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Articles: Financial Aid

As student loan debt levels and default rates in the United States continue to climb, consumers remain concerned about the accessibility and affordability of higher education. The average overall loan debt for bachelor’s degree recipients is fairly manageable (about $26,500 for the class of 2011, according to The Institute for College Access and Success). Still, students and families are shouldering a greater portion of the cost of college through loans than they ever have before.

Most financial aid offices are already beginning to receive appeals from families looking to improve their aid awards. A recent Wall Street Journal article encouraged families who were unhappy with their aid offer to call the aid office “as soon as possible.” Financial aid appeals have been a regular part of the aid awarding landscape for some time now, but the way institutions respond to appeals varies widely. How your own institution responds can affect enrollment, net tuition revenue, and your school’s reputation in the marketplace.

Higher ed organizations are bracing for potential cuts in student loan funding and the trickle down of major cuts to agencies that support the bulk of institutional research and development.

A House bill, the Earnings Contingent Education Loans (ExCEL) Act of 2012, attempts to reduce complexity, improve default rates, and increase the effectiveness of federal student loan subsidies—and would dramatically alter the way federal student loans are paid back. On Dec. 17, Rep. Tom Petri (R-Wis.) introduced the bill, which would provide unsubsidized loans and require income-contingent repayment for all borrowers through a payroll withholdings system.

At Tuesday’s State of the Union (SOTU) address, President Barack Obama discussed the importance of education at all levels and after putting emphasis on early education and job training for high schoolers, he asked colleges and universities to work to make higher education more affordable for students. 

With families’ growing concerns about financing higher education, and the federal government’s increasing involvement in recommending and/or requiring certain communications regarding institutional costs, every institution should be taking a step back to review all of the tools currently being used to present affordability, explain the aid application process, and communicate the awards themselves.

To avoid student loan pitfalls and misconceptions, NASFAA recommends administrators ensure students know:

Feedback from private student loan borrowers reveals they hold a host of common misconceptions about their loans. In comments and complaints submitted to the Consumer Financial Protection Bureau (CFPB), borrowers demonstrate a lack of knowledge about the difference between private and federal student loans, how bankruptcy can impact their loans, who holds and services their loans, what repayment options they have, and more. The consequences of these misunderstandings include unexpected default, forbearance fees, and ineligibility for repayment incentives.

NMU's Foundation Scholarship application and selection process was inefficient and labor intensive. A web application was designed that matched selection criteria to the student's academic and biographical profile. The new system reduced data entry, paper, timing, and labor costs, while increasing data accuracy and providing more information to selection committees.

Financial aid verification was a cumbersome, paper-intensive project that took 6-8 weeks and was prone to errors. With an automated verification solution, DCCCD shaved weeks off the schedule, reduced and realigned staff resources, and even retained some at-risk students.

Record numbers of students enrolling in college as well as an increasing reliance on student loans to finance the growing cost of college has vaulted student aid into the national spotlight this campaign season.

Both presidential campaigns are dedicating an unprecedented amount of time articulating their widely varying policies aimed at making college more affordable.

President Barack Obama’s administration has pushed for more student aid spending and more regulations to increase the return on the federal investment in higher education.

The Department of Education, in collaboration with the Consumer Financial Protection Bureau, has released a new, standardized format for financial aid award letters. The “Financial Aid Shopping Sheet” offers students and families a graphic summary of the cost of attendance and aid available and can be customized by each institution. The form makes it easy to compare costs and aid offers, and provides an index of how comparable schools perform against one another.

Greater access and better outcomes are needed in higher education, agreed James Kvall (Obama for America)(middle) and Scott Fleming (Romney for President) (left), as they spoke with NASFAA President Justin Draeger.

With the presidential election campaign heating up, it’s not just jobs and the economy worth paying attention to. Financial aid administrators from 900 institutions in all 50 states got a glimpse into how their niche would be affected by both presidential candidates when James Kvall, policy director for Obama for America, and Scott Fleming, an education policy advisor for Romney for President, spoke at the National Association of Student Financial Aid Administrators (NASFAA) national conference in Chicago in July.

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