In our testimony to the Iowa legislature's Government Oversight Committee yesterday, we recommended that the state seek details on the rates charged to students by the Iowa Student Loan Liquidity Corporation, the nonprofit lender created by the state. Mark Kantrowitz, publisher of FinAid.org, agrees with us and suggests additional information that should be disclosed by lenders. He also dismisses nonprofits' claims that rate information should be kept secret:

"Ideally, I'd like to see lenders disclose the mappings from credit scores to their rate tiers and not just the tiers themselves. Add a FICO Score Range column to your table. The lenders insist that they cannot or will not do this voluntarily because it reveals competitive information. But it's really all about obscuring the mapping from borrower characteristics to rates. Yes, if lenders had to publish their tiering, there'd be more competition. But isn't that the point? If lender X knows that lender Y's cutoff for LIBOR + 2.0% is FICO 750, lender X can potentially undercut with LIBOR + 1.8% at FICO 760. By making the mapping opaque, they minimize the opportunity for competition. But, frankly, it also probably has a lot to do with making it harder for borrowers to shop around by forcing them to apply to obtain rate information. Lenders don't want clear information because student loans are a commodity, and if they let it behave like one, supply and demand will drive down prices."

"It's especially egregious when a state agency protests against releasing detailed pricing models for competitive reasons. What they're saying is that if they release the data, their competitors will be able to undercut them on price. Why is that a problem? Either it will force ISLLC to cut prices, or their borrowers will go elsewhere to get lower prices. Either way ISLLC's mission to enable students to pay for college is met. Of course, more likely ISLLC is not adequately aligning pricing with cost, profiting from some students to subsidize others, and so will be prone to price competition on them. But the real problem is you have agencies thinking about profits first and public benefit second."

Posted by bob shireman at 1:19 PM | Permalink

By strong bipartisan votes, the Senate and House of Representatives passed the College Cost Reduction and Access Act in early September. On September 27, President Bush signed the legislation. Public Law 110-84 includes a new Income Based Repayment plan modeled on our Plan for Fair Loan Payments. Along with the substantial increase in Pell Grants, this is the most significant step forward that we have seen in years. For more information, see our fact sheets: Key Provisions in H.R. 2669 and Fair Loan Payments.

Posted by bob shireman at 7:07 PM | Permalink

By Deborah Frankle, Research Analyst

The budget stalemate in Sacramento is about to have serious repercussions for new and returning college students in California. Approximately 266,000 students are expected to receive Cal Grants to help cover fees, books, dorm costs and other expenses, but the agency that administers the Cal Grant will not have the funds for the scholarships until--unless--the state budget is approved. And with classes starting in the next couple weeks, it looks unlikely that this will happen in time to help students with initial college expenses.

We contacted several financial aid offices throughout the state to see how colleges were handling this, and it appears that the approaches vary in the different segments. At the University of California and some campuses in the California State University system, the colleges are dipping into other resources to front the aid with no discernable difference to students, at least in the short term. At other CSUs, fees covered by Cal Grants are not an issue because the college can allow the student to pay later, when the Cal Grant money arrives. However, the $1,551 that helps pay for textbooks, room and board, and other educational costs will not be dispersed. And it looks like community college recipients, whose only state grant funds come from the books-and-rent portion of Cal Grant B, won’t be receiving any Cal Grant money anytime soon.

These Cal Grant B recipients will then be most affected by the budget crisis, and three out of four of them attend a community college (45% of all Cal Grant Bs) or a CSU (29%) – the systems with the least resources to help tide students over until grant money arrives.

We estimate that as many as 137,000 students in these two segments alone may be impacted by this situation. Recent high school graduates in this population have an average family income of $20,573 for a family of 4. Older Cal Grant B recipients are even needier, with an average family income of $14,322 for a family of 3.

These are not students who can simply make ends meet without the grants designed to help make college accessible to them. At best, the inability to purchase required textbooks and supplies early in the term means that students will be unable to keep up in class; at worst, they may drop out of college without having had a fighting chance to succeed.

Our students deserve better.

Posted by Edie Irons at 10:11 AM | Permalink

Robert Shireman, the founder and president of The Institute, has been guest-blogging for Higher Ed Watch, a higher education news and policy initiative from the New America Foundation. In his final post, "Building Fences," Shireman argues that state policies that use college funding as a carrot to keep students in the state after graduation are counterproductive. Here is an excerpt:

But states don’t like to see those graduates leave, so they have been getting more creative in their efforts to keep graduates from jumping the fence. Some states, for example, are considering, proposals that are modeled after the Georgia Hope Scholarship Program, which provides free tuition to top students who stay in state for college. Others are debating plans to award scholarships that would be rescinded if a graduate decided to cross the border for a job.

The current debate in Washington on immigration underscores just how backwards and wasteful these state strategies are. Corporate America is concerned that the immigration bill does not allow for enough visas for immigrants to fill jobs that Americans do not have the skills to fill. This cries out for a domestic policy response that focuses on increasing the number of young people who go on to college and complete degrees. . .

At The Institute for College Access and Success, we believe that Congress, as part of the upcoming reauthorization of the Higher Education Act, should create a College Opportunity Incentive Fund to send a strong signal to states about the national imperative to improve college access and success rather than to build fences between states. The Fund would essentially provide a bounty to the state for every student from the lower half of the country’s family income distribution. In addition, the Fund would offer a double bounty for every degree conferred on a lower income student. The states could use the money to provide much-needed financial aid and to implement other strategies to expand access and to improve retention to graduation.

Posted by Edie Irons at 1:25 PM | Permalink