A recent study by the National Bureau of Economic Research has revealed that simplifying the rules of applying for financial aid is essential to facilitate more low-income students attending college. The study — “Into College, Out of Poverty? Policies to Increase the Post-secondary Attainment of the Poor” — is actually a review of 17 previous studies, all which examined the efficacy of various programs aimed at increasing access to college and keeping students enrolled. The authors of “Into College, Out of Poverty” found that confusing and cumbersome paperwork is a major deterrent to programs, such as the Pell Grant, in reaching their goal of enrolling (and retaining) low-income students who would not otherwise have gone to college. If targeted stud...

The National Center for Education Statistics recently released a report describing the characteristics of college graduates who have received Pell Grants and comparing them to non-Pell Grant graduates.  Here are some of the findings from their study: 36 percent of 1999-2000 bachelor’s degree recipients received at least one Pell Grant while in college. Pell Grant recipients had greater undergraduate “risk characteristics,” including delaying post-secondary enrollment or failing to graduate from high school than non-recipients Pell Grant recipients whose parents did not attend college took longer to finish their Bachelor’s degree than recipients whose parents held a least a bachelor’s degree. They also enrolled in graduate school at a lower rate. When con...

President Obama’s plan to federalize student loans and increase funding for the Pell Grant cleared its first legislative hurdle today when the House Education Committee approved the plan. Known as the Student Aid and Fiscal Responsibility Act of 2009, the President’s plan would expand the number of students eligible for Pell Grants. Currently 40 percent of American college students receive Pell Grant assistance. In addition, the bill would tie the dollar amount of the Pell Grant to the rate of inflation, allowing for a maximum increase from $5,550 next year to $6,900 by 2019. In order to pay for the increase in Pell Grant funding, the bill would eliminate subsidies for federal student loans by private lenders such as Sallie Mae, replacing them with direct loans from the feder...

A number of important changes are looming for federal student aid, which may save you some serious cash. Here’s a quick look at the most significant developments: Interest rates on subsidized Stafford loans are dropping — This year, they will go from a 6% to 5.6% (fixed). Under the College Cost Reduction and Access Act of ‘07, the rate will continue to drop until 2011-2012, when it will reach an all-time low of 3.4%. Unfortunately, the lower rate only applies to loans taken out — or consolidated — in that academic year. Remember, with a subsidized loan, the federal government pays your interest while you are in school. Income-based loan repayment — I won’t bother rehashing the details, since I’ve covered them extensively in earlier posts. ...

President Obama’s budget plan calls for a number of sweeping changes for federal student aid, from student loans to state grants to education tax credits. It also proposes to big adjustments in the Federal Pell Grant Program. The Pell provides need-based grants to low-income students. While the amount of the grant is set each year by the Congress, the Pell Program is often criticized for not providing enough aid to keep up with the rising costs of higher education. If President Obama passes his budget, however, the Pell Grant Program will be transformed into an entitlement program that grows every year to keep pace with inflation. Just like Social Security and Medicare, Pell Grants would no longer be dependent on Congressional approval for rate increases. Instead, low-income stud...

CNN Money reported today that President Obama’s Stimulus Plan is set to help college students worried about how to pay for tuition, room and board. While the plan, known as the American Recovery and Reinvestment Act of 2009, still needs to be approved by Congress, some of the most student-friendly changes would include: >> Increasing the HOPE Scholarship tax credit First and second year students are eligible for the HOPE scholarship, which makes tax credits available to all students (and their families) during their first two years of college. Originally, the credit was equal to 100% of the first $1,000 in tuition and fees and 50% of the second $1,000. Under the President’s plan, the credit would be bumped up to $2,500 and would be eligible to cover not only the cost...

September 22, 2008 by Mara Strom A panel of financial aid experts thinks that America’s federal financial aid system needs a major overhaul.  According to the Rethinking Student Aid study group, these changes include simplifying the application process (aka FAFSA, or the Free Application for Federal Student Aid) and increasing Pell grant maximums. The most sweeping change recommended by the Fulfilling the Commitment report is the creation of federally-funded college savings accounts for children from low-income families. Each year, the government would add money to a fund for each eligible child, until that child turned 18. To draw on the fund, the money would have to be used to cover approved college expenses.  The group recommends starting the program from the age of 5. The G...

June 30, 2008 by Mara Strom Last week, we spotlighted the views of Barack Obama, the (presumed) Democratic nominee, on higher education and financial aid. I promised you then that I wasn’t being partisan — and that we’d look this week at what the Republican nominee John McCain has to say about funding your college education. Well, I’m keeping my promise, but in all honesty, there isn’t *that* much to say. On Scholarships For Veterans We know that McCain doesn’t like the Democrat’s proposal to give veterans a free-ride to college. But McCain’s criticism of the bill isn’t a knock on full scholarships to veterans (per se) as much as it is a critique of the bill’s terms: McCain says to give these benefits after only three years (as th...

One assumption made by financial aid recipients that needs clarification is the belief that loans are not considered financial assistance. In fact, the vast majority of financial aid dollars are disbursed to students in the form of loans. While federal and state governments do dish out plenty of grant and scholaship aid, loans (often termed “self-help aid, along with work study) are the cornerstone of the modern financial aid industry. This is an important distinction to make, particularly if you enter a post graduate program. As a graduate student, you will no longer be eligible for a Pell grant or any other federal grant aid. Aid eligibility for graduate students usually falls into three categories: loans, assistantships and fellowships. From the Department of Education, the only...