Archive for ‘financial aid’

March 4, 2015

Can we afford this college?

by Grace

One of the most basic questions during the college planning process is often one of the hardest for a family to answer.

Can we afford this college?

The hard part is usually not in knowing what you can afford to pay, but in trying to find what the net cost of attendance will be for your child.  Here’s a three-step process that may help you answer this question.

  1. Run the Net Price Calculator
  2. Check the college website to find answers to the College Board “dirty dozen” questions
  3. Contact the school’s financial aid administrator


1.  Run the Net Price Calculator (NPC)

The NPC is an online tool that is a useful first step in comparing affordability.  Every college website has a calculator, which typically requires entering family financial information such as income and assets before the estimated net price of attending is generated.  Remember, this is an estimate and may not produce accurate results for business owners and other situations.  Proceed with caution, and check for online resources like the CollegeBoard tip sheet to help in the process.

2.  Check the college website to find answers to the College Board “dirty dozen” questions

A list of 12 questions to get you started on gathering information about a school’s financial aid policies is provided by the CollegeBoard.  In my experience, the answers to most of these questions can usually be found on college websites.  Going through these questions often prompts families to consider other important questions about college costs.

3.  Contact the school’s financial aid administrator

Okay, so not all your answers about costs and financial aid were easily found on the college website or other online resources?  Contact the college’s financial aid office and get the information directly from them.  They should be able to give you information rather quickly, and if they don’t it might be an indication of how transparent and helpful they are in other situations.

For organized families, it’s not a bad idea to create a spreadsheet that can capture important information and allow for efficient comparisons.

February 26, 2015

Student loan defaults are the only type that continue to rise

by Grace

Americans are having more trouble paying off their student loans than their mortgages or any other type of debt.

As student debt balances continue to grow . . .

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. . .  student loan defaults have overtaken those for all other types of debt.

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America’s total student loan debt is now nearly $1.2 trillion. One reason the burden is difficult to pay off, Fed researchers wrote: “Student debt is not dischargeable in bankruptcy like other types of debt … Delinquent or defaulted student loans can stagnate on borrowers’ credit reports.”

The number of student borrowers almost doubled over ten years.

The surge is fueled by more people borrowing — and borrowing larger amounts. The number of borrowers rose 92 percent between 2004 and 2014, according to the Fed researchers. The average student loan balance grew 74 percent.

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Danielle Paquette, “Americans are having more trouble paying off their student debt than their houses”, Washington Post, February 19, 2015.

February 25, 2015

Are we seeing a ‘big quasi-bailout’ for student loan borrowers?

by Grace

The Obama administration projects that the increased use of student loan forgiveness programs will cost taxpayers $22 billion next year.

… Primarily because of the recent growth in enrollment in the program, projected long-term revenues from the federal direct student loan portfolio were reduced by almost $22 billion compared with the best guess from the previous year….

This looks like ‘a big quasi-bailout’

That’s a big quasi-bailout, increasing the deficit nearly 5 percent. The White House budget office was unaware of any larger re-estimates since the current scoring rules for credit programs went into effect in 1992. As a January Politico Magazine feature on the government’s unusual credit portfolio reported, the Federal Housing Administration has stuck more than $75 billion worth of similar re-estimates onto Uncle Sam’s tab over the last two decades, most of them after the recent housing bust led to a cascade of FHA-backed mortgage defaults. But it’s never had a one-year shortfall quite as drastic as this.

Borrowers are made out to be innocent victims of “circumstances beyond their control”.

Regardless of which accounting method is used, the federal government is expecting to write off billions of dollars in future student loan balances under the program in order to reward public service employment and protect borrowers from economic circumstances beyond their control.

It’s not as if a student loan bailout should come as a surprise.  Here’s a question from 2011.

Is a student loan bailout inevitable?

20110913.COCCollegeLoanGrowth

Seeing the trend lines, Mark Gimein wrote this four years ago.

Eventually both private lenders and the government will be on the hook. The government has already moved to ease some loan terms. It will need to find more, especially for those snookered into paying for degrees worthless in the job market. The private loans, meanwhile, will simply blow up. We may as well start figuring now how graduates, taxpayers, lenders, and schools will split the bill.

Taxpayers just took on $22 billion, and there’s probably more to come.

Related:  “Politicized federal student loan program bails out ‘deadbeats’”

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Kevin Carey, “Flip Side of Reducing Student Debt Is Increasing the Federal Deficit”, New York Times, February 10, 2015.

Michael Grunwald, “The College Loan Bombshell Hidden in the Budget”, Politico,  February 05, 2015.

February 23, 2015

Student loan defaults are most common among those with lowest balances

by Grace

It’s borrowers with the smallest balances that are most likely to default on their student loans.

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College dropouts are more likely to default.

… One likely explanation, offered by the New York Fed researchers, is that many Americans with small loan balances are dropouts. They may have attended school for a semester or two without getting a degree. They often don’t end up with the decent-paying job that a college education is supposed to bring, and thus lack the income to repay their debt.

Another possibility is that low-balance borrowers attained credentials such as certificates that don’t lead to the kind of jobs and salaries that a bachelor’s degree does.

A larger loan balance usually indicates a graduate degree, a credential that generally correlates with a higher salary.

By contrast, many borrowers with large loan balances are people who graduated from master’s programs and professional schools—doctors, lawyers—who typically end up with generous salaries. (We said typical, not always. There are plenty of struggling lawyers.)

High earners disproportionately take advantage of income-based repayment programs that shift part of their loan burden to taxpayers.

So while they have the biggest debts, they’re getting the actual returns on their investment and thus are in position to repay their loans. They also may be the most likely to enroll in income-based repayment programs, which many academics say disproportionately benefit high earners.

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Josh Mitchell, “Who’s Most Likely to Default on Student Loans?”, Wall Street Journal, Feb 19, 2015.

February 19, 2015

Do kids only need ‘college’ because high schools are failing?

by Grace

Amy Otto believes the Obama administration’s overall push for more school before and after K-12 is a way to avoid solving the real problem”.

The “real problem” that needs urgent attention is K-12 education, but President Obama proposes “to spend money on preschool or community college instead of substantive reform of K-12″.

Do Kids Need ‘College’ Because High Schools Aren’t Doing Their Job?

Mandating “free” thirteenth and fourteenth grades via community college should make one wonder what is going wrong in tenth through twelfth grade that makes two more years of de facto public school now necessary. Only increasing opportunity can reduce poverty. More “free” preschool or thirteenth grade only serves as palliative care for those in poverty. These programs don’t spark real change, as demonstrated from studies from Obama’s own administration. It’s a tacit admission from Democrats that their goal is not to eliminate poverty but to paper over it with politically charged policy. In fact, what would animate the Democratic Party if poverty were significantly reduced? They much prefer the self-satisfaction of saying they care without ever having to produce results. If no one were poor, whom would they have to feel superior to?

That’s the problem Democrats won’t be addressing any time soon and it’s the one that deserves this nation’s attention. Institutionalizing children earlier and longer won’t lead to more creativity and innovation, which are the real stimulus of economic growth. Real-world experiences—whether it play when young or entry-level jobs when they’re teens—are being taken off the table while politicians mandate more isolation and testing within the confines of public school. Don’t fall for the bait and switch. It’s time to tackle the real challenge that we are already paying too much for universal education and getting diminishing returns.

Even though Head Start produces no long-term benefits, Obama pushes for more of the same.  His recent idea of “free” community college only emphasises the failure of our existing K-12 system to produce competent graduates.

… More “free” preschool or thirteenth grade only serves as palliative care for those in poverty. These programs don’t spark real change, as demonstrated from studies from Obama’s own administration….

Otto offers only vague ideas for alternative solutions: more real world experiences in the form of less structured child care and entry-level jobs for teens.  Those may be helpful, in theory at least.  Actually implementing them successfully is a whole other challenge.  Poor single parents are not easily trained to properly nurture their children and jobs are not instantly created by government dictum.  But if Otto’s ideas are not the best solutions, then “free” preschool and college certainly also fail the test for the best use of taxpayer money.

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Amy Otto, “President Obama Pushes Pre-K And ‘Free’ College Because He’s Got Jack For K-12″, The Federalist, January 23, 2015.

February 11, 2015

‘master’s degree is the fastest-growing college credential’

by Grace

Master’s degrees are “as common now as bachelor’s degrees were in the 1960s”.

More than 16 million people in the US — about 8 percent of the population — now have a master’s, a 43 percent increase since 2002.

20150209.COCGrowthOfMasters

 

Forty years ago education was far and away the most popular major for a master’s degree, but today business has taken that spot.

20150209.COC1971PopularMasters  20150209.COC2012PopularMasters

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Are graduate programs exacerbating the student debt problem?

… The typical total debt for a borrower with an undergraduate and graduate degree is now more than $57,000, up from $40,200 in 2004. (This includes medical and law degrees.)

40% of all student debt comes from graduate degree programs,“even though graduate borrowers make up only 17 percent of all borrowers”.

Expanded loan forgiveness programs are “tailor-made for graduate students”.

Students who took out big loans for graduate school and those with higher incomes stand the most to gain financially under President Obama’s expansion of the federal government’s loan forgiveness program.

Lawyers, doctors and other highly trained professionals who utilized federal loans throughout their post-high school education could walk away with most or all of their graduate school debt forgiven by the federal government under the program, say experts.

Graduate students usually get their money’s worth.

… Almost regardless of undergraduate major, a graduate degree boosts earning power even further, according to the Georgetown Center on Education and the Workforce.

But does this proliferation of master’s degrees produce wasteful credential inflation?

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Libby Nelson, “Master’s degrees are as common now as bachelor’s degrees were in the ’60s”, Vox, February 7, 2015.

Susan Ferrecho, “The surprising winners of Obama’s student-loan program”, Washington Examiner, June 12, 2014.

January 21, 2015

Another reason to avoid student loans

by Grace

Level of student debt burden, not choice of school, is the biggest predictor of a college graduate’s well-being.

Last year Gallup surveyed over 30,000 college graduates to learn how well they were doing.

For the most part, the type of school has little correlation with well-being.

… It asked graduates how they were doing across five different metrics, including financially, physically and socially. Eleven percent of graduates of public universities and private universities said they were “thriving” across all five. Twelve percent of graduates of U.S. News & World Report’s top 100 schools were thriving, essentially the same as the rest.

20140120.COCWellBeingTypeSchool2

But student loans can cripple well-being.

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The biggest predictor of whether a graduate wasn’t thriving was whether he or she had student loans. Fourteen percent of those without any debt said they were thriving, compared to 2 percent of those with more than $40,000 of debt. You can’t draw iron-clad conclusions from that, but those figures should be worrisome all the same for anyone thinking about taking on student loans.

Takeaway lessons:  Going into debt to attend your “dream” school may be detrimental to your well-being.  Private school may not be worth the extra money.

ADDED:

These are the five elements of well-being that were measured in the Gallup survey:

Purpose Well-Being: Liking what you do each day and being motivated to achieve your goals

Social Well-Being: Having strong and supportive relationships and love in your life

Financial Well-Being: Effectively managing your economic life to reduce stress and increase security

Community Well-Being: The sense of engagement you have with the areas where you live,

liking where you live, and feeling safe and having pride in your community

Physical Well-Being: Having good health and enough energy to get things done on a daily basis

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Max Ehrenfreund, “Private colleges are a waste of money for white, middle class kids”, Washington Post, December 18, 2014.

January 20, 2015

Student loan forgiveness is rising, with taxpayers paying the tab

by Grace

More student loan borrowers are getting a break as taxpayers take over repayment of their debt.  The administration’s policy on this matter is described by the Wall Street Journal:

First encourage more student debt, then promote nonpayment.

One of the slow-rolling and under-reported government debacles is the rising amount of student-loan debt that is guaranteed by taxpayers and will never be repaid. Thanks to the federal takeover of the student-loan market in 2010, the Education Department now stands behind more than $1 trillion in outstanding debt. Less well known is how the same federal government that has promoted and subsidized this debt is also scheming to make sure it doesn’t have to be repaid.

Income-based repayment programs are one way for borrowers to shift responsibility over to taxpayers.

So-called income-based repayment programs reduce a borrower’s monthly payments and then forgive the remaining principal after a period of years. Graduates who choose the nonprofit and government jobs favored by the President can have their loans forgiven entirely after 10 years.

Participation in expanded government debt relief plans has doubled over the last year.

The Obama administration greatly expanded benefits under income-based repayment plans in recent years and has launched efforts to promote them. Enrollments are growing rapidly and now stand at an all-time high. Some 24% of Federal Direct Loan Program balances ($115 billion) that have come due are enrolled in the two most generous plans, Income-Based Repayment and Pay As You Earn. That is up from 14% a little more than a year ago. The number of borrowers using the plans has doubled over that time, to 2.2 million.

At the same time, default rates are trending upward.  This at a time when the economy is supposedly improving.

Student loans are promoted for everyone, regardless of qualifications.  And loans are being made easier “not to repay”.

This all makes sense, however, when you realize that the student-loan program has been designed to achieve two political goals: Loans should be available to any student, at any school, pursuing any credential; and student debt is bad and burdensome, so it should be easy for borrowers not to repay.

Based on these goals, the program is performing quite well for students and the institutions whose coffers swell under such loose lending standards. Loan issuance has grown rapidly in recent years while repayment rates have declined steadily. From the perspective of the taxpayers who must ultimately finance these liabilities, however, the federal student-loan program is performing badly and steadily getting worse.

Here is another prediction that IBR schemes “will dramatically increase in 2015″.

Use and availability of income-based repayment (IBR) schemes, which set repayment expectations at a set percentage of the student borrower’s post-college income, will dramatically increase in 2015. This is because policymakers have narrowly defined the student debt problem as a problem of student borrowers struggling to keep up with payments (i.e., avoid default). Therefore, setting payments at a more affordable level would seem to resolve the problems student debt creates….

William Elliott III
Founding Director of the Assets and Education Initiative at the University of Kansas, School of Social Welfare and an expert on student debt

Meanwhile in New York, Gov. Andrew M. Cuomo will propose new legislation to forgive the student debt of thousands of college graduates.

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“Your Taxpayer Tuition Bill”, Wall Street Journal, Dec. 30, 2014.

Jason Delisle, “The Hidden Student-Debt Bomb”, Wall Street Journal, Dec. 30, 2014.

NPR Ed Team, “Kindergarten Entry Tests And More Education Predictions for 2015″, NPR, Jan. 3, 2015.

Kate Taylor, “Cuomo to Offer Plan to Cut College Graduates’ Debt”, New York Times, Jan. 3, 2015.

January 19, 2015

Completing the FAFSA

by Grace

Students and parents often find the Free Application for Federal Student Aid (FAFSA) to be a little intimidating. The form asks more than 100 questions about family finances and demographic details. The FAFSA is slightly more complicated than the typical federal income tax return. Officially, the form should take less than an hour to complete, but most parents don’t have advanced degrees in economics. Some parents want help completing the FAFSA, because they worry that making a mistake on the FAFSA will affect their ability to pay for college, ruining their child’s life forever.

Don’t panic! Take a deep breath. Relax.

Edvisors offers an online Step-by-Step FAFSA Tutorial

… This step-by-step guide provides a tutorial overview of completing the Free Application for Federal Student Aid (FAFSA). It is based on the bestselling book, Filing the FAFSA.

The book is available for free download at the link.

The Federal Reserve Bank of St. Louis offers a video that guides you through completing the FAFSA.

FAFSA 101
Take a stroll through each screen of the online FAFSA to see what information you’ll need on hand to complete the application quickly and accurately.

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January 16, 2015

Temple University automatic merit scholarships

by Grace

Temple University, a large, public college in urban Philadelphia ranked 121 on the US News list of National Universities, offers automatic merit scholarships based solely on grades and test scores.

The most generous award is the President’s Scholars, which offers full tuition plus $8,000 in stipends for approved “study abroad, research, internships or other summer academic activities”.  Freshmen qualify with the following criteria:

High-school GPA ≥ 3.8
SAT CR + Math ≥ 1420
ACT Composite score ≥ 32

Four other scholarships are available, as outlined in the table below.  About 40% of entering freshmen receive academic scholarships, and any student with a GPA of at least 3.0 and SAT score of 1150 will receive some level of merit aid.  2015 fall tuition and fees for a 12-hour semester at Temple University are $14,130 for Pennsylvania residents and $24,350 for out-of-state residents.

 

FALL 2015 FRESHMAN ACADEMIC SCHOLARSHIPS AT TEMPLE UNIVERSITY

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