NOW on PBS focused on student debt in America, following an unemployed single mother in Baltimore with over $70,000 in student loans.

The Project on Student Debt was featured.

Click here to visit the PBS website

Posted by Shannon Gallegos at 9:11 AM | Permalink

The Project on Student Debt and Income-Based Repayment were both cited in a recent report "Repaying Student Loans In Tough Times" on CBS' The Early Show.

Watch the clip below

Posted by Shannon Gallegos at 9:58 AM | Permalink

The Obama transition Web site is sponsoring an online discussion on college costs — noting both the interest of many in the issue and the recent death of Claiborne Pell, who as a Democratic U.S. senator from Rhode Island led the fight to create the grant program named for him. Numerous comments deal both with policy alternatives and the personal situations of individuals trying to pay for college.

[via Inside Higher Ed]

Posted by Shannon Gallegos at 4:44 PM | Permalink

By Lauren Asher, Vice President

In Monday's New York Times article about a new state student loan program for New York, a spokesperson for Governor Paterson's budget office said, "One of the big problems in the student loan program is that it is drying up. People who were able to get loans last year can’t get them this year." This kind of misleading statement encourages students and parents – already rattled about how to pay for college – to believe they’ll have trouble getting the most common and affordable type of student loan: a federal loan. In fact, federal student loans remain fully available to all eligible students and parents.

The New York program will encourage undergraduates to borrow up to a stunning $50,000 in state loans, even though dependent undergraduates can already borrow up to a total $31,000 in federal Stafford loans. These federal loans have lower interest rates than the New York loans and come with significant borrower protections and guaranteed access to affordable repayment options.

While it is true that the availability of private student loans has declined due to changes in the broader financial markets, only 8% of the undergraduate class of 2007 used private loans, and an estimated 40% of them had not maximized their federal borrowing options first.

If the goal of the new loan program is to make college more affordable, it misses the mark. Nationally, more than two-thirds of students who graduate from four-year colleges already carry an average of about $22,000 in student loan debt – with similar numbers for New York state. Struggling students should not be burdened with more debt, which will leave them even less able to buy a home, support a family, or save for retirement when the economy picks up again. Instead, tough economic times require states and the federal government to invest in higher education in ways that reduce the need to borrow.

Posted by Edie Irons at 9:32 AM | Permalink

by Debbie Frankle Cochrane, Research Analyst

This morning, the National Center for Public Policy and Higher Education released their fifth biennial Measuring Up reports. This series details how well individual states are doing on important performance measures including preparation, participation, affordability, completion, benefits, and learning.

By Measuring Up’s standards, California received the highest grade (C-minus) in the nation for college affordability. In fact, it received the only non-failing grade in this category. Because of the way this category is measured, California has always performed relatively well: low fees at community colleges help the state appear more affordable than it is for many students.

This (barely) passing grade should not be overblown, as the report also points out that the affordability of California colleges is declining. For every federal dollar that goes to Californians in grant aid, the state itself puts in only 56 cents, relatively little of which goes to community college students. When considering total costs and taking financial aid into account, the lowest income students still need 58% of their family income to afford to attend a California community college. Thanks to higher amounts of financial aid available to them, those same students would need slightly less – 57% of family income – to attend a public four-year college in the state. So how exactly are community colleges the affordable college option?

Low fees are only part of the affordability puzzle. To stay afloat, California needs to increase its commitment to college affordability by increasing grant aid – which can cover all related costs, not just tuition and fees – for the students who need it most.

Posted by Shannon Gallegos at 5:36 PM | Permalink

The Institute's president, Robert Shireman, was interviewed for the Washington Post. This article (subscription only) was printed on May 17, 2007.

Every spring, many thousands of students in the Washington region face the complex task of putting together a financing plan for college. This year, controversy has grown over how the $85-billion-a-year student loan industry operates, with revelations from a New York state investigation and other probes about loan companies' ties to university financial aid offices and the government.

The Post's Amit R. Paley spoke with Robert Shireman, executive director of the Project on Student Debt, about the controversy and what it means for students and families. The organization, based in the District and Berkeley, Calif., aims to increase public understanding about debt and help students make informed choices. It is funded by the William and Flora Hewlett Foundation, the Pew Charitable Trusts and other sources. Shireman was an education adviser to the Clinton administration.

Q What are the major revelations students and parents should know about?

A The investigations revealed gifts, trips and [payments] from student loan companies to universities and to some college financial aid advisers. In at least some cases, these conflicts of interest resulted in students and parents getting steered towards unnecessarily large or expensive loans.

What do the revelations mean to consumers?

We used to think of financial aid officers as impartial professionals dedicated to helping students pay for college. I still believe that most are. But every day we hear about another conflict of interest, so consumers need to be cautious about the financial aid recommendations that they get.

Make sure the advice is in your best interests, not designed to make money for the school or get the adviser a free trip to the Bahamas.

What are the basic questions to ask financial aid officers?

What are the total costs I will need to cover as a student at your school? How does the package of aid you have offered me cover those costs? How much will I need to borrow, and with what types of loans? What lenders do you recommend, and why? Do you have any financial relationships with the lenders you recommend?

What are the major types of student loans?

The best loans are Federal Perkins and subsidized Stafford loans. They have fixed, reasonable interest rates, and the government covers the interest while you are in school. Students from higher-income families are not eligible for those loans, but they can still get federal "unsubsidized" Stafford loans, which I put in quotes because the government actually does subsidize them by keeping the interest rate reasonable. These are the next best choice for any borrower.

Federal PLUS loans are available to parents and graduate students as long as they don't have any bad marks in their credit history. Again, the interest rate is fixed, but some families may find that a home equity loan rivals the rate on PLUS loans.

Private or alternative loans are the ones to avoid. Their rates are almost always variable, without any cap. The rates can be as high as a credit card. Some families may be able to find a good deal, but these loans lack the borrower protections that come with federal loans, such as assistance during unemployment and disability.

How do students know which lenders they should choose?

Despite the scandals, the financial aid office is not a bad place to start. Ask for their recommendations, and ask whether there are lenders that offer lower rates. For private loans, get actual rate quotes from at least three companies. The charges can vary a lot. Don't trust the "as low as" rates that lenders advertise.

What are preferred-lender lists, and are they good or bad for students?

Colleges usually recommend a few lenders, or even just one. These lists have been at the heart of the controversy.

Students usually use lenders suggested by the financial aid office. If they are chosen based on what's best for the borrower, that's fine, and it can help simplify an already overwhelming decision-making process for students and families. But if campus officials are getting gifts, trips and [questionable payments], then the recommendations are tainted.

What sort of reforms do you expect in the industry as a result of the investigations?

We're already seeing campuses canceling questionable arrangements with lenders, prohibiting gifts, and revamping or even eliminating their preferred-lender lists. I expect this trend to continue, and that Congress will ban or restrict many of the disturbing practices that have been revealed in the past few months.

If done right, the result will be a much more transparent, accountable and consumer-friendly student loan process.

Posted by Edie Irons at 10:17 AM | Permalink

Public confidence in college financial aid offices has been shattered by revelations of gifts, trips, deals, and kickbacks from lenders. In the resulting confusion, I have been asked time and again: "Is there a web site you can recommend where students can get accurate, complete and unbiased comparisons of student loan rates?"

Unfortunately, the answer is no.

The sites we have seen take money from lenders in exchange for getting listed. Often, lenders pay a premium to get prominent placement in the user’s search results. In some cases, "comparison" sites actually lead to only one or two lenders out of the thousands in the market. Even on sites that feature multiple lenders, it is perilously easy to be led down the wrong road, ending up with higher-cost loans that do not carry the interest caps and other protections that come with federal loans.

I recently logged into SimpleTuition.com to see what loan offers I could get if I decided to pursue my MBA at U.C. Berkeley. The lowest rate on the list (showing up on page 2) was 7.27% for a private loan from a company called Student Funding Group LLC. The price-conscious and time-constrained consumer, having found the best deal, might click on the "apply now" button and end the comparison shopping. Instead, I opened the expanded version of the search results, which revealed that the 7.27% is the "as low as" rate. It’s not a sure thing until I submit a complete application and allow the lender to peruse my credit reports.

Still, I had reason to be optimistic. MyFICO.com said my credit is so good that "Most lenders will consider offering you their most attractive and most competitive rates" and may even offer me "special incentives and rewards targeted to their 'best' customers." I should be a slam-dunk for that as-low-as rate of 7.27%, I thought. I proceeded through the application process (no, it didn’t take only a minute, as advertised) and eventually got a rate quote: 8.75% plus 4% in fees, or the equivalent of between 9 to 10% -- much more than the 7.27% that at first appeared possible.

Many (maybe most) consumers, after filling out that whole application, would go ahead and take the loan even at the higher rate, assuming there was some good reason they can’t get the as-low-as rate. But I decided to compare. A second lender, Sun Trust, had showed up on SimpleTuition with an as-low-as rate of 7.28%. After submitting, again, a whole application, I received a rate quote of 7.875%. It was much closer to the as-low-as rate, though there was no indication as to whether there would be any fees charged. I inquired via email, and it appeared that there would be no fees applied in my case.

Had I found the best loan for me? No, not even close. It turns out that SimpleTuition neglected to tell me about Federal Stafford loans, with rates of no more than 6.8%. And while the list included Federal Grad-Plus loans, I ignored them because the interest rate of 7.92% was higher than the rates I saw on listed private loans. Or so I thought. The important detail that I missed—because it’s not clear on the web site—was that the Grad-Plus loan rates are fixed, not variable like the private loans. That's a critical and potentially expensive distinction.

Not all lenders try to push private loans ahead of Federal loans. For example, Wachovia strongly encourages students to get Federal loans before considering private loans. Contrast that with the treatment you get when seeking a student loan through LendingTree.com. The site directs you immediately to a private loan company. And if you express an interest in Federal loans instead of their more expensive private loan, you are told with an ominous lack of enthusiasm: "Federal Loans may be a good option for some families." In fact, Federal loans are the best place to start for nearly everyone.

But wait! The lender list at GreentreeGazette.com shows that National City has private loans with zero interest. I applied. The promissory note arrived and I prepared to provide my electronic signature and get my loan. But I noticed that it said that my interest rate "margin" would be 4.25. I perused the rest of the document and found that the interest rate would be LIBOR plus the margin, which totals almost 10%. Plus 4% in fees. Another bad lead.

The system is confusing enough without the added problem of colleges' advice being potentially tainted by conflicts of interest. Students in the lending maze need unbiased, knowledgeable advisors. That's the important role that college financial aid administrators should be playing in the process.

Posted by bob shireman at 8:32 AM | Permalink

In the Chronicle of Higher Education's excellent series on low-income and working class students in college, the editors included rankings of elite colleges' enrollments of Pell grant recipients. The Pell grant data that is available from the U.S. Department of Education is for an entire academic year -- in other words, all the students who received a grant during any term, including the summer. Yet the denominator chosen by the Chronicle -- the enrollment for determining the percentage of Pell recipients -- is Fall only. Generally, at highly selective colleges, most students start in the fall and stay, so there's not a big difference between Fall enrollment and 12-month unduplicated total enrollment. But some campuses have more students who start in other terms. Those potential Pell recipients are included in the numerator (Education Department's Pell numbers), but not in the Chronicle's Fall denominator, causing the percentage to be higher than it should be. Given the fine gradation of the Chronicle's rankings (as small as 1/10 of one percent), this makes a difference in the rankings. In our database, for example, Baylor University jumps up almost two full percentage points when Fall enrollment is used as the denominator instead of the more appropriate 12-month number.

There's another wrinkle in these types of rankings. Most students attending elite colleges are dependent students, and therefore their parents' income is included in determining whether they come from a less advantaged background. Once a student turns 24, however, they become independent, and may suddenly qualify for a Pell grant because they have very little income of their own. More independent students qualify for Pell than dependent students. That's why our database includes an estimate of the proportion of dependent students at income levels below $30,000 and between $30,000 and $60,000. Again, looking at the campuses ranked by the Chronicle, some of the results would be different if they asked which campuses enroll more traditional-age undergraduates with incomes below $60,000. The flagship public institutions in Nebraska, Texas and Illinois all do significantly better under this alternative measure. Among private institutions, Stanford, the University of Chicago, Carleton and Pomona all move up significantly when using the estimates focused on dependent students only.

Thanks to University of Virginia economist Sarah Turner for pointing to these issues in her letter-to-the-editor in the Chronicle.

Posted by bob shireman at 9:46 AM | Permalink

"Working Class Students Feel the Pinch" in the Chronicle of Higher Education on June 9. This article is about how the financial aid formula can work against working-class students who work hard to pay for school. Here's an excerpt until we get a free link (the Chronicle is subscription only):

While there is no formal definition of working-class students, experts commonly use those from lower-middle-income families with incomes between $30,000 and $50,000 a year, as a substitute. The proportion of bachelor's degrees going to students from those families has declined over the past 25 years, from about 15 percent of all B.A. degrees earned in 1980 to about 11 percent in 2004. Comparatively, the share of the degrees going to students from more affluent families has risen to 79 percent from 72 percent over that period.

Working-class students are not well served, financial-aid experts say, by a student-aid system created by the federal government in the 1960s and 70s to help make college more affordable for students from low- and middle-income backgrounds. When the formula the government uses to assess a student's need was put into place, most students came from traditional two-parent families who could pay at least a portion of their children's college bills, and fewer students worked full time while enrolled in college. Those expectations were written into the formula, and, as a result, students are essentially penalized for working long hours to pay their way through college.

The only place to find comparative data on students with family incomes between $30,000 and $60,000 is at EconomicDiversity.org.

"Working-Class Students Increasingly End Up at Community Colleges, Giving Up on a 4-Year Degree" in the Chronicle of Higher Education on June 9 looks at how finances and socio-economic status are increasing factors in college choice. Just as Tally Hart and Ken Redd warned, some students are choosing community colleges for economic reasons and not pursuing four-year degrees.

"Opening Up the Elites" in Inside Higher Ed on June 2 focuses on discussions from a conference put on by the Education Testing Service and the Carnegie Foundation for the Advancement of Teaching. The article talks about different strategies to increase low-income access to higher ed, the role of assessment, and the disproportionate focus on elite private institutions when it comes to economic diversity. Lots of lively comments at the end of the article.

"Class Matters" in the Boston Globe on May 13. Now that some elite institutions are making an effort to enroll more lower income students, those students encounter social challenges as they try to fit in with a dominant culture of affluence and privilege. Students at Yale have formed a support group and are profiled in this story.

"Elite Colleges Lag in Serving the Needy" in the Chronicle of Higher Education on May 12 examines the numbers of low income students at elite colleges. The article is a good survey of the state of economic diversity in higher education today.

Posted by Edie Irons at 3:39 PM | Permalink