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What About The Interest Rate? – Federal Student Loans

The following is a guest article provided by J. Randy Green, Director of Financial Aid at Wittenberg University

This morning, a local reporter called me with questions about student indebtedness.  She raised some interesting points on the recent changes made by the Department of Education to ease the repayment burden on federal loans.

For example, the new Income Based Repayment guidelines should not only reduce the financial stress imposed by education debt, but also allow graduates greater flexibility in selecting a job that best fits their skills and preferences.  Someone who will make a great teacher will now be more able to afford accepting that teaching position, rather than being forced to work in a different field for the higher pay it may provide.

But the reporter’s focus was on the level of indebtedness and how that has changed in recent years; this echoes many other stories I have read lately.   Having this focus risks ignoring two important facets of borrowing – the rate of defaults and the impact of borrowing on daily activity – and one looming challenge.

If a student borrows money to attend college, and after completing college is able to repay that money, then the system is working.  The student may choose to borrow more to attend a higher cost institution, or less to attend a lower cost one, but the decision is left to the student and the equation does not change.  A school should prepare a student to repay the loan taken to attend.  One measure of this relationship is the default rate, which is the percentage of students who default within a given period and which the Department tracks for every institution.

Independent of this, the amount a student borrows may impact other aspects of life – the ability to rent an apartment, to be offered a job at a bank, the rate of a car loan – but the most closely felt impact is on day-to-day bills and purchases.  A student shouldering a large monthly loan payment (large relative to monthly income) will be less likely to be able to afford the activity that drives the economy.

An item that has not been discussed recently is the fact that the interest rate charged to financially needy students is set to double on July 1, 2012.  Currently, subsidized Federal Direct Student Loans are made at 3.4%.  Unless Congress or the Department of Education takes action, these loans will carry a rate of 6.8% for 2012-2013 and beyond.  Regardless of debt level, this change will increase the repayment burden students already face, raising the risk of delinquency, default, and diverting borrower income from the economy and into the government’s coffers.

Given the tremendous level of attention given to the cost of education and the indebtedness of graduates, it seems appropriate for some discussion to occur about this pending increase in the cost of that borrowing.

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Get a Sneak Peek at the 2012-2013 FAFSA Form

Parents and students have to wait until January 1st before they can officially submit their FAFSA for the upcoming academic year (2012-2013). Very few actually submit the FAFSA on January 1st but I am guessing that there are always over achievers amongst us that make the process part of their New Year’s Eve tradition. A financial aid director friend of mine once shared his opinion on how the festivities probably take place for those that are on top of their FAFSA game: “Oh look the ball has dropped in Times Square. We should probably smooch because that is what everybody does. Ok, now lets go submit our FAFSA form!”.

You may not be like the families mentioned above, but for those that want to get a jump start on what to expect when filing the FAFSA, I am pleased to clue you in to the fact that a draft of the paper FAFSA for 2012-2013 is now available. You can access the PDF version here.

My hope is that none of you actually utilize the paper FAFSA to submit your information to the Department of Education. The paper version mentioned above is more for information purposes and provides some insight on what will be asked of you. I always recommend that you make use of the latest and greatest technology available at to electronically submit your FAFSA. The Department of Education utilizes skip-logic technology to make sure you don’t answer redundant questions and they also provide a feature that allows you to import your tax information directly from the IRS (seems a little scary at first but definitely saves on time and limits mistakes).

I hope you find this information helpful. Remember, the FAFSA is the key to all things good when it comes to accessing financial aid to help pay for college. Make sure you designate time this coming year to get your FAFSA application completed. Your checkbook will thank you!

If you need additional help and/or guidance through the financial aid process,  please feel free to check out CheapScholar’s College Resource Page for more great information.

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Sign A Petition – Help Student Aid – It Really Is That Easy

The Joint Select Committee on Deficit Reduction (aka The Super Committee) has until November 23 to come up with a plan to reduce the federal deficit. Certainly not an easy task… Unfortunately, federal student aid could be at the top of their list when it comes to cuts.

In an effort to help the Super Committee understand the importance of federal student aid and the role that it plays in college accessibility for our nation’s students, the Student Aid Alliance has started a petition in support of maintaining federal funding for student aid programs.

If you would like to help support this cause (which I hope you will), you can visit the online petition here. It only takes about 20 seconds to add your name to the list and as of the time of this blog post, it looks like you will be joining 92,940 people in a great cause.

Here is the actual wording of the petition:

Our nation sorely needs to power up its economic engine. Work force projections show that by 2018, there will be jobs for as many as 22 million new workers with college degrees, but on our current trajectory, we won’t make that goal—in fact we’ll miss it by 3 million workers.

Recent budget deals have already cut $30 billion from the student aid programs, sacrificing some students’ benefits to pay for others. States across the country are cutting higher education from their own budgets.

That’s why it’s more important than ever to preserve, protect and provide adequate funding for the core federal student aid programs—such as Pell Grants and student loan benefits. Together, these programs offer students an opportunity to acquire the knowledge and skills our nation demands for a strong recovery.

Tough budget decisions in DC have put pressure on all federal spending, but cutting student aid, a long-term investment in our nation’s future, doesn’t make sense.

I support protecting federal student aid. Keep college within reach for our nation’s students and families.

Click Here To Show Your Support Today!

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Save Federal Student Aid – Pass It On!

A family begins the lobbying process for their fair share of federal student aid when they start the FAFSA process. However, before they can even begin to receive money from the various federal student aid programs, somebody else has to lobby for those coffers to be filled every year.  And, ultimately, it comes down to the federal government (our legislators) to appropriate the proper amount of funds to keep these programs in existence.

Our legislators will be coming together on July 26th to decide how federal dollars will be allocated for federal student aid programs. They have been provided a spending cap of $139.2 billion dollars. That may seem like a lot of money but it is drastically less than what has been allocated in prior years.

Justin Draeger is the president for NASFAA (National Association of Financial Aid Administrators) and he recommends that we all (students, parents, college administrators, education advocates, etc) do our part to “take action” and help make our legislators know that accessibility to education is important to us. Here are a few ways that you can help:

  1. Contact your representative and explain the importance of the student aid programs and how even small cuts can affect students. NASFAA has provided letter templates to aid you in this process.
  2. Share NASFAA’s “Faces of Student Aid” booklet with lawmakers to help them understand how cutting aid will impact all students.
  3. Join the “Save Student Aid” campaign (on Facebook) and urge your students to do likewise. Stories shared through the Facebook campaign lead to media stories that have an impact on the student aid debate.
  4. Pass this information onto others via your social media connections/conduits (Share Toolbar is below)

Federal student aid funding plays an essential role in helping students achieve their educational goals. Please take a moment to utilize the steps above to help spread the word about how important federal student aid is for our future scholars.

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Obama: Eliminate Tax Breaks, Not Financial Aid (video)

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The College Ranking That Nobody Wants To Be On

Holding true to the Higher Education Opportunity Act legislation, the Department of Education has started it’s own ranking system for colleges and universities. It is called the College Affordability and Transparency List (or CATL for short).

The government has always asked colleges and universities to report statistical data (including costs) every year through the IPEDS survey (Integrated Post-secondary Education Data System) but this is the first year that the financial data will be made widely available for families to sort through, compare, and contrast based upon specific criteria.

The purpose of this list is aimed at highlighting the schools that have the highest prices AND the highest rate of price increases. Schools at the top of this list for the three year period preceding the release of this list will be required to submit additional reports to the Secretary of Education. From what I understand, over 500 colleges will be required to execute the additional reporting piece this year.

The statistics of the data being presented are a little shocking (maybe even mind-numbing) but numbers don’t lie and usually speak for themselves.  Should you use this data to help you in your college search process? Maybe, but I would probably advise against it. These numbers are already a couple years old and since they provide a statistical average, your individual financial outlook at one of these colleges may actually be better or worse than the average.

Below are a few different categories that I pulled from the CATL report. If you would like to play around with the data and run your own reports or check out your favorite college or university to see where it stands amongst the others, click here to give it a whirl.

4-year Private Schools With The Highest Percentage Increase In Tuition From 2008-2010

Institution State 2007-08 2009-10 % Increase
Wells College NY $17,810 $29,680 67
Frank Lloyd Wright School of Architecture AZ $18,585 $30,100 62
Charles Drew University of Medicine and Science CA $7,100 $11,300 59
Sage College of Albany† NY $18,440 $27,790 51
John Dewey College-University Division PR $3,560 $5,000 40
International Baptist College AZ $6,930 $9,660 39
Jamestown College ND $11,535 $16,006 39
Trinity Lutheran College WA $14,170 $19,425 37
Bluefield College VA $13,180 $18,020 37

4-year Public Schools With The Highest Percentage Increase In Tuition From 2008-2010

Institution State 2007-08 2009-10 % Increase
Northern New Mexico College NM $1,668 $2,522 51
Florida State College at Jacksonville FL $1,714 $2,553 49
San Diego State University-Imperial Valley Campus CA $2,906 $4,260 47
Georgia State University GA $5,147 $7,498 46
California State University-East Bay CA $3,345 $4,872 46
California State University-Stanislaus CA $3,330 $4,840 45
California State University-Chico CA $3,690 $5,336 45
Alabama State University AL $4,508 $6,468 43
California State University-Northridge CA $3,350 $4,801 43

4-year Private Schools With The Highest Net Tuition Price (after financial aid)

Institution State Net Price(1)
Art Center College of Design CA $39,672
The New School NY $39,004
School of the Art Institute of Chicago IL $38,965
The Boston Conservatory MA $37,798
California Institute of the Arts CA $36,997
Manhattan School of Music NY $36,208
Rhode Island School of Design RI $35,991
Pratt Institute-Main NY $35,506
Santa Clara University CA $35,245
Northwestern Health Sciences University MN $35,062

4-year Public Schools With The Highest Net Tuition Price (after financial aid)

Institution State Net Price(1)(2)
The University of Texas Health Science Center at San Antonio TX $24,192
University of Guam GU $23,902
St. Mary’s College of Maryland MD $21,468
Rowan University NJ $19,344
Miami University-Oxford OH $19,305
Pennsylvania State University-Main Campus PA $19,056
Pennsylvania State University-Penn State Altoona PA $18,878
Pennsylvania State University-Penn State Erie-Behrend College PA $18,857
University of Pittsburgh-Pittsburgh Campus PA $18,786
Pennsylvania State University-Penn State Berks PA $18,048

4-year Private Schools With The Lowest Net Tuition Price (after financial aid)

Institution State Net Price(1)
Universidad Teologica del Caribe PR $82
Talmudical Academy-New Jersey NJ $469
Colegio Pentecostal Mizpa PR $1,776
Baptist Missionary Association Theological Seminary TX $1,876
John Dewey College-University Division PR $1,956
Turtle Mountain Community College ND $2,031
Pontifical Catholic University of Puerto Rico-Ponce PR $2,208
Southeastern Baptist College MS $2,699
Mesivtha Tifereth Jerusalem of America NY $2,839
Our Lady of Holy Cross College LA $2,874

4-year Public Schools With The Lowest Net Tuition Price (after financial aid)

Institution State Net Price(1)(2)
Sitting Bull College ND $938
Escuela de Artes Plasticas de Puerto Rico PR $995
South Texas College TX $1,317
University of Puerto Rico-Aguadilla PR $1,591
The University of Texas-Pan American TX $1,646
Indian River State College FL $2,138
University of Puerto Rico-Bayamon PR $2,345
California State University-Dominguez Hills CA $2,451
California State University-Los Angeles CA $3,263
Elizabeth City State University NC $3,335

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FAFSA Updating Issues To Be Resolved By Next Week

Richard Gordon, Chief Information Officer for Federal Student Aid, recently made an announcement about an “isolated” issue they are experiencing with the online FAFSA application.

It appears that anyone saving their FAFSA data after February 4th is currently unable to go back and retrieve their application and start from where they left off.

Federal Student Aid provides two solutions to this predicament:

  • Students can restart their application process from the beginning and submit it as required, or
  • They can wait until after Sunday February 13th (which is when the Federal Student Aid Office anticipates having the data restored) and complete their saved application at that time.

The Office of Federal Student Aid has sent a notification out to all the colleges and universities to request leniency on any FAFSA filing deadlines that may be missed due to this complication. In addition, all affected students should be receiving an email update today to let them know the status of their FAFSA and the options mentioned above.

If you have any questions on this issue, please contact the Federal Student Aid’s Research and Customer Care Center staff at 1-800-433-7327. You can also reach them via email at

Since it appears that this “issue” is only temporary, I was not going to post anything about the topic on  However, I have already heard from a number of families experiencing this glitch so I thought I would put something out here to provide some guidance.

Hope this helps…

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Sneak Peek at 2011-2012 FAFSA Application

I can tell you that not very many people get excited about seeing the latest and greatest paper FAFSA form being released. However, for those of you that are chomping at the bit to get a sneak peek of the 2011-2012 Free Application For Federal Student Aid, I am happy to satisfy your craving. Even though this form is the draft version, it will be very similar to the final version that applicants will be able to use starting January 1st, 2011.

My hope is that everyone quickly passes over this paper option to filing the FAFSA and goes straight to to submit the electronic version. Besides being more efficient, the electronic version now has all the cool bells and whistles like skip-logic questioning and IRS/Department of Ed linking.

However, if you still like good old paper FAFSA forms, you can click this link to view a PDF of the 2011-2012 FAFSA application (10 page draft). When you complete the final version, you need to make sure that you use a black pen (easier to scan), print all your letters clearly and make sure they are capitalized, leave an empty box between words, and round your dollar figures to the nearest dollar (no cents allowed). If you encounter problems or have a question that is stumping you, you can always call the FAFSA Help Department at 1-800-433-3243 (4-FED-AID).

Hope this information is helpful…

UPDATE (01/03/2011)

The 2011-2012 paper FAFSA is now available for download or you can complete it online. Click Here to learn more…

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