Gradefund’s Blog

Just another weblog

Archive for the ‘Student Loans’ Category

Students Covering Bigger Share of Costs of College

Posted by gradefund on January 22, 2009

Students Covering Bigger Share of Costs of College


Published: January 15, 2009

College students are covering more of what it costs to educate them, even as most colleges are spending less on students, according to a new study.

The study, based on data that colleges and universities report to the federal government, also found that the share of higher education budgets that goes to instruction has declined, while the portion spent on administrative costs has increased.

It describes a system that is increasingly stratified: the smallest number of students — about 1 million out of a total 18 million students — attend the private research universities that spend the most per student. The largest number of students — 6 million — attend community colleges, which spend the least per student, and have cut spending most sharply as government aid has declined.

“Students are paying more, and a greater share of the costs, but are arguably getting less,” said Jane Wellman, the executive director of the Delta Project on Postsecondary Education Costs, Productivity and Accountability, which drafted the study.

The Delta Project, a nonprofit, nonpartisan organization, seeks to increase college affordability by controlling costs, a goal it says can be accomplished without sacrificing quality. The study is a rare effort to look inside what researchers call the black box of higher education: the question of why it costs so much and where the money goes.

Colleges have justified rising tuition, in part, by saying that it does not cover anywhere near the full cost of educating a student. That is still true, but less so; the study found that students are contributing a greater share of the cost of their education at all kinds of institutions, even after accounting for scholarships and other tuition discounts.

In 2006, the last year for which data is available, students at public colleges and research universities paid about half the cost of their education — defined as the cost of instruction, student services and a portion of spending on operations, support and maintenance. That is up about 10 percentage points since 2002. At community colleges, students covered about 30 percent of their education, up from 24 percent.

At private institutions, the increases were less steep, but students cover a greater share: at private colleges that offer bachelors degrees — essentially, liberal arts colleges — the student share went to 63.5 percent in 2006 from 61.1 percent in 2002. At those that offer masters’ degrees, it went to 83.6 percent in 2006 from 80.4 percent in 2002.

At public institutions, spending on instruction declined from 2002 to 2005, and increased in 2006, but the increases did not make up for earlier reductions.

Spending on instruction decreased at private institutions, as well, except for private research universities, where it rose slightly.

“The institutions whose primary mission is teaching — the masters and community colleges and bachelors colleges, are slowly disinvesting in the teaching function,” Ms. Wellman said.

And the percentage of the budget going to instruction declined everywhere between 1995 and 2006 — to 63 percent from 64.4 percent at public research institutions, to 50.2 percent from 52.8 percent at public community colleges, and to 38.9 percent from 40.7 percent at private bachelors colleges.

The biggest decline occurred at private research universities, where the percentage of the budget devoted to instruction went to 57.9 percent in 2006 from 62.3 percent in 1996.

Meanwhile, the share spent on administration and support increased everywhere. At public research universities, those costs consumed 28.3 percent of the budget in 2006, up from 27.7 percent in 1995. At private research institutions, they accounted for 32.9 percent of the budget, up from 30.1 percent, and at public community colleges, 37.7, up from 35.9 percent.

Tuition increased faster than spending on education, with students at public institutions taking on the biggest increases, as states contributed less per student.

Had tuition increased only to match spending, the report’s authors calculate, it would have increased only 2.5 percent at public research universities, where it went up 29.8 percent. At private colleges, it would have increased 1.9 percent, rather than 12.5 percent. And at state and community colleges, tuition would have declined, by 2.1 percent and 5.8 percent. Instead, it rose 29 percent and 18.1 percent.

As state revenues decline, Ms. Wellman predicted, the problem will only get worse. “We see the picture ahead being more of the same, but dramatically more of the same,” she said.


This article has been revised to reflect the following correction:

Correction: January 19, 2009
An article on Friday about a study that found that college students are paying a higher proportion of the cost of their education included incorrect preliminary data provided by the authors of the study, the Delta Project on Postsecondary Education Costs, Productivity and Accountability. At private colleges that offer master’s degrees, the portion of education costs paid by students rose between 2002 and 2006 to 83.6 percent from 80.4 percent, not from 75.5 percent. At private institutions that offer bachelor’s degrees, the percentage rose to 63.5 percent from 61.1 percent, not from 57.7 percent. At private research universities, the percentage declined to 55.8 percent from 57.6 percent; it did not rise from 55.3 percent.


Posted in Education Incentives, Rising Tuition, Student Loans | Leave a Comment »

Navigating the Murky World of Student Loans

Posted by gradefund on December 12, 2008,28804,1651473_1651472_1651495,00.html?iid=sphere-inline-sidebar

Navigating the Murky World of Student Loans

New York State Attorney General Andrew Cuomo
Richard Drew / AP

Nicole Gibson, 26, took out six private loans from 1999 to 2004 to finance her education at the Rochester Institute of Technology in New York. Like thousands of college students across the U.S., Gibson was steered to private loans by her school’s financial aid office and is now struggling to pay them off. Her monthly payments are $1,300 — almost exactly how much she earns each month as a graphic designer. With few places to turn to for help, Gibson contacted a number of lawyers to explore consolidation and payment-plan options, only to be told that nothing can be done. “One of them actually told me to marry a rich doctor,” Gibson says. “Had I known it would be like this, I wouldn’t have gone to college in the first place.”

That’s why Gibson was so struck by the findings of New York Attorney General Andrew Cuomo, whose office has been investigating the $85-billion-a-year student-loan industry since last November. Cuomo discovered that loan companies were bribing their way onto schools’ preferred lender’s lists, which students trust to lead them to the best deals.

Prompted by Cuomo’s findings, the Senate began its own investigation and released a 600-page report in June that revealed misconduct among lenders, regulators and universities was much more common than previously thought. Violations included lenders paying for access to students, using official school logos to market their loans and working out of college financial aid offices — acts as insidious as they are unethical. The report also uncovered what Senator Ted Kennedy called “inappropriate marketing practices” used by lenders to over-emphasize private loans by omitting information about unsubsidized federal loans, which have lower interest rates than private ones and are not need-based. Now Gibson, like a growing number of people, wonders who is looking out for students.

News of such misconduct is all the more troubling given how much and how quickly the private student-loan industry has grown in recent years. As federal aid stagnates, more students are taking out private loans — often in mortgage-size amounts. In the past decade alone, the private student-loan industry has grown 913%, with companies like Sallie Mae, Citibank and Bank of America cornering a large share of the market.

Almost everyone agrees that private loans are worse for students than federal ones. While federal loans have capped interest rates, private loans, like credit cards, have variable interest rates that can climb as high as 18%. Private lenders are also not required to provide forbearance or deferment payment options to students. What’s worse is there’s almost no debt forgiveness to speak of when it comes to this type of loan. In 2005, Congress passed a law giving private loans as much protection from bankruptcy as federal ones. This means that now, unlike nearly every other type of consumer debt, private student loans cannot be discharged in bankruptcy unless “undue hardship” is proven, the standards for which are nearly impossible to meet. “They will chase you down like a dog after a bone for the rest of your life,” said financial author Suze Orman in an interview with TIME.

Take Teresa Huber, who co-signed a Sallie Mae loan with her daughter, Sheena, to finance an education at Spencerian College in Louisville, Ken. Last January, Sheena, 22, died of lung disease just one semester before completing her degree. After sending her daughter’s death certificate to the loan company, Huber received a one-sentence letter in response, which stated that the loan must still be re-paid. Though she has taken her case to bankruptcy court, Huber knows the law is not on her side and worries that she will still be paying off Sheena’s loans by the time her 14-year-old daughter, Taylor, applies for college.

Conwey Casillas, Sallie Mae’s director of public affairs, acknowledges that the previous bankruptcy law, which allowed students to discharge their loans after seven years of active re-payment, might be more appropriate, adding that the company would support revisiting bankruptcy laws for students who act in good faith but still struggle to pay off their debt. Martha Holler, a company spokesperson, defended Sallie Mae, saying: “We don’t make the rules, but we do have to follow them.”

Private student loans come under the regulatory umbrella of a number of agencies, including the Comptroller of Currency, the Federal Deposit Insurance Corporation and the Federal Trade Commission. In addition, the Equal Credit Opportunity Act, the Fair Credit Reporting Act and other federal and state lending and consumer protection laws govern the industry. With so many watchdogs in place, one would think it impossible to break the law. In practice, though, this regulatory web seems to highlight the consequence of too much red tape. Testifying before the Senate banking committee in June, Cuomo called the agencies an “alphabet soup” in which responsibility became so diffused that none were doing the job. “They have the authority, but they didn’t use it,” he said. “Private loans are the Wild West of the student loan industry,” Cuomo told members of Congress.

Given their youth and inexperience, students are especially vulnerable to the loan industry’s fine print and confusing jargon. Kelly Bryan, 23, a graduate of Chicago’s Columbia College, says she still doesn’t fully understand how the process works. “It was like reading a foreign language,” Bryan says of the myriad forms and paperwork she had to fill out while applying for loans. And while some students are simply not doing their homework when it comes to financing their education, Harvard law professor Elizabeth Warren warns that financial illiteracy is not the problem: “It’s a little like mugging someone, and saying, ‘Well, you should have run faster.”

This lack of regulation cripples the country’s financial future while enriching a select few, Warren argues. She says that students are being bamboozled into risky private loans they don’t understand by an industry that “exercises influence as if it were part of the government, but collects profits as if it were a Fortune 500 company.”

Congress has launched a flurry of legislation in response to the ever-widening scandal. One bill, the Student Loan Sunshine Act, would require loan companies to tell students about federal loan options before they take out private ones. Another, known as the College Cost Reduction Act of 2007, just passed the House in July. If signed into law, it will mark the biggest increase in federal education aid since the GI Bill. The money would also mean a sharp blow to private-loan industry — it aims to slash nearly $19 billion in government subsidies to private lenders. But the bill might not survive the summer; President Bush is expected to veto the legislation because it asks for $3 billion more in cuts than the proposal he made earlier this year.

But because these bills are mostly sponsored by Democrats in Congress, some industry insiders are calling the entire scandal nothing more than political grandstanding in the prelude of a White House election year. And recent votes in Congress seem to suggest the issue does not transcend party lines. In July, Senate Republicans rejected an amendment to the Higher Education Act that would have created a federal loan program to compete with the private student-loan industry. Known as the Federal Supplemental Loan Program, these loans would have been dispensed through the Department of Education, entirely removing companies like Citibank and Sallie Mae from the equation.

Whether these bills become law or not, students like George Mallone feel their financial destiny has already been decided. Mallone, a junior at Columbia University, launched a blog last fall titled “I Will Be Paying Off My Student Loans With My Social Security Checks,” describing it as a place for students whose “loan repayment plans will terminate around the time we have flying cars and sentient AI killer robots.” Mallone received just one response, from a fellow Columbia student, who wrote: “Do you mean the social security checks that I will never see in this lifetime?”

Posted in Financial Aid, Student Loans | Leave a Comment »

Graduates drowning in debt from high cost of college

Posted by gradefund on December 12, 2008

Graduates drowning in debt from high cost of college

College graduates are starting work with twice as much debt as in the mid-1990s. For many, the burden of loan payments — sometimes as large as mortgage payments — is constraining big decisions, from picking a career to buying a house.

Seattle Times higher education reporter

Tyson Hunter dresses sharply, works out most every day and can’t wait to make his mark on the business world.

Hunter, 23, also happens to owe $152,000 in student loans, accumulated in four years at Boston University. He graduated last year with a bachelor’s degree in business administration, and now earns $40,000 a year at a market-research company.

His loan payments soon will top $1,000 a month — the amount of a small mortgage, and about a third of his salary. If he makes the minimum payments, he will retire his student debt when he is 53 years old, having handed lenders some $300,000.

“Buying a house? That’s not even in the 10-year goals,” says Hunter, who has temporarily moved back into his mom’s Bothell condo to reduce expenses. “The next two years are going to be crippling. Hopefully, after that, it won’t be as crippling.”

At a time when deep uncertainty permeates the economy, graduates across the country are entering the workplace with staggering liabilities. The average student debt has doubled since the mid-1990s.

And that burden often has an effect on the most fundamental choices graduates are making about their lives — decisions about home, family and career.

Take Isiah Sandlin, 32, and Hollie Sexton, 26, who are studying medicine at the University of Washington. Sandlin already has $275,000 in student loans; Sexton, $100,000. When the couple graduate in two years’ time, they expect their combined student loans will top half-a-million dollars.

Each new loan helps cover the payments on the previous ones. At least one of them will likely need to work in a high-paying specialty to make the whole thing fly. Sexton’s dream of volunteering abroad seems a long way off.

“I couldn’t quit now if I wanted to. No way,” Sexton says. “Once you are on the train, you’ve got to keep going.”

Most students borrow

While Hunter and Sandlin have exceptionally large loans, more than two-thirds of all students now borrow money to finance their education, up from less than half in 1993. Among undergrads who borrow, the average finished school in 2004 with loans of $19,000, up from $9,000 a decade earlier, according to one analysis of federal data.

Debt is escalating the fastest in graduate schools.

Take the UW. By its own estimate, the average undergrad who borrows winds up owing a little more than $16,000 by graduation. Master’s students who borrow, however, finish with an average $36,000 in loans; law students with $66,000; medical students with $106,000; and dental students with $143,000.

At Seattle University, where 80 percent of undergrads now borrow, the average student graduates with $23,000 in debt. Because federal loan limits are rising this fall, Seattle U officials say this year’s freshmen can expect to graduate with debts averaging $27,000.

On a 10-year repayment schedule, at 6 percent interest, that will add $300 to a graduate’s monthly bills.

Educators and economists have argued for decades that higher education represents a great long-term investment, thanks to the higher wages graduates can command. Janet Cantelon, director of student financial services at Seattle University, points out that even $300 a month is manageable for most graduates — the equivalent of a car payment — and a good long-term investment.

Yet the payoff is simply not as good as it once was.

Workers with bachelor’s degrees do earn more — an average $51,000 a year, compared with $31,000 a year for high-school graduates, according to the U.S. Department of Labor. But the department also reports that college tuition now costs five times what it did in the early 1980s, and it is rising at more than twice the rate of inflation. Inflation-adjusted wages, meanwhile, have remained stagnant since 2002.

And experts say there are some worrying trends in the rising debt levels — particularly in the precipitous rise in private loans, at least until recent months. More and more of those loans are directly marketed to students, without any oversight or involvement from schools, and often at higher interest rates.

In 1997, the federal government financed almost all student loans, with private loans making up just 5 percent of the market, according to the College Board.

But with the government failing to keep pace with costs, the private sector last year wrote at least 22 percent of the loans. Put another way, the amount of money borrowed from private lenders rose tenfold to $17.1 billion over that decade. And those figures don’t take into account other ways students and their families are borrowing, such as tapping home equity or credit cards.

In recent months, the credit crisis has halted the rapid expansion in private lending, and experts say that may not be a bad thing. Some lenders have abruptly pulled out of community colleges and for-profit schools; others are demanding more documentation.

Treasury Secretary Henry Paulson told Congress the $700 billion economic bailout package it approved Friday will benefit student-loan companies — a result some claim will unfairly reward companies that have profited from writing risky loans to students.

Just how the economic upheaval will play out remains to be seen. For now, at traditional four-year colleges, most students still are able to access large loans.

Driving up college costs in recent years is the fact that states are investing less in public universities, putting more of the burden on students, says Jacqueline King, an assistant vice president at the Washington, D.C.-based American Council on Education.

With its professors and tutors, administrators and groundskeepers, education is labor-intensive, King says. The cost of employing skilled professors has risen sharply. And universities can’t keep costs in check the way big business can, she added, by outsourcing or manufacturing overseas.

To be sure, student loans do help hundreds of thousands of students each year make it through college and improve their prospects in life. And there are signs that parents are coming to grips with the new financial reality of college: Assets in so-called 529 college-savings plans grew from $15 billion in 2001 to $122 billion in 2007, according to the College Board.

But for students graduating now, large loan repayments are adding a significant financial burden at a time when they also face rising health-care costs, expensive housing options and a difficult employment market — not to mention an economy on the brink.

Choices and sacrifices

When Tyson Hunter chose to attend Boston University, he never imagined he would end up borrowing so much money. His parents were willing to pay the equivalent of in-state tuition, about $6,000 or $7,000 a year. He also took a part-time job at a campus Starbucks, earning, with tips, $11 an hour.

BU tells students they will need at least $51,000 per year to cover tuition ($36,500) as well as lodging, food and personal expenses. Add it up, and it costs more than $200,000 for an undergraduate degree — not uncommon these days at a well-regarded private school.

Hunter was in his freshman year when his dad lost his job. His parents later divorced. Those events turned the family’s financial situation upside down, and they could no longer help out.

For a few months, Hunter left BU and tried a cheaper option — classes at Shoreline Community College and Seattle University. But, he said, he missed the intellectual stimulation and “East Coast competitiveness” of BU.

“I thought ‘Screw it. I’ll go back, and I’ll just take on debt,’ ” Hunter said. He doesn’t regret the move for a moment, he added.

“I felt like I was striving to better myself and to reach my greatest potential, and that BU facilitated that,” he said. “I wouldn’t have been nearly as happy if I went to a local school.”

Hunter did receive some extra aid due to his family’s changed circumstances, but it wasn’t nearly enough. Now working as an account manager in Bellevue, Hunter has deferred principal payments on his largest student loan for a year, reducing his monthly bills until April.

“All I can do is offer him a place to stay for free and help him out that much,” said mom, Nancy Hunter. “And if I win the lottery, I can pay off his loans.”

Tyson Hunter said he appreciates his mom giving him a place to live, but he misses his independence. He has sketched out a financial plan that should allow him to move out in February.

Hunter seems confident he will be able to repay his loans. But he has no room for missteps.

For some students, loans can change a career path. That’s the case with Josh Bates.

“Once upon a time, I wanted to be an engineer,” Bates said. “But I didn’t want to take on any more loans. I was so in debt.”

Bates, 27, of Bothell, studied mechanical engineering at Montana State University. He slacked off for a couple of years, he says, partying too much and enjoying the perks of student life. After five years at MSU, he had accumulated nearly $50,000 in student loans, another $8,000 in credit-card debt, and he still didn’t have a degree.

So Bates moved back in with his parents in Bothell and took a full-time job with a Seattle marketing firm. He has been finishing his degree by taking after-hours Central Washington University courses, offered at the Edmonds Community College campus. Because there is no mechanical-engineering program available, Bates has switched his major to business.

“If I had the time to go back to Montana State, I’d go back and finish,” Bates said.

Student loans also are playing into the career decisions of Isiah Sandlin and Hollie Sexton, the couple studying medicine at the UW.

Sandlin accrued a lot of his debt while finishing a four-year degree in naturopathic medicine at Kenmore’s Bastyr University, before realizing his true calling lay in traditional medicine.

He and Sexton, who has accumulated most of her loans during her two years at medical school, say the amount they owe is a big concern.

“I’d be lying to say it didn’t color my specialty,” said Sandlin, who is looking into emergency medicine or a surgical specialty. “Some of the specialties I’m considering are of interest to me, but they also pay particularly well on the whole physician spectrum.”

On Sexton’s 2008-09 financial-aid statement, the UW outlines the expected cost of medical school: $50,500, including tuition, housing and personal expenses. The university subtracts “total resources” — zero — and offers a package that includes $3,000 in grants and $47,500 in federal loans.

Sexton is taking the full amount. She doesn’t feel like she has any other option.

Nick Perry: 206-515-5639 or

Copyright © 2008 The Seattle Times Company 

Posted in Financial Aid, Rising Tuition, Student Loans | Leave a Comment »

How to Get Scholarships in a Bad Economy

Posted by gradefund on December 12, 2008

How to Get Scholarships in a Bad Economy

Six tips for getting more grants as part of your college financial aid package

Posted October 21, 2008

Financial aid experts say the current economic troubles will very likely make the competition for scholarships more fierce than ever. They expect about half of all college students to receive at least a little free money to fund their education. To maximize your chances of getting aid in these tough times, experts recommend that students:

A freshman enters the admissions and financial aid building at Harvard University.

A freshman enters the admissions and financial aid building at Harvard University.

1) Be the early bird. Start applying for scholarships and lining up low-priced college options right now. “You want to make sure you are the first one in line,” says Cheryl Maplethorpe, director of financial aid for the Minnesota Office of Higher Education. Many grants are awarded on a first-come-first-served basis, she notes. And many low-cost colleges are cutting off applications especially early this season. College students who haven’t already filled out the Free Application for Federal Student Aid this year should do it as soon as possible. (High school seniors have to wait until January to apply for next fall.) You can search for nongovernmental scholarships by asking your high school counselor, your college’s financial aid office, and your college’s department for scholarship possibilities and advice. Many are also listed on websites like this one,, or the College Board.

While there aren’t many private scholarships still awarding money for this academic year, students can—and should—start applying now for private scholarships for next year, because some of the biggest and best private scholarships, such as those offered by the Coca-Cola Scholars Foundation, have October deadlines. And the most popular cheap four-year schools in California, including San Diego State University and Sonoma State University, will stop taking next year’s admissions applications for many types of students November 30.

2) Ask the boss. Check with the student’s and parents’ employers to see if they offer any kind of education or scholarship benefit.

3) Try low-cost colleges. Prepare applications (including transfer applications for students already in college) to some low-cost, in-state community colleges and public universities to provide a “financial safety school” option, says Eileen O’Leary, assistant vice president of student financial services at Stonehill College in Easton, Mass. That way, even if you don’t get any free money, your bills still will be much lower.

4) Become a catch. Prepare applications to at least two (or even more, to increase your chances of setting off a scholarship bidding war) public and private schools for which you’d be a catch because of higher-than-average grades or some special skill or talent. Students whose grades or test scores are higher than the school’s average have a good chance of receiving merit grants. “Put as much detail as possible into your college application,” says Sandra Bartholomew, dean of enrollment management at Green Mountain College in Poultney, Vt. “Colleges have money to award for lots of nonacademic credentials” like leadership, community service, environmentalism, visual and performing arts, etc., she adds.

5) Fill out forms in January. As soon as possible in January, fill out the Free Application for Federal Student Aid to qualify for aid next fall. While it is easier to complete the form if the student and parent have also filed their taxes, it is better to fill out the FAFSA with estimates (which can later be corrected) early than to wait past February 1. Students hoping to attend one of the approximately 300 schools that also require the College Board’s more exhaustive CSS/Financial Aid Profile application should also complete that before mid-February.

6) Appeal. Draft an appeal letter if the student has any financial difficulties not covered by the FAFSA, such as a parent’s job loss or mortgage problems. The student should send letters explaining the problem (with documentation, if possible) to any target schools and private scholarship programs, financial aid officers say. The letter to schools should request a “professional judgment review.”


Posted in Cheaper Tuition, Economy and School, Financial Aid, Student Loans | Leave a Comment »

Deepening student debts cause for worry

Posted by gradefund on December 5, 2008

Deepening student debts cause for worry
Graduate debt outpacing starting salaries

Ryan Simmons

The Project on Student Debt released on Wednesday its third annual report, “Student Debt and the Class of 2007.” The survey found that graduating seniors in 2007 carried 6 percent more debt than those in 2006, averaging almost $22,000, while mean starting salaries for graduates with bachelor’s degrees rose only 3 percent. The report broke down the data state-by-state: the lowest average student debts in the country were $13,266 in Utah, while the highest were $26,208 in Iowa.

The study also looked at the proportion of graduating seniors that had to cope with paying college debt. While the national average remained the same, around 59%, state averages were recorded to have increase in 25 states. The report notes that debt numbers may be artificially low, as they are reported by the institutions, which often do not have access to full information about student borrowing, discount transfer students in their records, or do not respond to questions about student debt.

Another survey, released Tuesday, by the National Association of Independent Colleges and Universities (NAICU), found that students attending private colleges are having a harder time securing loans to pay for tuition. Almost half of all private colleges report that some students have to take time off or go part-time due to financial troubles.

Of over 500 institutions surveyed, about 75% claimed they have received more requests for aid than in previous years, and 20% reported smaller incoming classes then expected. Rising tuitions and the state of the economy have made it increasingly hard for families to plan and pay for college, even with the largest number of graduating high-school seniors since the Baby Boom.

The survey found that nearly half of all private colleges reported students who could not secure a loan this academic year, most of whom had to take time off or start working part-time. Sarah Flanagan, the NAICU’s vice president for government relations, told BusinessWeek, “There are a concerning number of students who have had to change their educational plans because of a lack of credit.”


The starting salaries for graduating college students is outplaced by the debt accrued during their time attending school
  • Student debt rose 6 percent between 2006 and 2007, while graduate starting salaries rose 3 percent
  • Students attending private colleges are having a harder time securing loans
  • Nearly half of colleges reported students taking time off for financial reasons

Posted in Financial Aid, Student Loans | Leave a Comment »