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Financial Aid

Time is running out for Congress to take action to stop a scheduled interest rate increase on Stafford loans this summer. In July, interest rates are set to double for almost 8 million students. The average subsidized Stafford loan borrower will pay an extra $2,800 on their loans, and students borrowing the maximum $23,000 in subsidized loans starting next year would pay almost $5,000 more over a 10-year repayment period.

Stafford Loans

  • Subsidized Stafford loans are available based on financial need, and unsubsidized loans are available to everyone. 
  • For graduate students, the maximum annual loan limit is $20,500 (with up to $8,500 subsidized). The aggregate loan limit, including undergraduate debt, is $138,500, except for medical students, for whom the limit is $224,000. 

Student borrowing is going up. National Student Loan Data System data shows that cumulative borrowing per student participating in federal loan programs increased from about $3,943 in 1990 to $11,510 in 2000 and $13,856 in 2009. Much of the increase is attributed to funding for graduate education, and recent changes in federal student loan policies for graduate students will likely cause this to go higher.

The time of unprecedented growth for the federal Pell Grant program couldn’t have come at a worse time for Congress. As lawmakers were looking to cut federal spending to address the growing national deficit, record college enrollments, the economic downturn, and expanded Pell Grant awards and eligibility criteria combined to triple the cost of the program over five years.

Given federal and state regulations­, especially now, there are many policies and procedures related to applying for, awarding, and disbursing aid that can’t be avoided. Still, in our travels, we often see aid offices making unnecessary extra work for themselves or students by clinging to outdated procedures or implementing policies for the entire student body because of concerns that impact only a select few. Scannell & Kurz has compiled this “hit list” of time—and money—wasting policies and procedures that should be reconsidered:

Student loan debt has been steadily rising for a number of years and has recently passed the $1 trillion mark, making it more than credit card debt. The issue has had attention all along, but there is more of a focus on it as recent graduates are having a hard time finding jobs that would enable them to repay those loans.

Are the financial aid award letters your institution sends to returning and prospective students clear, correct, complete, and comparable to other institutions’ award letters? The federal government thinks that too many are misleading and difficult to compare.

  • 360 Degrees of Financial Literacy: Free program from the American Institute of Certified Public Accountants to help Americans understand their personal finances through every stage of life
  • CashCourse: Free, noncommercial online educational materials from the National Endowment for Financial Education

With college costs still top of mind for most families, financial aid is more important than ever. Community college leaders are especially challenged to communicate the importance of the Free Application for Federal Student Aid (FAFSA) to their student body, which appears to be less likely to apply for federal aid. According to the report "FAFSA Completion Rates by Level and Control of Institution," 58 percent of Pell-eligible community college students applied for aid, compared to 77 percent of four-year students in the 2007-08 academic year.

Since the market crash of 2008, a number of private education lenders have left the marketplace. Those who have remained have not increased their lending to fill this gap and anecdotal evidence suggests that the remaining lenders have further reduced access to private education loans by tightening their credit criteria. Higher-education institutions have responded to the credit needs left unmet in the current marketplace by creating or revising their own institutional credit and payment arrangements.