leave school because of personal and family responsibilities. Others said poor English skills hampered their ability to keep up with the rigors of college, and even high school. About 40 percent said it was just too expensive to go to college.
All minority students should know there is help out there when it comes to funding your education. Scholarships for minorities are the most common student-specific awards out there, and minority students are eligible for funding from not only the federal government, the state, and their intended colleges, but outside organizations that aim to diversify college campuses. Try conducting a free scholarship search to find not only Hispanic scholarships, but scholarships based on a myriad of criteria specific to you.
December 30, 2009
A recent Scripps Howard News Service article looks at one government job you may be surprised you don't need a college degree for. According to the Congressional Research Service, 27 House members, one senator, and two governors are currently serving without college degrees.
The article claims this is great news, considering the history of the position. Just 30 years ago, Congress had at least 48 representatives and seven senators without college degrees. Historians point to the idea that a college degree is becoming increasingly relevant for the position, which currently only requires U.S. citizenship and a number of years of residency in the state a politician is running in.
That shouldn't come as a surprise, right? We want our lawmakers to be educated. Do you know if your Congressman or Congresswoman holds a college degree? Considering the number of bills moving through Congress now related to college students' financial aid options and student lending practices, a college campus experience could be especially beneficial.
According to the article, the degree-less lawmakers defend themselves by saying they came up in a different era, when it was more beneficial to have a background in labor-intensive professions. In certain constituencies across the country, it may also be more useful to come from a farmer's background than an Ivy League one to better serve the communities those lawmakers look to represent. "They put their pants on the same way I put my pants on," Rep. Solomon Ortiz, a Democrat representing Texas' 27th District, was quoted as saying in the article about the difference between lawmakers with and without college diplomas. Ortiz joined the Army as a military officer to help support his migrant family, eventually becoming a sheriff when he returned home. Rep. Steve King, an Iowa Republican, ran a construction business for 28 years in Western Iowa before pursuing a Congressional seat.
According to the Congressional Research Service, the more educated Congressional lawmakers include 169 House members and 57 senators with law degrees, 83 House members and 17 senators with master's degrees, 16 doctors, six former Peace Corps participants, and five accountants. A more educated Congress also reflects the national trend. The percentage of people 25 and older with bachelor's degrees has increased from 4.6 percent to 28.7 percent between 1940 to 2007, according to the National Center for Education Statistics.
December 31, 2009
A lot has happened in the last twelve months. We inaugurated a new President, weathered a recession, and obsessed over and forgot hundreds of minor crises and scandals. College students and recent graduates have marked all these events, and have very likely also noticed some pretty sweeping changes in their financial situations. Here are a few of the most memorable.
At the start of the year, President Obama encouraged more Americans to enroll in college, calling for the U.S. to again lead the world in college attendance by 2020.
The recession also motivated more students to go back to college, especially community colleges. Enrollments surged at two-year schools across the country. State colleges also saw increases in applications and enrollment. Along with this, financial aid applications were up in 2009, as were aid appeals.
Colleges and universities searched for creative ways to cope with the recession and the accompanying booms in enrollment and financial aid applications. Several community colleges added late night classes and many public and private colleges boosted their financial aid offerings to assist needy students.
Federal aid also underwent significant changes. Revisions to the Higher Education Act went into effect, as did new and renewed economic stimulus legislation. Pell Grants went up, as did Stafford Loan borrowing limits. The Income-Based Repayment plan premiered, guaranteeing college graduates affordable federal loan payments, and a new public service loan forgiveness program.
Veterans' benefits were reworked in 2009, as well, and the resulting backlog of applications had students waiting weeks or even months to receive the money they needed to pay their tuition and their bills. Once the bugs are worked out, though, veterans will see an expansion of their college benefits, and in the meantime, veterans were able to receive emergency payments to help them get by.
States also received much needed cash from the government to help them minimize cuts to education while they dealt with budget crises. However, several states had to make cuts to education budgets, including state aid and loan repayment programs. California made some of the most sweeping budget reductions and the state's university systems were forced to cap enrollment and hike tuition over 30%.
As we look toward 2010, more changes appear to be underway. Congress is (still) considering changes to federal loan programs and the creation of a consumer financial protection agency, and recently passed credit card legislation will soon go into effect. States and colleges are still struggling with fallout from the recession and may alter their financial aid offerings more in the next year.
January 5, 2010
It's January, which means it's time to start thinking about completing a new FAFSA (Free Application for Federal Student Aid) for the 2010-2011 school year. This can be a long, complicated process for parents and students, but the Department of Education has begun taking steps to make the form easier to complete.
In a presentation to high school students and school counselors in Washington, DC today, Education Secretary Arne Duncan and other officials demonstrated the 2010 FAFSA, which went online January 1. While the paper form remains roughly the same length, at 107 questions, changes have been made to the online application to allow applicants to skip several questions that don't apply to them. A few other changes have also been made to make the website easier to navigate and the form easier to complete. These steps will hopefully speed up students' application processes and reduce confusion.
Progress is also being made on syncing the FAFSA and tax information from the IRS. In late 2009, the Department of Education announced that beginning in 2010, some students would be able to access a new tool that would allow them to import their 2008 tax information into a 2009-2010 FAFSA. The tool is expected to go live later this month, with work continuing on making the feature available to everyone.
According to Nextgov, one of the main barriers still remaining is a conflict between state FAFSA deadlines and the dates 2009 tax information will be available on the IRS website. Currently, previous year tax information goes online in the middle of the year, after many state deadlines have passed for FAFSA filing. The Department of Education and the IRS are working to find a solution to this problem to make the data transfer tool more widely useful. Other tweaks are likely to be made once the pilot program gets underway.
Legislation currently in Congress may further simplify the FAFSA by eliminating additional questions that many deem unnecessary. While the financial aid application process is likely to remain long and complicated for the foreseeable future, concrete steps are being taken to make it shorter and simpler, and it appears the movement is gaining momentum.
January 8, 2010
As January gets underway, college students across the country are waiting eagerly for that spring financial aid disbursement. While a variety of students will encounter processing delays and unexpected errors this spring, one group may be particularly likely to see problems: student veterans.
The Post-9/11 GI Bill, which went into effect August 1, offers expanded education benefits to veterans who have served their country since 2001. GI Bill benefits include money for tuition and fees, a stipend that covers living expenses, and the option of transferring education benefits to their family members. However, many veterans who applied for this aid faced a months-long backlog in processing as the Veterans Affairs administration struggled to develop and streamline procedures for handling the new claims.
The delay caused a variety of problems for over 68,000 veterans who applied for the new GI Bill benefits in the fall. Over 26,000 veterans were still waiting for checks at the end of the fall semester, and thousands are still waiting to receive their first check. The VA issued emergency advances of $3,000 in October to veterans still waiting for their first disbursements, but for many that money ran out long before benefits checks arrived.
Some students have had to put tuition or food and rent on credit cards, while others faced problems stemming from still owing their universities for fall tuition. While schools pledged not to drop veterans with unpaid bills, some have prevented veterans from receiving their transcripts and diplomas or registering for spring semester while waiting for benefits checks to arrive, according to the Associated Press.
As of late December, the VA reported a remaining backlog of only 5,000 claims, but an Army Times story lists the number of pending claims as of January 4 at 48,000, many of which are for spring semester. Given the popularity of the bill and the continued delays, members of Congress have begun exploring ways to simplify the procedures for processing GI Bill benefits claims. In the meantime, the VA has pledged to have all claims received by January 15 processed by February 1, but given the number of pending claims and the speed at which processing moved in the fall, veterans may once again find themselves waiting months to receive their financial aid.
January 27, 2010
Immediately on the heels of an announcement that President Obama would be calling for additional assistance to college graduates struggling to repay student loans, the administration also unveiled a proposal to hold federal discretionary spending to current levels for the next three years, a move that could potentially have serious implications for colleges and students.
Currently, most federal education spending, including student financial aid, is discretionary, not mandatory, so it would fall under the umbrella of the budget freeze. This makes it possible that students will see limited increases to federal grants, work-study, and subsidized student loans in the coming years. The White House has pledged to make education a funding priority, but with states and colleges also struggling financially, it’s quite possible that financial aid programs will see an end to the boost in financial support they’ve received in the last few years.
It’s possible one federal aid program, at least, may be spared from the budget freeze. Last year, President Obama proposed making the Pell Grant an entitlement, putting it in the category of Medicare and other programs that would be exempt from the budget freeze, but the bill to do so still has not passed the Senate. If the bill passes, Pell funding will be mandatory and increases in Pell Grants will be tied to inflation, guaranteeing students a small, but steady, increase in available aid. If not, it’s up to Congress to allocate limited resources for any increases in grant amounts, and with increases in the numbers of college attendees, applications for financial aid, and Pell Grant recipients, it may be all Congress can do to hold funding levels steady for the next three years.
As details of federal and state budgets emerge, and emergency legislation that temporarily boosted funding to schools and student aid begins to be revisited and possibly phased out, exact changes to college funding will become clearer. Already, though, many families are finding paying for college increasingly challenging, even with the aid of college scholarships and grants. There’s a possibility that a federal budget freeze could mean that students in the next few years will see a situation similar to the one that faced students at the start of the last decade, where tuition increased rapidly while federal aid held steady and more and more students came to rely on private student loans.
February 19, 2010
New regulations that the federal government hopes will protect college students from excessive credit card debt by making it more difficult for young people to open multiple lines of credit go into effect Monday. The regulations, which fall under the Credit Card Accountability Responsibility and Disclosure Act of 2009, were approved by Congress last May.
The key pieces of the act include the followin:
The regulations also included a strong suggestion to institutions of higher education that they provide education and counseling to students who may be struggling with credit card debt, or who may know little about managing credit card usage wisely.
Critics of the act since it was approved say that college students, who take on a slew of new responsibilities once they get on campus, should be treated as adults. For better or worse, students now are more apt to use credit cards to pay for their college expenses, and critics say they shouldn’t meet obstacles when using their credit cards for those costs. (According to a recent survey by student lender Sallie Mae, 84 percent of undergraduates have at least one credit card; 92 percent of those undergraduates use the cards toward college expenses. College students’ average balances are more than $3,100.) Some consumer advocates also say that while it's a good first step toward keeping students from incurring massive amounts of debt, it doesn't do enough, according to an article today in Inside Higher Ed. It fails to include any cap on the interest rate credit card providers can charge, for example.
We have a number of resources available to you about how to avoid credit card debt, make smart decisions about covering your college costs, and managing your money so that you're spending within your means. It may not mean much to you now, but it isn't all that easy to improve upon a credit score. The spending choices you make today will follow you down the line, so ideally, stick to one card if you need one, and if you find yourself in debt, pay off as much as you’re able to each month until you’re done.
March 12, 2010
To compensate for stalled negotiations on both health care legislation and a bill that would overhaul the country's student loan program and improve college students' access to federal aid, Democratic leaders proposed a solution yesterday that would move both of those hot-button issues forward—combine them, and pass them as one.
Both the comprehensive health care bill, which would guarantee health insurance to 30 million uninsured Americans, and the student loan bill, which would replace private lending with direct lending through the government and increase Pell Grant maximums, have faced opposition as Democrats work to pass both through Congress before the November mid-term elections. To kill two birds with one stone, Democratic legislators proposed bundling the two bills into one last night, not only to give the proposals a better chance at passage, but to keep them alive long enough for a vote by the full Senate and House.
An article in the New York Times yesterday describes the strong support a dual measure already has among the Democrats, suggesting that adding the student loan bill to the more expansive health care legislation would improve the health care bill's chances at passage. (Providing college students with more access to federal aid is undoubtedly more popular and less controversial than crafting a reasonable health care bill.)
The student loan bill had already passed in the House. Recent predictions have the government saving about $67 billion by going to direct lending; that new funding would go toward Pell Grants and other education programs. (A rise in the number of people attending college and seeking aid in the weak economy has raised the projected cost of new Pell Grants to $54 billion from $40 billion, according to the New York Times.) The student loan bill has been a consistent goal of President Obama's, as lenders have come under fire for a lack of oversight, rising student loan default rates, and contributing to excessive debt among college students. Effectively, the bill would put an end to direct-to-student private loans, which students can borrow without even informing the financial aid office, and which can be taken out for more than the student’s cost of attendance for the academic year.
The private student loan industry has obviously not been very supportive of the bill, and Republicans have questioned whether giving the government control over the student loan industry is really a wise choice.
May 14, 2010
July 1 marks the official date that colleges, if they haven’t already, must transition to the recently approved Federal Direct Loans Program. Schools will no longer offer students the option of having private banks or credit unions handle their federal loans; federal loans will now be coming directly from the U.S. Department of Education. Advocates of the student loan bill have said this will make the process more seamless and fair, with the government taking responsibility for keeping interest rates manageable. And private loans will still be available via the traditional channels, although those loans are typically offered at higher interest rates.
The student loan debate has been a constant in the world of higher education, as legislators and administrators look for ways to reduce the debt of graduates. This week, The Christian Science Monitor considered student loans in a different way. Is it ethical to send students out into the world with all this debt, especially when they may not be making enough in their chosen careers to pay back those loans in a timely fashion? Are student loans moral?
The Christian Science Monitor piece looks at the history of the student loan industry, questioning whether it was ever right for Congress to increase borrowing amounts to current levels, or to offer students described as “in need” much easier access to federal loans through the re-authorization of the Higher Education Act in the 1990s. According to the Project on Student Debt, student loan totals only continue to rise. The average national debt for graduating seniors with loans rose from about $18,650 in 2004 to $23,200 in 2008. Meanwhile, employment prospects have not increased at comparable levels; by 2009, the unemployment rate among new graduates hovered near 11 percent, the highest on record.
It isn’t just a case of telling college students not to borrow so much. Student loans are often a necessary evil, and while debt can be minimized some through scholarships and grants, most students will end up taking on some amount of debt. The Monitor questions whether there should be more strict limits on borrowers that exist in other scenarios where credit checks and expectations that borrowers will be able to pay back what they borrow are enforced. There is no guarantee of a job after college, after all, so why shouldn’t the fact that a student is unable to pay off more than the minimum on their credit cards be taken into account more when they take out loans? (On that note, the U.S. Senate has approved an amendment that would lower “swipe fees” that banks charge college bookstores when students use their credit cards for purchases.)
Student loans are a hot topic, and will continue to be. What do you think? What else can be done to reduce graduates' debt, especially among those graduates who are not entering high-paying fields?
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