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College financial aid system ‘in crisis’

Posted by gradefund on January 30, 2009

College financial aid system ‘in crisis’

http://www.usatoday.com/news/education/2009-01-24-financial-aid_N.htm

CHICAGO (AP) — Finding financial aid for college this year promises to be tougher than any final exam.

The quest for money that begins for students and parents every January has taken on new urgency in 2009 amid fears that loans and grants will be scarcer than in the past due to the recession.

“The financing system for college is in real crisis,” said Barmak Nassirian, associate executive director of the American Association of College Registrars and Admissions Officers. “Every one of the participants in the system is experiencing hardship — higher education institutions, states, aid donors and families all are cash-strapped.”

Federal student loans remain readily available — with some funding even increased recently by Congress. But the prospect that grants and scholarships may be cut at many schools, combined with the shrinking availability of private loans, has fueled widespread angst at a time when more people than ever are seeking help. Applications for federal aid for the current academic year already are running 10% above last year’s record pace, according to the Department of Education.

Savings held in Section 529 plans — the state-sponsored investment funds for college that are popular for their tax breaks — have been depleted by the worst bear market in decades and home equity values have plummeted. That has sapped two sources most tapped by parents to fund their children’s higher education. Colleges’ endowments have been similarly walloped.

Administrators at Ohio State University see no big immediate impact on aid from the economy but are concerned about what may happen over the longer term, said Bill Shkurti, chief financial officer. The school’s endowment has fallen by as much as 30% from $1.5 billion a year ago but accounts for just 2% of operating revenue, he said.

The University of North Carolina at Wilmington, with a much smaller enrollment and endowment, similarly has taken a hit. In a scenario likely to be repeated on many campuses, financial aid director Emily Bliss says the school is bracing for unpleasant conversations with parents about next year as it relies more on loans in its aid packages and eliminates some of the “free” money.

“Grants and scholarships won’t all come through,” she said. “It’s difficult for us to tell families that, because our heart is breaking for them knowing what they’re going through.”

Private student loans are especially hard hit. Last year, 60 private lenders provided $19 billion to students. Now, 39 of those have stopped lending to students and the remaining firms have made it harder to borrow, according to Finaid.org, a website that tracks the industry.

“The stress level is high,” said Rod Bugarin, financial aid adviser for the New York-based college consulting firm IvyWise.

Numerous revenue-short states are likely to consider cutting aid in one way or another, and public colleges and universities are expected to raise tuition — in some cases by double digit percentages — as they set rates for next year.

Scholarships from civic groups and local companies across the country also are likely to decline, Bugarin said, although it’s too early to know the extent.

What it all means is that families and college counselors are having to hold difficult conversations about reduced savings and the need to take on more debt and lower sights to focus on more affordable schools.

“There are no sure answers because we’re in new territory,” said Bruce Hammond, a Washington, D.C.-based college admissions consultant and co-author of “The Fiske Guide to Getting into the Right College.” “But students with high need and lesser credentials are going to have to brace themselves for less aid.”

Jean Kliphuis, 46, of Huntington, N.Y., is concerned about the tightening vise of college costs and how to pay for them as she studies aid prospects for daughter Katie, a high school senior who has applied to six schools. Jean is a librarian and her husband Tim is self-employed in the office equipment business. As middle-income parents of three children, their tab for college could be overwhelming if they didn’t do all their homework on aid options.

“There is money out there, but you have to jump through a lot of hoops to get it,” Kliphuis said. “So my husband and I are jumping through the hoops.”

The key to success in the “convoluted” financial aid process is good information, she said, and there’s lots of it available through schools’ aid offices and online at such sites as Collegeboard.com and Princetonreview.com.

Indeed, the news isn’t all bad. The federal government has authorized some $95 billion in grants, loans and work-study assistance to help almost 11 million students and their families pay for college this year, and its recent commitments mean that total will all but certainly be exceeded next year.

“It’s scary, but not as scary as people might think,” said Lauren Asher of the California-based Institute for College Access and Success, an independent nonprofit group.

Among the encouraging developments for parents and students:

• The government broadened student borrowing in the midst of the credit crunch, ensuring the continued flow of federal loans that families depend on ahead of costlier private ones. Among other changes, annual borrowing limits for unsubsidized Stafford loans, which students can take out regardless of income, were raised by $2,000 and parents can now defer repayment of federal loans until after their child leaves school.

Stimulus proposals that would give students more financial aid also are progressing through Congress.

“This certainly has been an unprecedented disruption in the student loan marketplace,” said Mark Kantrowitz, publisher of Finaid.org. “But Congress and the Department of Education have acted quickly to avert a crisis.”

• No school is known to have withdrawn pledged financial aid this academic year despite financial setbacks that have prompted them to make cuts elsewhere. A number of top institutions, from Harvard, Yale and Duke to smaller institutions with large endowments, announced expanded aid last year and have insisted they will stick to those commitments.

Aid can make a huge difference in affordability. The average list price of tuition and fees for the current academic year is $6,585 for in-state students at four-year public universities and $25,143 at private colleges, with some costing far more. But grants and tax breaks lower the average net price to about $2,900 at public universities and $14,900 at private schools, according to the College Board.

• Some students will benefit from the turmoil, especially at colleges with high tuitions and scarce resources.

“These places continue to jack it up,” Hammond said of tuition increases, “so if you can pay the full outrageous fee in this economy, as long as you can walk and chew gum you will be admitted. And if you’re pretty good — average, even — you might get a $10,000 merit scholarship.”

Admissions experts recommend considering a range of fallback options, from lower-cost public schools to community colleges or even waiting a year to save more money. And colleges and parents alike are hedging their bets on next year and beyond.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

 

Posted in Alternative Payment, Financial Aid, Rising Tuition | 1 Comment »

Should Students Be Paid for Good Grades?

Posted by gradefund on January 15, 2009

Should Students Be Paid for Good Grades?

By Laura Fitzpatrick Wednesday, Jan. 14, 2009

http://www.time.com/time/nation/article/0,8599,1871528,00.html

 

Back in the day, a good report card earned you a parental pat on the back, but now it could be money in your pocket. Experiments with cash incentives for students have been catching on in public-school districts across the country, and so has the debate over whether they are a brilliant tool for hard-to-motivate students or bribery that will destroy any chance of fostering a love of learning. Either way, a rigorous new study — one of relatively few on such pay-for-performance programs — found that the programs get results: cash incentives help low-income students stay in school and get better grades. (See TIME’s special report on paying for college.)

According to a study released today by the social-policy research group MDRC, a nonpartisan organization perhaps best known for evaluating state welfare-to-work programs, cash incentives combined with counseling offered “real hope” to low-income and nontraditional students at two Louisiana community colleges. The program for low-income parents, funded by the Louisiana Department of Social Services and the Louisiana Workforce Commission, was simple: enroll in college at least half-time, maintain at least a C average and earn $1,000 a semester for up to two terms. Participants, who were randomly selected, were 30% more likely to register for a second semester than were students who were not offered the supplemental financial aid. And the participants who were first offered cash incentives in spring 2004 — and thus whose progress was tracked for longer than that of subsequent groups before Hurricane Katrina abruptly forced researchers to suspend the survey for several months in August 2005 — were also more likely than their peers to be enrolled in college a year after they had finished the two-term program. (Read “Putting College Tuition on Plastic.”)

Students offered cash incentives in the Louisiana program didn’t just enroll in more classes; they earned more credits and were more likely to attain a C average than were nonparticipants. And they showed psychological benefits too, reporting more positive feelings about themselves and their abilities to accomplish their goals for the future. “It’s not very often that you see effects of this magnitude for anything that we test,” notes Thomas Brock, MDRC’s director for young adults and postsecondary-education policy.

Although U.S. college enrollment has climbed, college completion rates have not. Only a third of students who enroll in community colleges — which educate nearly half the undergraduates in the U.S. — get a degree within six years. Hence the interest in this study among such philanthropic powerhouses as the Bill & Melinda Gates Foundation, which helped fund the MDRC study. (MDRC, by the way, was created in 1974 by the Ford Foundation and a group of federal agencies; originally named the Manpower Demonstration Research Corporation, it now goes only by the abbreviation.)

Given that the follow-up study of the program was disrupted as the schools struggled to rebuild enrollment and facilities in the wake of Katrina, it’s difficult to draw any long-term conclusions about the effects that cash incentives will have on community-college students. However, there could soon be more data to parse: with a grant from the Gates Foundation, MDRC plans to test cash incentives at community and state colleges in California, New Mexico, New York and Ohio.

Despite the study’s impressive, albeit short-term results, some critics in higher education are concerned that cash incentives will encourage students to start taking easier courses to ensure they’ll do well enough to pocket the money. “Everyone knows what the gut classes are when you’re in college,” notes Kirabo Jackson, an assistant professor of labor economics at Cornell who has studied cash incentives for high school students. “By rewarding people for a GPA, you’re actually giving them an impetus to take an easier route through college.” Other critics note that students’ internal drive to learn may be sapped as they focus on getting an external reward.

But those involved with the study note that particularly in this economy, cash incentives could help part-time students devote more hours to their studies. Faced with soaring bills for tuition, books and housing, many college students need a job just to get by. In the Louisiana program, all the participants were low-income parents, three-quarters of whom were unmarried or living without a partner. “We’re talking about adults who have quite a number of other responsibilities,” says Brock. “When you’re talking about minors who are required by law to be in school, that’s a different situation.”

Arnel Cosey, assistant vice chancellor for student affairs and provost for the City Park Campus at New Orleans’ Delgado Community College, one of two schools in the study, says she understands why some people are concerned that cash incentives are nothing more than bribery. “But on the other hand, I think because I am involved with these students daily, I’m not sure that I’m opposed to bribing,” she says. “If that’s what we need to do for these people to reach these goals, which ultimately will lead to them having a better life, I wish I had more money to give.”

Besides, as Cosey adds, if all goes well, students will be getting cash incentives for their work soon after graduating — in the form of a paycheck. “Most of us wouldn’t turn up at work every day if we weren’t getting a check,” she says. “What’s wrong with starting the payment a little early?”

Posted in Alternative Payment, Education Incentives, Paid for Grades | Leave a Comment »

6 Rules That Can Help You Afford a Private College

Posted by gradefund on January 9, 2009

6 Rules That Can Help You Afford a Private College

http://www.usnews.com/articles/education/2008/12/24/6-rules-that-can-help-you-afford-a-private-college.html

Posted December 24, 2008

Jackie Steffen separated from her husband and lost the family home to foreclosure just as her oldest daughter, Rhiannon, was applying to colleges. Steffen, who works as a legal secretary in Chicago, says that wiped out her savings and quashed any hopes of borrowing to pay her daughter’s tuition bills. Yet Rhiannon is now a sophomore at $42,000-a-year Illinois Wesleyan University and will most likely graduate with less than $30,000 in debt.

More than 2 million families have lost their homes to foreclosure in the past two years. And economists warn that 3 million more families could lose their homes in the next couple of years. Many struggling parents fear that such financial difficulties may crush the college dreams of their children. But as the Steffens discovered, college is still possible if everyone in an extended family pitches in with wisdom, hard work, sacrifice—and some good luck.

“I think many of the families facing foreclosure today are hardworking, but with the accumulation of housing expenses and medical bills, they just get in too deep,” Jackie Steffen says. “These families are not lazy. They are willing to make an effort to keep themselves afloat. I guess that’s why I feel families facing foreclosure will eventually see their situation turn around for the positive. And I think that most students in college, or approaching college, are not looking for a free ride. They just want a little assistance, which I think is out there,” she says.

Here are some of the hard lessons the Steffens learned about paying for college during hard times.

1. Keep close to family: Jackie Steffen’s credit was ruined. She couldn’t qualify for any kind of loan to help her daughter cover the gap between the aid and the cost of attendance. Luckily, Jackie had long had a good relationship with her parents. “My mom and dad are retired, and they are not rich,” but they want their grandchildren to succeed, she says.

“Family is very important,” Rhiannon agrees. Without the help of her family, she wouldn’t be able to afford college, she says.

2. Students should take responsibility and action: In hard times, parents can’t do it all. Jackie says it was important that her daughter request her grandparents’ help cosigning an education loan, since it really was for Rhiannon. “It helps if the student initiates the request,” she says. “She had to promise to pay it all back. It is her responsibility, ultimately.” The experience taught Rhiannon that she and her family couldn’t secure enough loans to pay for her school, so she was energized to apply for scholarships. It turned out to be “a lot easier to ask someone for a reference or help with a [scholarship application] essay than it is to get someone to lend you $40,000 to get through school,” she says.

3. Apply to several different kinds of colleges: Rhiannon applied to a local in-state public university as a backup, as well as several private schools. But after counting up all her scholarships, it turned out to be no more expensive to attend her first-choice private school. Studies show that students who give themselves lots of college choices—including cheap in-state public universities and generous private schools—receive more financial aid than those who have limited choices.

4. Tell EVERYONE that you need help paying for college: Rhiannon’s grandmother happened to mention to her accountant that her granddaughter needed scholarships. The accountant suggested she try a foundation whose finances he also happened to manage. Rhiannon did, and won $75,000 worth of scholarships from the foundation—enough to relieve her of most of her college debt worries. “I learned that scholarships and money opportunities could literally come from anywhere and end up meaning the world,” Rhiannon says.

5. Communicate with your schools financial aid office: After she figured out how much it would cost to go to each school she got into, Rhiannon wrote a letter to her first choice, IWU, explaining the family situation and asking for more aid. IWU boosted her aid. Students “shouldn’t be afraid to be aggressive” about explaining their true needs to a college, Rhiannon says.

6. Dont despair, and keep trying: Rhiannon worked hard, earned good grades, and applied for lots of scholarships. In the meantime, Congress passed legislation making it a little easier for parents with mortgage trouble to get educational loans. And Jackie found affordable housing for her family and started working herself out of her financial hole. “Sometimes it seems like things are never going to get better. But, slowly but surely, they do,” Jackie Steffen says.

Posted in Alternative Payment, Cheaper Tuition, Financial Aid, Rising Tuition | Leave a Comment »

How I Got Into College: 6 Stories

Posted by gradefund on December 12, 2008

http://online.wsj.com/article/SB122765578387658069.html?mod=rss_Today’s_Most_Popular

How I Got Into College: 6 Stories

Many seniors in the Class of ’09 — that’s more than 3.3 million students — are now applying to college. For many, it’s a time fraught with paperwork, essays, interviews and road trips. And after all that work, it comes down to a letter or an email: In or out?

Theo Rigby for The Wall Street Journal

Told his chances of getting into Stanford were low, Matthew Crowley, above, applied anyway — and was accepted.

Admissions are expected to be as competitive as ever, and many schools say even the economic downturn has not slowed the onslaught of early applications. At Cornell University, early applications are up 9% from what they were this time last year; at Amherst College, they are up 5%; and at Barnard College, the rise is 8%. The acceptance odds are still long; many highly selective schools accept fewer than 20% of applicants.

Counselors, admissions staff and parents can all provide useful advice for getting in, but some of the best tips can come from the most recent veterans of the application frenzy: college freshmen. We’ve asked a range of students to share what they’ve learned.

Dare to Dream

Matthew Crowley was set on going to Stanford University last fall, but all the signs told him he wouldn’t make the cut. He plugged his grades and test scores into a computer program that tracked college-acceptance statistics and came out on the low end of a graph for Stanford. Guidance counselors at Kent Denver, a private school he attended in Englewood, Colo., did not include Stanford on a list of suggested colleges. And he says a college adviser his family hired for $2,800 told him not to bother applying.

But Mr. Crowley, who at age 16 started a company that built and tested skis, didn’t like being told what not to do. He remembered his father, who died when Matthew was 11, telling him, “What’s the harm in trying?” He sent in his application early, but also applied to seven other schools.

Soon he got the news that Stanford had put him on the wait list, meaning a slot for him could open up later. Then, while hanging out in the basement with his brother, he got the email from Stanford: accepted. Mr. Crowley ran upstairs with the news. “It was the greatest joy I’ve had as a parent other than giving birth,” says his mother, Melissa Crowley.

Now a freshman, he’s majoring in product design and was accepted to a small class led by Banny Banerjee, the director of Stanford’s design program. Prof. Banerjee once worked for IDEO, an innovation and design firm that Matthew had admired so much, he toured the company’s Boulder, Colo., office as a 9-year-old with his father. “I walk into his class and I can’t stop smiling,” Mr. Crowley says.

Advice: Have a backup plan, but don’t get scared off by long odds. “It pays off to keep on going for it even if you’re told you can’t do it,” he says. His mother says with the next kids, twin high-school juniors, she’ll seek advice that is realistic but still “gives them hope.”

Keep It Neat

When Dartmouth College rejected Ramond King last December, he blasted Radiohead’s “Let Down” and tried to figure out why he wasn’t at least put on the wait list. He had a 3.9 grade-point average his senior year, took five Advanced Placement courses and won the headmaster’s cup, an award to the student who showed the most personal growth at the Branson School in Ross, Calif.

A few weeks later, as he was finishing 13 applications, Mr. King’s college counselor called with a possible explanation. On his application, where he’d described his course load, Ramond had spelled chemistry as “chemestry” and literature as “literatre.” The errors appeared six times.

“When it happened, of course, I’m freaking out,” Mr. King says. Before he’d sent that Dartmouth application, his mother, father and sister had studied each word, scouring for mistakes. But the errors were on a page he filled out on his own and gave to the guidance office to complete with recommendations.

In his next round of applications, the errors were corrected. This time, he was accepted to five schools, including Cornell, where he is now a freshman. He says blatant misspellings can be fatal to an application: “I try and laugh about it now,” he says.

Advice: Check every section of an application immediately after finishing it, as well as before sending it. Many college counselors recommend printing out an online application and proofreading the hard copy.

Practice Makes Perfect

Three days after she received her first college rejection, Sophie Nunberg started a Facebook group for others who were turned down by their top choices. Over the next few weeks, the senior at the International High School of San Francisco returned to the online group as rejections and wait-listings arrived from eight of the 12 schools she had applied to, including Columbia, the University of Chicago, Vassar and Swarthmore. “I was very upset,” she says.

She started to look back over her applications to figure out what had happened. When she re-read her essay for Columbia, where she’d applied early, she sounded like she was posing as a kid who could only thrive in a city. Her applications to Swarthmore and Vassar emphasized her love of writing but revealed little else. But her essay for Wellesley, where she was accepted, really stood out — because it sounded like her.

Her ease came partly from her familiarity with Wellesley — her mother is a graduate — and partly from her impatience with twisting her essays to fit what she thought admissions officers wanted to hear. Her two Wellesley essays about working for Planned Parenthood and her mother’s influence on her life came naturally: “I just wasn’t afraid of being judged.”

She’s now a campus tour guide, touting Wellesley to prospective students. “If it hadn’t been for a hard year and very difficult admissions, I might never have come here, and I might not be as happy,” she says.

Advice: The more applications she filled out, she says, the better they got. So she advises students not to rush an application for the sake of applying early. College counselors recommend avoiding clichéd essay topics, such as community service, unless they’re essential to a student’s identity. Students can also consult how-to books to view sample essays.

Cast a Wide Net

Virat Gupta was at the top of his class at Detroit Country Day School, president of the student council, captain of the cross-country team, captain of a public-speaking team and secretary of the honors choir. So when he applied to about 10 colleges, including four Ivy League universities, he felt pretty confident.

Fabrizio Costantini for the Wall Street Journal

Virat Gupta, now at the University of Michigan, wasn’t accepted at the four Ivy League schools where he applied.

In December, Columbia University rejected his early application. In April, he was put on the wait list by Duke University, University of Pennsylvania, Georgetown and Rice. Rejections came from Yale, Cornell, Northwestern and Washington University in St. Louis. He got the news while on vacation in Paris. “I had a couple of breakdowns,” he says.

Last fall, Mr. Gupta was accepted at two in-state schools, the University of Michigan and Michigan State University, but he considered them “safeties” — schools he had a strong chance of getting into — and barely paid them any mind. Now he’s a freshman at the University of Michigan, where he says he enjoys working in student government and singing in the men’s glee club. “I really, really like it,” he says. He thinks less about transferring than he used to, though he still may send applications to some schools that rejected him. “It’s not the end of the world,” he says. “Everything will end up working out.”

Advice: Students shouldn’t just apply to dream schools and safeties, but schools in between as well. “And make sure that all the schools you apply to, you’re pretty sure you’d be willing to go there,” Mr. Gupta says. In his view, the pressure of college is nothing compared to the stress of getting in, he says. And he still has big plans. “I’ll do my best and get into a killer law school,” he says.

Just Do It

Mari Huessy says she was expected to be “the pride of the high school” in Essex Junction, Vt. But when December of her senior year rolled around, she was overwhelmed by the prospect of applying to 10 different colleges. “I totally freaked out,” she says.

Her approach: apply only to her top choice, Grinnell College in Iowa. An aspiring writer, she’d been hoping to attend the school ever since ninth grade because of its top English program. But she froze when it was time to follow through on her dream. She didn’t visit the campus or interview with the admissions office. She struggled with her essay about imagination. “It was really bad,” she says. Her rejection notice came on April 1, her birthday.

Instead of applying elsewhere, she took a year off after high school to teach English at a school in Germany, hoping the experience abroad would strengthen her bid. When application season came around the next fall, she spent nearly two hours speaking with Nancy Maly, Grinnell’s interim director of admission, describing the ways Germany had changed her.

Two days before Christmas, Ms. Huessy’s parents called to tell her she got in. “It was incredibly, incredibly wonderful,” she says. The 20-year-old freshman says the gap year didn’t just help her get into Grinnell; it also enabled her to make the most of college once she arrived. She’d given her major a lot of thought during her year off and gained confidence from living in a foreign country.

Advice: Had she visited a number of campuses, Ms. Huessy says, she probably would have gotten excited and applied to more schools. Many school counselors urge students to apply to at least 10 colleges, and some say seniors should apply to extra schools this year to give themselves some lower-priced options. Ms. Huessy also tells peers not to apply at only one school: “I got lucky,” she said.

Know Thyself

Caitlin Flood, the oldest of six children, turned down Georgetown, which costs about $50,000 a year. She also passed on Cornell, too, worried she’d feel timid in big classes at a school with more than 13,000 undergraduates.

After visiting 40 campuses, Ms. Flood of Bellerose Terrace, N.Y, discovered Lafayette College. The Easton, Pa., school offered $16,000 in financial aid, and she thought she’d thrive in a freshman class of 600 students.

The choice surprised some classmates at Mary Louis Academy in Queens, N.Y. “It was hard for me,” she says. “Most people hadn’t heard of Lafayette.” For three weeks, she questioned turning down two elite schools. But she also knew she didn’t want to worry about a mountain of student loans, and she didn’t want to go to a pressure-cooker school where she’d feel guilty if she left the library before 2 a.m.

Since starting her freshman year, she’s joined the College Democrats and the school’s law society. She’s also helping kids with educational projects at a local community center. She says she adjusted to college right away, while some friends at big universities still haven’t gotten comfortable.

Advice: Ms. Flood suggests setting limits on campus visits; touring dozens of colleges just ended up confusing her. To get up to speed on financial-aid options, students can use calculators found on the prospective schools’ Web sites. The National Association of Independent Colleges and Universities also has financial-aid resources at information on its site at www.ucan-network.org.

Write to Ellen Gamerman at ellen.gamerman@wsj.com

Posted in Alternative Payment, Cheaper Tuition, Economy and School, Financial Aid | Leave a Comment »

An E-Mail Plea: Help Pay My Tuition!

Posted by gradefund on December 12, 2008

http://www.time.com/time/nation/article/0,8599,1838738,00.html

Student entrepreneur, Max Stephenson

An E-Mail Plea: Help Pay My Tuition!

Student entrepreneur, Max Stephenson
Mike McGregor for TIME

The e-mail looks like a scam: “I have to come up with big-time cash,” writes Max Stephenson. The 18-year-old is headed for New York University, he explains, but his mom is on disability, his dad works three jobs, and all his grants and loans only cover half of the school’s $50,000 annual tab. So to cover the gap, he’s hoping 10,000 friends of friends of friends will each put $2.50 in the mail or send the money via PayPal. “If you’re worried I am one of those internet rip-off artists, call NYU’s admissions office at 212.998.4500,” his e-mail continues, “and ask for someone in international admissions — they handled my admissions as I was recruited to play ice hockey for Russia and spent last year there.”

The thing is, his plea is legit. And two weeks after Stephenson sent his e-mail to 300 of his friends and his parents’ business contacts — and asked them to forward it to anyone they could think of — he says he has already received close to $6,000 from more than 2,000 people. Only a dozen or so e-mail recipients have written to him asking if he’s a swindler. “Everybody’s been really nice about it,” he says. “As nice as I guess you can be to somebody you suspect to be scamming you. It hasn’t been, ‘Oh, you dirty bleep-bleep-bleep,’ but, ‘Don’t try to scam people.’ No curse words or anything.”

A recent high school grad from Glen Gardner, N.J., Stephenson is sending out his e-mail solicitation at a time when students’ financial needs are expanding and the loan market is shrinking. A slew of peer-to-peer lending companies geared toward the college set — including Virgin Money, GreenNote, Fynanz, and CapAlly — have sprung up in the past year. Borrowers create Facebook-like profiles detailing their backgrounds, interests, and financial goals, and lenders choose the students who seem particularly appealing — or appear most likely to pay back the loan. The companies play matchmaker, then keep track of who owes what to whom.

It’s too soon to tell whether this business model will work. Meanwhile, Stephenson is taking a slightly different route. Instead of promising to repay the money, the future sociology major is trying to motivate givers by offering them a souvenir. “If you will send me $2.50 in the next week or so, I will send you a piece of my graduation gown,” he promises, in a kind of collegiate variation on relics of the cross. “For $3.50, you get a piece of my cap.”

To help keep his end of the bargain in four years, he is keeping a spreadsheet with contact information for all of the donors who did not send money anonymously. Among them is Chris Sperry, a sponsorship manager in Atlanta who put $5 in the mail for Stephenson even though the two of them have never exchanged a single word. Like other donors, Sperry says he wants Stephenson to have an easier time paying for school than he did. “It’s a shame that you get saddled with [loans] right out the gate,” Sperry says, recalling that during his own years as an undergraduate, he worked three jobs to offset tuition costs. “It’s tough to get ahead when you have that anchor weighing on you.”

Stephenson’s solicitation explains that for safety reasons, he provides potential donors with a P.O. box instead of his home address. And the natural-born promoter also directs PayPal users to route the money using his e-mail address, MStephenson@AccessHybrid.org. “In case you’re interested, I have plans to use my college education to improve our environment,” he notes toward the end of his tuition plea, which explains that AccessHybrid is an organization he set up to help college and vocational students buy fuel-efficient cars. “I found the work incrediably [sic] satisfying,” he adds in what would have been a pitch-perfect letter, had he bothered to run a spell-check. (To see the evolution of the college dorm room click here.)

Posted in Alternative Payment, Cheaper Tuition, Economy and School, Financial Aid | 2 Comments »

Putting College Tuition on Plastic

Posted by gradefund on December 12, 2008

http://www.time.com/time/nation/article/0,8599,1834160,00.html

Putting College Tuition on Plastic

College Tuition Credit Cards
Left; Rob Melnychuk / Corbis: Alan Schein Photography / Corbis

Credit cards. Retirement funds. Home equity. All should be last resorts for families seeking funds to pay for college. But amid the current credit squeeze, a new poll indicates many parents and students are making these less-than-brilliant financial moves to pay for tuition.

The nation’s biggest student loan company, Sallie Mae, and polling firm Gallup just released the results of a survey, conducted in May, of 1,400 undergraduates and their parents about how they plan to pay for college this year. One in five parents borrowing money reported either taking out a second mortgage of more than $10,000 or charging some portion of college expenses to a credit card. In a study released earlier this summer, consumer advocate U.S. Public Interest Research Group (PIRG) found roughly a quarter of students reported billing their tuition to a credit card. Such borrowing practices generally carry along with them much higher interest rates and fees than private student loans. “Using a credit card to pay for your education is absolutely the worst financial decision you can make,” says debt counselor Catherine Williams of Chicago-based Money Management International.

But many parents and students say they have little choice other than to deplete their savings or grapple with high interest rates down the road. Indeed, among respondents in the Sallie Mae/Gallup poll who said they were using credit cards to pay tuition bills, no parents and only 15% of students said they were doing so because they thought they’d get a better interest rate. Nearly half reported using Visa or MasterCard to finance their education because they had no alternative. Some 3% of survey respondents said they have resorted to withdrawing money early from retirement savings, which can carry up to a 10% penalty fee.

When deciding how to pay for college, families should start by contacting their school’s financial aid office. About $130 billion a year is available in scholarships and grants. The first step in borrowing money for school is to max out on low-interest government programs such as federal Stafford loans. In the past, lots of families have turned to private loans to make up the difference, with borrowers taking out about $17 billion in such loans during the 2006-2007 school year. But as credit markets dried up last spring, many private lenders either went out of business or became much stricter about approving loans. And the people least likely to get a bank loan are often the same ones credit card companies are trying to reel in with low interest rates that quickly jump sky-high.

Also of concern from the Sallie Mae/Gallup poll is the finding that some 40% of families didn’t factor cost into the decision about which school their undergraduate should attend, which is astounding given the price difference among schools. Tuition at a private, four-year college averages about $24,000 a year, while a good public institution may be as little as $10,000, even for out-of-state enrollees, according to the College Board, the nonprofit that administers the SAT. “We eliminate homes and cars all the time due to price, but then don’t go through the same exercise for college,” says Tom Joyce, a Sallie Mae spokesman. “That’s got to change.”

Another troubling finding: some 70% of survey respondents said they didn’t consider what a student’s potential post-graduate income would be. This is bad news for today’s college students, who graduate with an average of some $9,000 in credit card debt, which will cost young wage earners more the longer it takes to pay back. Aggressive on-campus marketing by credit card companies “equates signing up for a new card to impulse shopping,” says PIRG spokesman Ed Mierzwinski. “No one tells students that if they don’t buy off the balance each month, the price of that pizza they just charged is going to compound steadily.” And if the price of a pizza can really add up over time, just think about four years of tuition.

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