TuitionCoach.com Blog - Paul's Corner

Maximizing Scholarship Dollars

Tue, 2 Dec 2008 09:50:04 -0800

TuitionCoach provides lots of advice to families on ways to make “outside” scholarships work better. An even more useful approach is to write a piece directed at the providers of scholarships to help them make more effective use of their money.

As you may know, most private and organizational scholarships are awarded late in the student’s senior year of high school. By that time, a student has already been accepted by a college and a financial aid package has been offered. Then suddenly, a new scholarship is received from a local Kiwanis or Rotary Club. Under the accepted protocol, the new scholarship should be reported to the college whose financial aid office will likely reduce its aid award on a dollar-for-dollar basis rendering the new money largely irrelevant. It happens every year in thousands of locales across the nation.

There are many better ways for scholarship sources to help needy students.

First, before you release the money, be sure the recipient student has actually contacted the college to see how the college treats outside scholarships. The way to do to is to have the student call the financial aid office and ask, “I may get a scholarship from (your organization) but before I accept it, I want to know how the college treats outside scholarships.” If they say that they will replace financial aid on a dollar-for-dollar basis, the student should ask if he/she can use the scholarship to replace any self-help aid (loans and/or work-study). The college may say that it doesn’t negotiate such things or that it will split the new scholarship between self-help aid and free or grant money. Then it is up to the student and the scholarship provider to decide what to do. Depending upon the size of the scholarship, there are a couple of options. Whatever you decide in this limited scenario, it is not the best way to maximize the impact of an outside scholarship.
If you insist on awarding scholarship so late in the game, one way to help is to first see if the student has been “gapped” in his financial aid award. Gapping means that if the student has a demonstrated need of, say, $25,000 but the college only offers $15,000, there is a financial aid gap of $10,000. In that case, the money can be sent to the college in order to fill the remaining gap. Don’t send the check to the financial aid office but, rather, to the college billing department in the name of the recipient student. Don’t label it as a scholarship…just a payment. Because it fills an already demonstrated need that has been gapped, it doesn’t have to be reported to the college financial aid office nor is it taxed because the amount does not exceed the cost of college.
If there is no remaining gap and/or if the college refuses the option of using the scholarship money to replace any self-help aid (loans and work-study) in the student’s financial aid award, you should offer (to the student) to put the money in an escrow account and have the student show up the next May with his/her grades and a copy of the student loan promissory note containing the address of the lender. Simply cut a check for the amount of the scholarship and send it to the lender to pay off all or part of the student loan. Some scholarship entities appreciate this because of its inherent quality-control focus. If the student fails to do well or even complete the academic year, you can withhold the scholarship and direct it to a more successful student.

Another suggestion for any scholarship provider is to integrate a cost-effective tool like TuitionCoach into the program for two reasons:

For many scholarship applicants, their need is profound and their level of hope is high and then, when the scholarship is denied as most are, it is just another “no” in a lifetime of rejection. If the scholarship provider made an arrangement with TuitionCoach so that they could make its content available to all of their deserving scholarship applicants, those students would still be winners by showing them and their families ways to increase their financial aid awards at any college they wish to attend. One example is a service club in the San Francisco Bay Area that decided to reallocate a portion of $7,500 scholarships normally awarded to three students ($2,500 each) to a program that included detailed, ongoing information on ways to fund college, TuitionCoach. Using that model, they assisted fourteen students not three. If one takes the total financial aid offered to the participating students in the first year and multiplied the number by the normal 4-year college career, the program helped to provide over $844,000 in direct college financial aid to 14 families. If scholarship purveyors use TuitionCoach for all or any qualified applicants, they will do almost as well as the actual scholarship recipients. They would most certainly do better if the actual scholarship winners did not also have access to TuitionCoach.
Given the high cost of college, a small scholarship of a couple thousand dollars given on a one-time basis doesn’t make much of a difference in the lives of the recipient. But intelligently navigating the larger financial aid maze and knowing how to deal with all costs not covered by financial aid can make that scholarship much more meaningful by reducing the after-financial-aid costs to a bare minimum. A $2,500 scholarship to a family with a calculated expected family contribution of $3,000 means a lot more than if that family’s EFC were $8,000, made needlessly high as a product of simply bad planning and lack of timely and comprehensive financial aid knowledge.
Scholarship vendors should consider requesting applicants earlier, certainly no later than the end of the high school junior year. In that way, by using TuitionCoach earlier in the game, college choices are likely to be upgraded so that the actual scholarship will be spent on a more appropriate college experience.

The philosophy here is a simple one: Is it better to give a hungry person a loaf of bread or the means to make bread? The answer is obvious and scholarship entities would do well to consider it.

If you or your organization has interest in exploring this approach in further depth, simply contact TuitionCoach by email at: partnerships@collegecompany.com.

Coming Soon: Beginning in January, 2009, “Paul’s Corner” will feature a series of articles that will suggest ways to overhaul the college and graduate school financial aid system. It will mark a dramatic departure from the current orthodoxy and outline a template to create simplicity and rationality while providing dramatically more equitable college access to those at all income levels who are yet to become victims and life-long collateral damage of the present system.

The Awakening

Sun, 9 Nov 2008 09:51:02 -0800

I woke up early on that Wednesday morning and something was missing. For the first time in so many years, I wasn’t angry; for the first time in so long, I wasn’t afraid. It was still dark outside but it felt like a bright sun was shining down on my house, my country and my planet. Something monumental had changed….something both real and symbolic.

Over my first coffee of the day, the old images flooded my mind’s eye, still clearly etched in my memory. The visions of the police dogs attacking fellow citizens engaged in a peaceful march, the ashes of a church fire that had consumed innocent little girls, the seemingly endless parade of funerals for decent citizens like Medgar Evers and so many others engaged in trying to secure the full rights of citizenship for an entire race of Americans whose only “crime’ was being born with dark skin. Their world was one of lynchings and burning crosses, of unexplained and unsolved disappearances of loved ones, of denials of employment, of lives in sub-standard housing and of carefully orchestrated second-rate education. This book of memories has been with me for as long as I can remember. Included in my scrapbook of the past was that day at the Lincoln Memorial when the Reverend Martin Luther King Jr. raised his powerful voice in a plea to what seemed at the time an unhearing deity, the hope that one day our nation would learn to judge people not by the “color of their skin but by the content of their character”. We heard those moving words and we collectively sighed, “If only…!”

Then, on one November day, providence, politics and a nation’s long-repressed conscience intersected to create a moral critical mass that erupted into the miracle that we thought would never, ever come. In an historical instant, the work, vision and courage of leaders from Abraham Lincoln and Nat Turner, from Jackie Robinson and Roy Wilkins, from Rosa Parks and Thurgood Marshall and legions of anonymous people of all races were transformed into a new reality. In that moment in time, people of good will everywhere elevated our nation to a new, higher plateau of human possibilities. In doing so, we finally placed some soothing balm on the open wound of racism in our nation’s soul, a wound that had been left too often untreated for what seemed to be an eternity.

On that November day, the world paused, then caught its breath and finally shouted in both disbelief and triumph with faces often laced with tears of joy. That symbol of freedom, that beacon of democracy, that once reliable friend and incubator of everything possible had stirred from its slumber and was reigniting that special light for all to see. America, the last, best hope of humanity was stirring again to reclaim its role as a full partner in the global community and to lead by example and not by the threat of its arsenal. It was again time to be the custodian of its moral imperative to show the way to a better tomorrow for all humanity.

For those of us who have been saddened by the direction of the last eight years, it feels good to be home and to once again be a welcomed part of the endlessly interesting and challenging world. We rejoice in the prospect of putting the old Machiavellian playbook featuring fear and intrigue back in some obscure, dusty stack in the library where it belongs. We look forward to living in a nation that may have learned it is always a good idea to listen to our neighbors rather than ignore them or vilify them because of their political affiliation or ethnic roots. Maybe, at last, we have learned that we’re in this together and that all of us are better than any of us.

The meal that has been served to Barack Obama is not a happy one. On his plate are two dangerous wars, a wayward economy, a world environment at risk, and any number of global conflicts many spawned centuries ago and often fueled in the present age by economic hopelessness. Neither he nor anyone can cleanse the world of its current ills. But Mr. Obama did show us one thing. Collectively we, all of us, have the power to transform the world. There will be naysayers but they haven’t been paying attention. Our President-elect has already shown us that people regardless of political affiliation, religion, ethnicity or any other allegiance, people of good will working together can usher in a new era, one that demonstrates unambiguously the old idea that when we help each other and treat others as we would choose to be treated, we can change the world. Yes, we can!

Private Student Loans – Caveat Emptor!

Thu, 6 Nov 2008 08:09:48 -0800

The current financial crisis has implications for college funding.

The private student loan model was created and sustained largely by the failure of the college financial aid system to keep pace with rising college costs and changes in the larger economy. The resulting funding gaps and shortfalls are often bridged by private student loans, “paper” that is created primarily for the benefit of investors and not the needy, often desperate students and their families.

In March 0f 2008, the National Consumer Law Center issued a report that described the all-too-often predatory nature of this marketplace.

Pricing: The average APR (annual percentage rate) of private student loans was found to be 11.5% and was tied to the student’s credit rating so the lower the credit score, the higher the interest rate. A reasonable person might have some trouble with the logic of this. But, as you know, good business and bad logic are common bedfellows.
Origination Fees: These range from a low of 2.8% to around 9.9% and are supplemented by other fees (late charges, research, forbearances, etc.).
Disclosures: Despite the TILA (Truth in Lending Act) requiring disclosure, lenders often provide them too late or in a format too confusing for the vast majority of borrowers.
Flexible Payment Plans: There are no requirements for lenders to provide them so few do.
Postponing Payments: Some lenders offer short-term plans but very few provide information about this in a before-the-fact disclosure in the promissory note.
Workouts and Cancellations: Lenders rarely offer reasonable settlement or cancellation provisions even in the event of the death of the borrower.
Mandatory Arbitration Provisions: Typically, the borrower MUST agree to binding arbitration by an arbitrator chosen by the LENDER.
Default Triggers: This is a moving target. There are no standard time lines. Some are as soon as one missed payment.
Holder Notice and Other Borrower Defenses: Typically, there are limitations on the borrower’s right to seek relief even when the school is unlicensed or fails to deliver on its promises. This is exacerbated when the school and lender have a “sweetheart” arrangement.
Misleading and Default Information about the Student Borrower’s Bankruptcy Rights: These loans are often very difficult to discharge in bankruptcy. There are waiver clauses sometimes requiring the signee to repay even if under the age of 18. There are often venue restrictions requiring the borrower to sue only in the state of the lender and a requirement that compels the lender to sue only in its own state.

If you are forced to enter the financially risky world of private student loans, you should take heed to the old advice, “caveat emptor”, buyer beware! Hopefully, this short reminder will alert you to put out your mental antennae and to carefully read the small and often confusing print before agreeing to sign a supplementary private student loan.

It is one thing for lenders to use these practices (and not all do) but it is even worse that the inadequate college financial aid system drives ordinary citizens into this largely unregulated swamp.

During this extraordinary time as we evaluate the causes of the greater worldwide financial collapse, it wouldn’t be a bad idea to include the domestic private student loan market when we construct the new regulatory system to replace the old one which, to put it gently, was largely missing in action during the buildup to the financial meltdown. The private student loan market is in dire need of a comprehensive, enforceable laundry list of regulations. Of course, the best and in the long run, probably the cheapest solution would be to make the financial aid system so strong and so reliable and so tightly mandated that there will be no need for the supplementary private student loan market. But nobody ever accused the government of practicing wise preventive medicine.

Troubled Times and Paying for College

Fri, 17 Oct 2008 08:24:33 -0700

The current financial crisis has implications for college funding.

First, each of us is feeling the pressure of falling investments. Colleges and their endowments are also being affected. More than a few colleges are heavily invested in hedge funds and other assets filled with bad “paper”. For families, the impact will be manifested in the colleges’ ability and/or willingness to provide adequate campus-based aid to needy students. The same is true in states that have programs to help colleges meet the financial need of low and middle-income students. Those state-based programs are funded by tax revenue but with the tax base shrinking as a byproduct of falling property values and the general tightening of state budgets, a gap in financial aid packages is the likely outcome. “Gap” means if a family has $10,000 of aid eligibility, the college may only be able to fund $5,000 of that need leaving a gap of $5,000.

Second, the typical way to cope with both gapping in financial aid awards and calculated family contributions that are already too high is to take out private loans. In the absence of any targeted programs, that resource will either dry up or become so selective and expensive that they will only be available to families who don’t need them or whose credit scores are extraordinarily high.

Private loans are expensive because they are created to attract third party investors and as such they are designed for someone other than the actual borrower. Instead, they tack on high processing costs and initially high interest rates that are likely to increase substantially with every late payment or if the borrower’s credit rating diminishes because of some other occurrence in the borrower’s credit history which may have no direct relationship with the private student loan.

So, for all of us in the college market, while the basic forms of federal aid are not likely to change much, the sources of aid below the federal level will show the effects of the meltdown. This grim prognosis would suggest that consumers who want to survive must know as much as possible about ways to qualify for financial aid and just as important, strategies to deal with what are likely to be high costs not covered by need-based financial aid. Following is a time-tested recipe for success.

Like any recipe, you must begin with the menu. For college, there are really two courses: managing college costs and protecting retirement. Add to this, an overriding outlook that will determine how you will approach the preparation of the meal. In this case it is simple: “You can always borrow for college but you can never borrow for retirement”. The current climate may affect the front end (borrowing) of this advice.

Here is how it should all work:

Calculate the predicted “bottom line” costs for the year of college. Use the personalized tools on TuitionCoach to learn how to increase your aid eligibility and minimize those costs. The “bottom line” is the total student budget or cost of attendance (COA) for a year at the college minus financial aid (if any).
Take the remaining costs and spread them out over 10 or 12 months to see what they would look like as a monthly bill.
Decide whether the monthly amount can be comfortably accommodated out of the family’s normal monthly cash flow. If not….

If it hasn’t been used up in the financial aid award, borrow any remaining eligibility for an unsubsidized and/or subsidized federal student loan. The below chart outlines loan limits for dependent students:

Year	Base Limit (subsidized and unsub)	Extra limit for unsubsidized loans	Total
Fr.	$3,500	$2,000	$5,500
So.	$4,500	$2,000	$6,500
Jr.	$5,500	$2,000	$7,500
Sr.	$5,500	$2,000	$7,500
5th	$5,500	$2,000	$7,500

The aggregate total each year includes both subsidized and unsubsidized loans. For instance, if the student has been awarded a $2,700 subsidized loan in the freshman year, total eligibility for an unsubsidized loan is limited to the total eligibility for that year or, in this case, $2,800.

If the family has to borrow to make monthly costs affordable, public student loans are always the cheapest college options. Moreover, students with loans seem to take college more seriously and because of that, they tend to graduate in four years, a clear, money-saving outcome for parents.

If that still fails to make the now-reduced monthly payments possible, consider borrowing enough federal PLUS loan money (Parent Loan for Undergraduate Students) to bridge the gap between the amount you can afford monthly and the actual monthly cost of college. Remember, both PLUS loans and unsubsidized student loans will become due and payable about 60 days following the full disbursement of the loan each year, about March or April of that academic year. Both loans are 10 year notes. Servicing these loans will have an impact on the amount you will be able to pay out-of-pocket to the college in future years.
Sign up for a monthly payment plan at the student’s college and pay the remaining, affordable, out-of-pocket amount over 10 or 12 months. If the college does not have a monthly payment plan, just create one using a PLUS loan or private loan with no pre-payment penalty or other creative borrowing solutions like a home equity line of credit. It will require some personal discipline to maintain those payments in light of the many other claims on your resources.
Repeat until graduation. After graduation, it is not the worst idea to pretend the student is still in college but instead of sending your monthly money to the college, send it to the PLUS loan or other lender to get the loan off the books as soon as possible while you are still healthy and working.

At no time should you cash in retirement assets. You will need them later on.

This recipe has been successfully used by literally tens of thousands of Americans and by doing so, they have upgraded college choices while securing the family’s long-term financial security and the promise of a fulfilling retirement for the parents.

If there are several college-bound students in the family, the recipe becomes somewhat more challenging as it does when cooking a fine meal for many, many guests but with imagination and patience, it is doable. A good rule of thumb is to stretch your out-of-pocket contributions on the front end of the college years while you are more active and productive as an employee so that you won’t be burdened with old debt as new students enter college. That old debt must be serviced which may reduce the amount you can afford to send to the college every month thus forcing the family to take out larger loans to make ends meet. So maybe a good “spice” for our meal would be to “sacrifice early so you can relax later”.

Entering the college funding arena with a philosophical game plan and some tools to help lower the bottom line is a perfect setting for those years that we at TuitionCoach have always characterized as a “celebration of the family”.

Middle-earth

Fri, 10 Oct 2008 09:26:40 -0700

During these times of financial uncertainty, one reflects upon the landscape of commerce and some questions arise that seem to merit attention. Because of the unworldly nature of this mess, my thoughts drifted to the place that could handle the twists and turns of the unfolding drama. My thoughts drifted to Tolkien.

In his “Lord of the Rings” trilogy, J.R.R. Tolkien created a place called Middle-earth where a battle for control of the world was waged between the good guys and the bad, featuring creatures called Orcs and an assortment of other miscreants. Tolkien first told us that Middle-earth occurred some 6000 years ago but he later recanted and suggested it existed in a different stage of our imagination. In my view, it exists today in an altered but very real form.

In the “Lord of the Rings” they key to world dominance was control of certain magic objects. In the “Middle-earth” of today, the magic stuff is money.

Our nation is blessed with innovative and energetic people, hard working creators of products and hands-on technicians who keep those products running. In addition, we have armies of skilled practitioners, teachers, doctors, lawyers and so many others. But in between, there are legions of Americans who spend their time and our dollars simply manipulating the space between production and delivery by shuffling money which makes them wealthy and for the rest of us just adds to the cost of goods and services.

Witness an experience with Medicare. I needed a simple accessory for a minor medical issue. I went directly to the distributor and watched in astonishment as they billed Medicare an amount that exceeded $200. I then went online and found that I could order the exact product for $79. The approved Medicare distributor increased the cost to the nation by over 100%. That transaction is replicated every day by a factor of millions and it illustrates one of the costly flaws in the way we do things. No system of health care can exist very long when there are layers of non-medical people skimming money from health care goods and services in that “Middle-earth” between the patient and the providers of actual medical services.

In the private student loan market (and to a degree in the public student loan market), loans are created not for benefit the consumer but, rather, the investor. Private loans are designed to be packaged and sold sometimes several times by firms and people you never see or know so that some faceless investor can make money from you simply by shifting his assets or the assets of others he controls to invest in your loan. Those investors educate no one; they produce nothing; they benefit themselves and in doing so they raise the private and public ante for whatever service or product the original loan was intended. This practice is what disproportionally drives our economy and the nether world of “Middle-earth”. We have become a high-risk, high-cost economy made so by endless layers of anonymous middle men who finance their often lavish life styles by manipulating your money while producing zero products and services. The entire credit card and indeed the larger credit industry was built on the easy (and dangerously untrue) proposition that anyone can and should be able to afford anything by simply borrowing the money. It is a risky and cynical approach that creates a false sense of wealth and in doing so, may ease the urgency of quests for higher salaries by working Americans. If there were no lures of easy credit to fill the income shortfall, the union movement and the power of working America would increase exponentially. The big winners in this dangerous, high-stakes game, of course, are the creditors themselves who are paid by the both buyers and sellers. The other winners that typically escape notice are the captains of industry who preside over a debt-ridden workforce who cannot afford to ruffle their employers’ feathers for fear of being terminated and becoming easy prey for their own creditors. The more an employee depends upon his employer to merely survive, the less likely the employee will make demands on that employer because of the omnipresent specter of being laid off or providing an incentive for the employer to move his manufacturing facility to some emerging country that still pays third-world salaries.

I have many friends in the financial services industry. I ask them “What do you do?” “I am a broker”; “I sell insurance”; “I manage funds”. “Yes, but what do you do?” What they do is manipulate money in order to make money as an end in itself. There’s something vapid about that. Living one’s life moving money around to acquire personal wealth without a clear social purpose seems like a life-long dance marathon with greed as one’s sole partner.

Colleges and universities, often the beneficiaries of the inhabitants of “Middle-earth”, typically fail to pass on the gains of such money manipulation. For instance, why do colleges who enjoy huge endowments charge anything to attend? While some wealthy colleges are beginning to share their bounty with students, many others do not and that is troublesome. If education is a right of all Americans, why is there a rider on that right that says, “…if you can afford it?”

Our “Middle-earth” is a dark place. Too often, little of any lasting social value is produced; greed and manipulation are its life force; there is little or no sunshine and the air is foul. Sadness and suspicion are everywhere. As a society, we would be well-advised to do some excavation to expose it to the light of day and if we don’t like what we see, to clean up that part of our environment so that our democracy can grow and reclaim our role as the beacon of freedom and the planet’s most prolific incubator of ideas and technology while also serving as the world’s gold standard of social responsibility, the truest measure of a nation’s greatness.

Loren Pope and Paul Newman

Mon, 6 Oct 2008 15:47:37 -0700

Education lost two of its treasures recently. Each contributed in a different way but both enriched our lives and the lives of those we serve.

Loren Pope wrote two of the most thoughtful books on college ever written. In “Looking Beyond the Ivy League”, he reminded us that colleges should be chosen for the student fit and not the ratings of third parties more interested in selling magazines and books than they are about the stewardship of a student’s college selection process. It was Pope who first challenged the college ratings game in any meaningful way. In “Looking Beyond…”, Pope explored not only the essence of the college experience but how a student can approach college with a taxonomy of attributes so that the student can compare colleges against a known, personally-driven suite of standards that will form the basis of college selection. It was Pope’s notion that if a student applied to multiple colleges, they should be very similar in certain key characteristics. In that way, if the student was admitted to any or all of the choices, the student would likely be happy because the college reflected the academic and social environment that addressed the student’s personally-defined comfort level.

In the event the reader failed to grasp the full message of Pope’s book, he wrote a companion volume, “Colleges that Change Lives”, in which he explored colleges around the nation that provided certain attributes that many “prestige” colleges can only dream about. My daughter attended one, The College of Wooster. She emerged an educated, confident, poised, and competent adult, the raw materials of a productive, meaningful life.

Pope’s books are required reading for any college counselor and any parent facing the challenges of college for their kids. His words are sensible and are likely to change many of the college selection parameters for students and their families. He challenges the notion that the “prestige” of a college attended is somehow the singular hallmark of successful parenting. It isn’t but it makes for nice cocktail party conversation.

I once lived and taught high school in the Connecticut community where Paul Newman lived. As a varsity soccer coach, I would hang out from time to time at Tip Schaefer’s sports shop. Tip provided our teams with equipment and uniforms. Every now and then Paul Newman would drop by the store usually clad in something bordering grubby. He was an avid jogger and liked to be just a regular guy. He completely succeeded in that role. He was just another, normal person doing normal business in the town he so loved.

Paul Newman’s acting career is well-known and seldom, if ever, equaled. I loved his work. My personal favorite was “The Verdict”, directed by Sidney Lumet. His stunning portrayal of Frank Galvin, a lawyer beaten down by life and faced with a high-risk, career-rescuing, “Hail-Mary” case involving medical malpractice is one for the ages. He conveyed the burden of life as no other actor can. His patient, intense and ultimately riveting example of the actor’s craft approached perfection. Through “The Verdict” and Paul Newman, we gained greater insight on that often moving target we call justice.

Much of my professional life has been directed at work in the non-profit world. Over the years I have founded two non-profits and I have helped hundreds of talented, deserving young people to go to college. Typically, the students were from low income, first generation, single parent families. Time and again, those efforts were funded by generous grants from Newman’s Own. Paul Newman’s sense of public responsibility changed lives just as surely as those wonderful colleges mentioned in Loren Pope’s book. I am confident that his work will be carried on by his daughter, Nell, and Peter Meehan who will continue to manage Newman’s Own and its social mission in the years ahead.

The world of acting, the world of philanthropy and indeed the larger world of humanity will miss Paul Newman. In his last role as the stage manager in Thornton Wilder’s “Own Town”, his last words at the end of the play are entirely appropriate as our last word to him, “Hm…Eleven o’clock in Grover’s Corners. – You get a good rest, too. Good night.”

The Bailout as Katrina Revisited

Mon, 29 Sep 2008 14:27:04 -0700

Even with Katrina on the radar, our government played the business-as-usual game. The outcomes of that dangerous approach are well known. Surely, the financial meltdown has been on the radar for months if not years and like Katrina, the government’s tardy response is one fueled by a sense of urgency largely created as the stepchild of federal neglect and dereliction of duty as the steward of our nation’s economy. Looking for the villains in the current financial meltdown is like shooting fish in a barrel. They are all over the place. But that obvious conclusion is not the point. What is lurking in the shadows of the nation’s future is the probability that the cure for the meltdown may be worse than the disease because of its likely impact on social programs that benefit the larger body politic. This includes higher education, college opportunity for the next generation and the competitive edge of our nation. All may be in harm’s way.

First, colleges are major stake holders in the financial arena. Their endowments and financial health are closely linked to the investment marketplace. As the market continues to tank, colleges are also victims. They too invested in risky paper in an effort to maximize their endowments. Many colleges are mired in hedge fund investments and others have spent real money on securities that resemble illusory beachfront property in Arizona. This will no doubt impact the colleges’ ability to provide sufficient campus-based aid to needy students. And that is only in the private college marketplace. With budgets at the state and federal levels also victimized by the financial crisis created in part by lower property values and the subsequent impact on the tax base, there will be less public money available to address the demonstrated need of students in public colleges and universities. That effect is already evident in California, where the practice of “gapping” financial aid offers is the rule rather than the exception in the University of California and the California State University systems. As always, the big losers in the short run are lower and middle income Americans. In the long run, the nation will suffer collateral damage as an entire generation of American potential may go untapped because a college education, so vital to developing that potential, will remain merely an elusive dream. To compound the problem, the money committed to the “bailout” will divert funds from the public services that will surely be needed as an under-educated generation of Americans drifts aimlessly though their lives.

The college financial aid system is easily the best public investment the nation can make. Tied to it are a higher tax base, a greater competitive edge in the global game of influence, and a much lower need for expensive publicly-funded services. But, it will fall victim to the headlong rush to bail out the investment marketplace as a puzzling reward for malfeasance and greed. When will we learn that “deregulation” is simply a code word for unfettered avarice and irresponsible behavior by people who know they are behaving badly? Even more importantly, they don’t seem to care because they live in big houses and wield great influence in the halls of Washington and are thus unlikely to pay the piper for their misdeeds. Witness the current bailout scheme. We throw people in jail every day for stealing a loaf of bread from a convenience market but we give a pass to overpaid executives who steal millions from ordinary, unsuspecting, hard-working Americans. It is the stuff of Lewis Carroll who introduced us to this world on the other side of the looking glass.

I am not a business school graduate and I am certainly not qualified to deal with the small print of the bailout deal or to do complex financial projections but intuitively, I don’t understand why the American taxpayer has to pay anything for a bailout. Why not simply allow financial organizations to unbundle their shaky deals and walk away from the dead-end loans by giving the bad paper to the federal government at no cost? That is the very thing these banks and financial institutions require homeowners to do in foreclosure. Why not have the financial companies face the same horrible choice facing their debtors? Then the feds can deal with the borrowers and, where possible, work out reasonable settlements that can be used to fund other important government programs and to make up for the tax write-off the financial entities will enjoy when they dump the bad investments. In that way, the government (taxpayers) might actually make some money while the financial behemoths can move forward on the strength of cleansed portfolios that consist only of preferred loans and other profitable ventures. Sure, they may lose some money in the short run but they will start anew with a clean slate of solid, lower-risk investments. Meanwhile, the government can make it possible for people to keep their homes with renegotiated low-cost mortgages that should be preceded with a substantial period of forbearance to allow the homeowners to catch their financial breath and to have the cash needed to relocate and to restart their financial lives. If the financial services companies need more money to help with their liquidity, the feds, who will not have spent that $700 billion, can provide very low-cost, low-risk loans that should be secured by the remaining good paper in the company’s portfolio. It is exactly the same model the companies used when they gave out loans to homeowners. Sounds like a much more rational solution that benefits everyone. Just paying top dollar to financial giants and overpaid executives for bad decisions is counter intuitive, maybe even stupid.

A cynic might suggest that the hidden agenda behind the bailout is to so impoverish the nation, any new occupants of the White House and Congress will be unable to implement any grand social programs including a critically-needed massive upgrade of our K-12 and college systems or the national health care system. Relying on Congress to work things out also makes me a little nervous. After all, we are depending on the same body whose immediate response to the horrific events of 9/11 was to sing patriotic songs on the steps of the Capitol and to rename a vegetable.

If there is any upside to the current financial crisis, it is the sight of democrats and republicans breaking with the rigid confines of party loyalty and actually joining together to find a solution that benefits the greater whole of American society. To see our publicly-elected officials actually thinking about us rather than the strategic positioning of their political parties is refreshing and uplifting because one of the unspoken reasons why we are in this mess was the myopic, self-serving, partisan approach of legislators and members of the executive branch. These people sold their souls to the narrow interests of party loyalty at the expense of their primary mission to serve all Americans and to “…secure the blessings of liberty to ourselves and our posterity…”. Those imperatives articulated in the Preamble to our Constitution, are too often violated, too often twisted and, sadly, all too often completely ignored.

NACAC: Keepers of the Flame

Wed, 24 Sep 2008 09:45:43 -0700

This week, members of the National Association for College Admission Counseling (NACAC) will assemble in Seattle, Washington. Since the late 1930’s, NACAC has been the professional “umbrella” organization for college admissions personnel, high school counselors, private counselors and many, many companies and entities associated with the pre-college world. The annual NACAC Conference brings together all of these elements in one place, under one roof for a few valuable days of learning, idea sharing and social events.

Someone once said, “All of us is better than any of us.” When it comes to college admissions, nothing could be more accurate. It is neither college admissions staff nor high school counselors who alone create the college magic for our students; it is all of us working in concert that craft unimaginable life opportunities for generations of talented young people. And it is very hard work!

Few “outsiders” understand nor appreciate the real world of a college admissions staff member. For many, it means weeks on the road giving presentations at schools and countless auditoriums and conducting interviews in hotel lobbies and some less-desirable venues. It means working a full day at the admissions office and then reading dozens of college essays at home before you can finally rest. It means making life-altering decisions on the fate of young people knowing that you might be wrong both in terms of those you accept and those you reject. It means gingerly walking the fine line between competition and collegiality with your professional counterparts from other colleges. All of this is done with little fanfare and little appreciation and often comparatively little compensation. All of this requires an unshakeable work ethic, a firm commitment to the social good, a deep appreciation of the human condition, more than a fair amount of intelligence and some would suggest, a touch of insanity. But, in the end, their hard work pays off and their colleges and this nation are all the better for their efforts.

Then there are the counselors at the secondary public, private and parochial school level. As a former principal and vice principal at comprehensive public high schools, I can report without hesitation that the world of a school counselor is on its face a nearly impossible task with student loads of 200 to over 500 per year. That’s just the number of kids but what doesn’t get noticed are all the things counselors have to do that are not explicitly outlined in their job descriptions. School counselors are faced with increasing burdens imposed by programs like special ed and the requirements in many states that mandate creating and implementing Individual Education Plans for each student which involves endless paperwork and meetings with families, administrators and teachers. Additionally, there’s the responsibility for executing state-mandated testing programs and other functions loosely associated with simply being a counselor. There’s creating master schedules, dealing with never-ending class assignments and changes, serving as an emergency substitute for teachers who might fail to show up at the last minute or who have a mid-day emergency. Their days include dealing with angry teachers who often have a justifiable reason for rejecting yet another student the counselor has been forced to put in a class for reasons beyond the control of the counselor; coping with parents who have an issue with the school or a teacher and who only take calls in the evening or on weekends; dealing with the ongoing, year-long, steady stream of new students who need to be placed in classes and who may or may not be fluent in English; hosting evening informational programs for parents and students and serving as a last school-level resort for students who are disruptive or who have substance-abuse issues or eating disorders or who may be pregnant. And then, of course, there’s the Herculean task of writing all of those school reports for college applications and the list goes on.

Next, are the many selfless workers and volunteers who serve the hundreds of thousands of disadvantaged and under-served students and families of this nation. Such programs blossom in every state and every day, young people are given a chance for a real life through the efforts of these compassionate professionals. Examples include but are certainly not limited to Upward Bound, Talent Search, QuestBridge, Posse, CollegeWorks and others across the nation, along with private and charter schools created specifically to serve this demographic . The programs may be varied but for the vast majority, the primary goal is the same, to create fair and equal access to post-secondary education.

Finally, there are members of the private sector pledged to serve the pre-college world as counselors, funding resources and creators of new tools to supplement the work of the over-burdened human resources already in the trenches. Entities like Naviance, the College Board, Kaplan, the Princeton Review and Simple Tuition just to name a few, help to make college a reality for so many. Their work along with a host of others, despite some recent events, has been one that uniformly supports the college world by increasing college readiness and by creating an awareness of college venues often over-looked by under-manned and sometimes non-existent school counseling services. Still other companies and individuals work with parents to help them deal with the increasingly daunting issue of college funding and in doing so, they complete the work of college counselors and increase the applicant pool for large numbers of colleges.

These are the many and varied faces that one encounters in the family of NACAC members. On the occasion of the NACAC conference, it is altogether fitting that we acknowledge not only the work of NACAC and its regional and state-level affiliates but that we also celebrate and salute their members, professionals in the best sense of the word, people who perform nothing short of small miracles every day and in doing so, forever alter the futures of the students and families they serve and the destiny of this great nation.

Maggots and Morons

Fri, 19 Sep 2008 08:24:58 -0700

In my other life, I taught government to ninth graders at a public high school in Connecticut. We covered many topics often using original texts as our basis for understanding how our system works. Locke’s Second Treatise was on our agenda along with John Stuart Mill’s, On Liberty. It is the latter that is particularly relevant during this time marked by a troubling political climate.

John Stuart Mill reminded us that an enlightened people should be engaged in an unrelenting search for truth and that every opinion great or small may contain some elements of that elusive commodity. But more to the point, Mill said, “We can never be sure that the opinion we are endeavoring to stifle is a false opinion; and if we were sure, stifling it would still be evil.” Using Mill’s advice as a standard, our nation is becoming more evil with every passing day as minds become more closed and ideas from our fellow citizens are met with scorn and ridicule as a function of their affiliations rather than the content of their messages.

Fueled by the lions of the left and right along with an out-of-place sprinkle of religious dogma, this nation is becoming a less fertile breeding ground for ideas particularly in the political realm. If you need to understand how much vitriol and intolerance is out there, just turn on your radio after 10 pm and surf the dial. The hatred one hears has no bounds. It is the stuff of banana republic dictatorships because the talking heads label anyone who may disagree with their ranting as “maggots” and “sub-human morons”. Rhetoric like that permeated the speeches of the Nazis in the thirties and other dictatorships throughout the ages. It is intolerance and demagoguery at its worst and it is the toxin that can destroy any vibrant democracy as it stifles the healthy search for truth.

Mill also said, “If all mankind minus one were of one opinion, and only one person were of the contrary opinion, mankind would be no more justified in silencing that one person than he, if he had the power, would be justified in silencing mankind.” This includes the right of the strident on-air voices in the night to express their opinions but what it doesn’t include is the character assassination by them and others intent in raising their image through indiscriminate personal attacks on the character and intelligence of those with whom they differ.

Dictatorships are built on personalities while democracies are forged by ideas. To reject ideas and to mock those with whom we may disagree is not only foolish but it is anathema to the whole idea of democracy. Those who make a living by deliberately and maliciously pitting neighbor against neighbor may be doing more harm to our democracy than an armed uprising. Our history is marked by a tradition where ideas have almost always trumped raw force. When they haven’t, things like the Civil War occur where all the casualties were Americans.

Those who wish to make the coming election about personalities and not issues, represent the embodiment of an approach that denies an eternal truth about our form of government. Democracies were founded to create societies where ideas can flourish and to decide among those ideas, free and open elections are held. To categorically attack those with whom we may disagree as “maggots” and “morons” says more about the speaker and his utter lack of understanding about the true meaning of democracy than it does about the person he attacks. An unfettered, respectful exchange of ideas is the life blood of this democracy and anything or anyone obstructing that flow of ideas or downgrading the importance of policy discourses among free people is a toxin that can only be cured in unimaginable ways.

Emily University and Brian College: Selecting a College

Thu, 11 Sep 2008 10:37:22 -0700

Reposted from July 31, 2007

College is not about names or ratings...It is about fit. The way the deal works is that parents have to write the checks, something that TuitionCoach can make less painful, but it is a student’s responsibility to ensure that those checks make them happy. This suggests that students should try to create substance and form to the generic word, college.

In an active college day, with the exception of science and engineering majors, students are in class for about three hours. During the other 21 hours, they are either sleeping, studying or part of the larger college social community. Once a student enters a class, it is difficult to tell whether he or she is in a public state college or an Ivy League institution. Great classes are more often than not a function of the skill of the teacher and skilled teachers abound in colleges across the nation. It is safe to mention that a class at a highly selective college does not necessarily provide a guarantee of great teaching. It is when the student leaves class and joins the larger college community that environmental differences become evident. The setting, the social life, the climate, the facilities can differ markedly from college to college which would imply that college choice should be predicated on those factors as much or even more than others. Students who feel they are a part of a comfortable college community seem to do better than students who feel alienated from a social setting that fails to address the non-academic requirements of the student.

One shortcut to finding a fit is to create an inventory of the student’s needs. In the absence of another approach, Ed Fiske’s “Sizing-Yourself-Up Survey” in his Fiske Guide is a good place to start. Simply answer the easy questions and a self-scoring guide will provide you with and decent overview of the kinds of attributes you may want in a college.

Then, after you design a college environment, go to any number of college guides to find colleges that seem to address those needs. Here are some hints about ways to expand your number of college possibilities:

Try to take location out of the mix as a very important factor. See what’s out there first in terms of your college description and then choose one that most closely satisfies your geographic needs. Even if your ideal college is far away or in a cold climate, you would be foolish not to seriously consider it. Colleges have central heating and changes in seasons are a great excuse to get new clothes!
Try to avoid choosing a major before attending college. Parents get a little nervous when kids depart for college without a sense of a possible career choice. The truth is that when most high school students think they know what they want to do in the workplace, they are often wrong and they may waste valuable college class time getting ready for a career they won’t ever pursue. College is a place to become an educated young adult. Remember, most of your adult life is not spent on the job. When you consider weekends, holidays and 20 or 30 years in retirement, it would be a shame to devote all of your college education to the smallest segment of your adult life. Moreover, a great, broad-based education will serve as valuable resource if you change careers or if you get down-sized by technology or inept management.
Never allow your college choice to be driven by college ratings. If you love a college, any college, for you that is the best college in the land.

Be sure to create a list of prospective colleges that is realistic in terms of admissions. It is fine to apply to a very selective college but always try to create a list based upon statistical realism. Check the admissions profile of each college by looking at things like the SAT score range of the middle 50% of last year’s accepted applicants to that college. Also look at the yield or the percentage of students the college accepted from the entire list of applicants. The colleges with higher yields (lower percentage of admits from the total applicants) tend to be the more selective colleges.

The litmus test of whether your college selection list is on the right track lies in the similarity of the colleges on your list. If they all seem to fit your descriptive profile, then you will dramatically skew the odds in favor of a happy college landing because whatever college you finally select will mirror your requirements.

In my view, college selection is by far the most important part of the college process. When a student winds up at an inappropriate college, any college savings created by TuitionCoach is largely irrelevant. There is no upside to spending money on a college that makes a student unhappy. To avoid this, parents should monitor their student’s initiative and energy level through this and other college admissions components. A passive approach by a student may indicate that he or she is not college-ready or that there may be a self-esteem or confidence issue that should be addressed prior to moving forward on the college path.

College can be an intellectual and social feast but not unlike the restaurant experience…If you aren’t hungry and/or if you don’t like the food, it is a bad investment at any price.

The College Financial Aid House of Cards

Tue, 26 Aug 2008 13:39:55 -0700

Normally, I am a pretty optimistic person. I look for the good in nearly everything but now I find myself bearing witness to the slow unraveling of the college financial aid system and with it the key to the American dream is being denied to literally millions of talented young people. The problem is not only with the system itself which, while mostly irrational and process-driven, seems to be at least moderately operational. What is more frightening is the growth of a sinister virus that is being spawned in the colleges and it is one that in the absence of a cure is likely to kill the patient.

Across the nation, colleges of every type are playing fast and loose with the outcomes of the FAFSA (Free Application for Federal Student Aid). What good is the expensive FAFSA processing system if the colleges are not duty-bound to respond fully to its imperatives? Here is what is happening:

When families complete the FAFSA, the data are used to calculate a dollar amount that the family will be expected to pay for one year of college, the EFC or Expected Family Contribution. Let’s say, for instance, that a family has an EFC of $5,000 and the student is admitted to a college that costs $25,000. According to the long-established formula (the Federal Methodology), the student in this example has a demonstrated need of $20,000 (the difference between the EFC of $5,000 and the actual cost of college, $25,000). The demonstrated need is the amount that the college is expected to provide with a combination of need-based subsidized loans, work/study, and grants in whatever combination the college deems appropriate. For years, colleges have responded rather well to that standard. But now, things have changed, often dramatically.

For many reasons, colleges and universities across this nation are displaying a callous disregard for the formula by “gapping” families. In the above case, it would not be unusual for the family with a demonstrated need of $20,000 to receive only half or less in the form of need-based aid. Instead, the “award” would contain financial aid totaling, say, $10,000 or maybe $10,000 in need-based help and a non need-based PLUS loan (Parent Loan for Undergraduate Student) for about $10,000. In the latter instance, the college offering the PLUS loan in its award will usually claim that 100% of the demonstrated need of $20,000 was filled when, in fact, only about half of the need was addressed with real need-based aid. So, as a practical matter in this example, a family making about $50,000 a year would be treated as one making nearly twice that much in terms of the actual financial aid it received. Remember, anyone can get a PLUS loan. The richest families on the planet can easily borrow as much as they want every year to pay for college using a PLUS loan. PLUS loans were put in place to help families pay the EFC not to masquerade as need-based financial aid.

What is happening is dangerous. With colleges gapping families at will in the absence of penalties of any kind, there is a growing trend by colleges to accept and dole out federal money (Pell Grants, Student Loans, Work/Study and other programs) while ignoring the college’s responsibility to contribute an appropriate amount to the process after the public money is exhausted. When this practice carries with it no penalties for the colleges that do business this way, there is an implied incentive to merely increase the cost of the college to make even more families eligible for federal aid with no tangible effects on the college except that they are likely to increase their income. What is most alarming is that public colleges and universities are some of the most active practitioners of the gapping betrayal. These are institutions whose life blood is the tax money from the very people they are gapping! In California, the extent of the practice is stunning and disheartening.

The effect of this growing specter is enormous. As the need-based financial aid system unravels because of its unreliability and the unwillingness or inability of the lead players to adhere to the original script, families at any income level can no longer plan for college. All the counseling from schools and the private sector mean nothing if the system continues to be a moving target. College and universities, the gateways to opportunity, will simply become agencies that reinforce the establishment of a society of the haves and have-nots as the financial aid system continues its drift toward becoming a cruel hoax.

What is needed is more federal oversight. Yes, it’s that “big government” issue again. When will we all recognize that the size of government is nothing more than the stepchild of bad behavior by the private sector? If people and institutions would play by the rules, government at every level could shrink dramatically. If you don’t like big government, simply act more responsibly. When a college, for whatever reason, refuses to fund the entire demonstrated need of a family by failing to allocate campus-based money to supplement limited public funds, the institution should run the risk of becoming ineligible to participate in the federally-sponsored financial aid system. By the government’s failure to hold colleges accountable for undermining the reliability of the financial aid system, it makes the federal government a codependent in an act of bad behavior. If the college can’t contribute its own funds (a discounted student would work), then it should close its doors or do a better job tapping alums and others to upgrade their endowments. The public sector should also consider increasing its financial commitment to the federal financial aid system that has not come close to keeping up with the effects of inflation since its inception. That would help to take some of the pressure off colleges by narrowing the funding gaps.

Unless or until there is aggressive oversight by governmental agencies that provide financial aid programs to colleges, the system will continue to unravel and in doing so, this nation’s greatest resource, the ingenuity, energy and vision of its young people will be forever squandered. Remember, colleges are cheaper to build and maintain than prisons and welfare programs, the hallmark products of ignorance and despair. Massive support of colleges and students is also less expensive than the effects of a dysfunctional college financial aid system that needlessly impoverishes parents who may face their retirement solely dependent upon a publicly funded, financially at-risk social security system. That nightmare is yet to come.

How Americans Pay for College or the Road to Ruin

Wed, 20 Aug 2008 13:09:59 -0700

Sallie Mae and Gallup have just released the text of a national survey of an admittedly small sampling (1400 parents and students) showing how Americans pay for college. The survey while somewhat useful is notable for what it fails to address. What we are given is a snapshot taken in relatively low light on a subject that demands far greater depth of field. The outcome is a pretty typical sample of what we educators often produce, a statement of the obvious with a sense of discovery. Findings of the survey include:

32% of the family contribution to paying for college comes from income and savings; student borrowing contributes 23% while parent borrowing contributes 16%; money from grants and scholarships constitutes about 15% to the college funding mix; student income contributes another 10% and help from friends and relatives makes up about 3% of college-funding resources.
About one half of the families surveyed borrowed to pay for college with public student and parent loans comprising the lion’s share of those loans. Of the 8% of the student and the 4% of parents who used private education loans, the amounts borrowed were very significant (Sallie Mae should know this well).
While a small percent (3%) of the sample used home equity to pay for college, the amounts borrowed were significant (over $10,000 per year). Incredibly, a similar percent used credit cards to help pay for college.
Interestingly, 9 out of 10 families with incomes lower than $35,000 applied for financial aid via the FAFSA. One wonders what the other thousands of low-income families in the remaining 10% did to pay for college. Sadly, however, only 76% of families with incomes between $35,000 and $50,000 submitted a FAFSA and even fewer (73%) completed the FAFSA with incomes from $50,000 to $100,000 resulting in a very significant number of college-bound families leaving federal and other kinds of aid on the table.

None of the survey questions cover cost issues like the timing of FAFSA submission, sources of college funding advice, the correctness of the data submitted on the FAFSA and the effects of college financial aid practices on the college-cost burden at all incomes. We don’t know from this survey how the system itself needlessly adds to the cost of college. I conclude from my personal experience with a much larger sample of American families across the nation spanning more than two decades of work, that it is the system itself that typically fails to deliver on its promise. It is the system that places needless financial burdens on nearly every family at incomes under $150,000.

What the Sallie Mae/Gallup study does highlight is that use of the FAFSA is mixed and parent’s response to paying for college is equally mixed. The one constant, regardless of the method used to pay for college, is that a generation of American parents is risking retirement security because of the absence of a reliable and rational college funding system. With every dollar put into a family’s college savings plan, there is a dollar less for a parent to use for retirement along with immediate reduced eligibility for need-based aid, realities that will come home to roost for American taxpayers in the years ahead. When will this nation understand that it is far less expensive to massively underwrite the comparatively closed-end costs of a four-year college career than a more open-ended 30 year retirement for families whose personal retirement funds have been dangerously depleted by college costs?

The upside of the Report is that some serious work is being done to better understand the effects of college costs. More needs to be done and at some point when we all finally agree on the obvious, that the system does not work and that there is a need to rethink society’s approach to the college funding issue within the context of our nation’s future, then we will be able to dismiss the researchers who are consumed with a study of the “what is” and focus on developing a system that will better address our nation’s needs and the future of this democracy, a focus on the “what can and should be”. After all of the studies, after all of these years of reflection and research, the college financial aid system remains largely intact, preserving an approach created by well-meaning people who drove to work listening to Patti Page and Perry Como on their automobiles’ monaural sound systems.

The Higher Education Opportunity Act

Wed, 6 Aug 2008 09:33:57 -0700

Congress showed some signs of life this summer with the passage of a law that marks a fairly large assault on a few of the barriers to high education. Much of the text has to do with “behind-the-curtain” regulations for colleges and financial aid professionals but a few provisions actually impact the consumer. The following summary is based upon a release by Senator Ted Kennedy’s office.

There is substantial reform in promoting transparency in the college cost arena. Colleges will be required to provide a rationale behind their rising costs to not only justify costs but to combat what for many looks like some price collusion by colleges. The Act requires the U.S. Department of Education to publish reports on college pricing practices.
Textbook pricing policies will also be required to share some sunlight. The law mandates that textbooks should be “unbundled” so that students will only have to purchase those textbook materials that are relevant to their courses. Many students are required to buy very expensive textbooks even though only a small portion of the text is actually assigned and used in the course.
There is a provision for a new, simple version of the FAFSA. The new EZ-FAFSA is only 2 pages long and it is a precursor to the eventual phase out of the 7-page FAFSA and the emergence of the simpler, shorter form for everyone. It essentially creates easier access to a very flawed system.
The law also provides for a pilot project that enables juniors in high school to receive an estimated Expected Family Contribution which anyone can already do in a couple of minutes on TuitionCoach.
The new law provides greater transparency in the student loan marketplace, the subject of much deserved criticism in the last year or two.
There are a number of provisions for members of the military that enhance access to college along with certain monetary benefits. It is not nearly as powerful as the original GI Bill that helped me get three advanced degrees but it is a step in the right direction.
The Pell Grant will increase by about a third and continue to increase to $8,000 by 2014. That increase is not very dramatic given the increases in the cost of college and the rate of inflation. It does create incentives for low-income students to complete their degrees in less time by funding students year-round.
The federal TRIO and GEAR UP programs will be strengthened to provide more chances for low-income, first-generation college kids to access and graduate from college, a good public investment given the cost of publicly-funded services for under-educated and under-employed citizens.
The Act addresses issues that provide college support for students with disabilities and is clearly an important advance for that group. Provisions supporting future teachers and nurses are also included in the new law.

The Act is a step forward by correcting some of the college-related issues facing families but it doesn’t really address the core problems with college funding and their effects on the nation’s long-term intellectual health. It is a little like putting perfume on a wart hog. Hopefully, the legislation will buy us some time to really reform the higher education funding mess.

For those of you who are gluttons for punishment or who have nothing better to do, you can read the entire bill once it becomes law. It is called the Higher Education Opportunity Act and it is more than 1,100 pages in length. To save you that agony, from time to time we will discuss various provisions of the Act in the months to come.

When the day arrives that we are able to put smart, reform-minded people in a room, people who are required to check their political labels and loyalties at the door, that day will signal the dawn of a new age for higher education in the United States. It will trumpet in an era where ability, initiative, ambition and vision are the only operative college admission standards and where the money issue is left pretty much to the “green eye shade” people who will enable the system to function in a paper-free environment for American families across the financial spectrum.

Student Loan Update

Tue, 8 Jul 2008 10:30:44 -0700

Funding cycles in the post-secondary education world begin on July 1. There are significant, important alterations in the student loan landscape for the 2008-9 academic year.

First, the amounts of borrowing have been increased in an effort to keep pace with rising post-secondary education costs. Both subsidized and unsubsidized student loans are affected.

Subsidized loans are those loans offered as a part of a need-based financial aid award. They do not require payback until after the student leaves college or grad school and while in college, interest does not accrue. For undergraduates, the new interest rate beginning with loans disbursed after July 1, 2008 is 6.0% and 6.8% for graduate students and unsubsidized loans at both undergraduate and graduate levels.

Subsidized
Year	Old Limit	New Limit	Old Interest Rate	New Interest Rate
Fr.	$2,625	$3,500	6.8%	6.0%
So.	$3,500	$4,500	6.8%	6.0%
Jr.	$4,500	$5,500	6.8%	6.0%
Sr.	$5,500	$5,500	6.8%	6.0%
5th	$5,500	$5,500	6.8%	6.0%

New this year for dependent students is the eligibility to borrow an additional $2,000 unsubsidized loan annually. The new total amounts for student loans looks like this:

Year	Base limit (subsidized and unsub)	Extra limit for unsubsidized loans	Total
Fr.	$3,500	$2,000	$5,500
So.	$4,500	$2,000	$6,500
Jr.	$5,500	$2,000	$7,500
Sr.	$5,500	$2,000	$7,500
5th	$5,500	$2,000	$7,500

The aggregate total each year includes both subsidized and unsubsidized loans. For instance, if the student has been awarded a $2,700 subsidized loan in the freshman year, total eligibility for an unsubsidized loan is limited to the total eligibility for that year or, in this case, $2,800. Unsubsidized loans have a fixed rate of 6.8% and become due and payable while the student is in school. However, the student can elect to defer payment until after college but the interest will accrue during the deferment period.

Aggregate Dependent Student Loan limits:
Base: $23,000
Extra: $8,000
Total: $31,000

Interest rates on undergraduate subsidized student loans are slated to decrease over the next four years to 3.4%.

Year	Interest Rate
2008-9	6.0%
2009-10	5.6%
2010-11	4.5%
2011-12	3.4%
2012-13	6.8% in the absence of further Congressional action

Rates in unsubsidized loans will remain at the current 6.8%.

In some instances, a dependent student may borrow more than the standard limits on unsubsidized loans. If the parent has been turned down for a PLUS (Parent Loan for Undergraduate Student) loan, a federal loan program that allows parents to borrow whatever amount they need to pay college costs not covered by financial aid, the student becomes eligible for additional unsubsidized student loans dollars every year the parent is rejected for a PLUS loan.

For Independent undergraduate students and dependent students whose parents were denied a PLUS loan have higher loan eligibility.

Year	Amount of Loan Eligibility	Subsidized	Unsubsidized
Fr.	$9,500	$3,500	$6,000
So.	$10,500	$4,500	$6,000
Jr..	$12,500	$5,500	$7,000
Sr.	$12,500	$5,500	$7,000
5th.	$12,500	$5,500	$7,000

The amount of unsubsidized loan eligibility each year is reduced by any subsidized loans awarded. Regardless, the total amount that can be borrowed cannot exceed the total maximum eligibility each year.

Aggregate Independent Totals (including those dependent students whose parents were denied PLUS loans:
Base: $23,000
Extra: $34,500
Total: $57,500

For graduate school students, each year you can borrow:

	Subsidized limit	Unsubsidized limit	Total per year	Aggregate
Each year	$8,500	$12,000	$20,500	$138,500
Medical Sch.	$8,500	$32,000	$40,000	$224,000

In addition to the FFELP and Direct Loan programs, colleges still use Perkins loans in financial aid award packages. They are ten year notes with a fixed interest rate of 5%. The amounts are up to $4,000 per year for undergraduates and $6,000 for graduate students. Undergraduates have a cumulative limit of $20,000 and a $40,000 aggregate limit for undergraduate and graduate Perkins Loans.

There is also the private loan marketplace. As a general rule, private loans are more expensive than public loans (the current national average is about 11%) since they are created to satisfy the needs of the investors who fund the loan. In the absence of any wide-spread, coherent plan to ensure the likelihood that the loan will be repaid, those rates will continue to be high as an offset to the risk associated with student loans. Private loans should always be used as a last resort when all other options have been exhausted. Before turning to private loans, every family should carefully review financial aid applications and awards to be certain all other avenues of support have been fully explored. The many resources in TuitionCoach can be very helpful in that process.

Regardless of which loans one uses, it should be part of an approach to paying for college that practices our ongoing mantra: “You can always borrow for college but you can never borrow for retirement!” Look for loans that are low cost with flexible payback options. And ALWAYS be aware of any tax benefits associated with both student and parent loans. This can be checked by downloading the IRS Publication 970 and/or visiting “Paul’s Corner” in the late winter every year when we will publish an annual update and overview of all education tax benefits relevant to families and students dealing with the monetary challenges inherent in the higher education process.

When Freedom’s Just Another Word

Tue, 1 Jul 2008 17:02:09 -0700

Over 200 years ago, a small group of visionary patriots risked everything by signing the Declaration of Independence, a document created by Thomas Jefferson with substantial contributions from John Locke’s social contract. The Declaration stated unequivocally that because a state of absolute freedom was also a very dangerous condition, we needed to find a way to safeguard our lives, liberty and estates. To ensure that security and protect those precious things, we would voluntarily give up some of that absolute freedom to form a government. Those wise, brave men knew that it was possible to actually enhance the quality of life if one was willing to limit absolute freedom in certain ways. So the contract emerged; the people ceded some liberty to the government in order to secure other, more lasting and important freedoms. That was and is the essence of the deal and both the people and the government they created are duty-bound to keep their ends of the bargain.

As we near the twilight of the first decade of the new century, it is fitting to assess the contract to see how it is working. If freedom is a centerpiece of the deal, let’s look at it. How well is the government, that child of the people’s will, doing?

How free are we, the people, to determine the activities of the government when money drives elections and the creation of legislation?

How truly free are the people who have to work two or three jobs to meet their mortgage or rental obligations?

How free are the people who can’t pay for the fuel needed to get to work or to heat their homes?

How free are citizens who can’t afford medical care because of a health system bloated by legions of bureaucrats who never cured anybody?

How free are people whose quality of life is often dictated by credit bureaus and credit card companies who collude to arbitrarily raise rates on debt at any time for reasons only they know?

How free are people who because they can’t afford higher education, are excluded from equal access to the “American Dream”?

How free are Americans who go to bed hungry every night in this land of plenty?

How truly free are people who feel the need to triple latch their homes for fear of criminal activity?

How free are our kids who can’t walk to school or to a friend’s house without the fear of predators and how free are the parents who worry about those kids?

How free are we as a people as thousands of our fellow citizens die at the hands of gun-toting Americans in every city and town across the nation?

How free are American citizens when our highest courts demonstrate a greater allegiance to political parties and politically motivated positions than to the law?

How free are Americans who routinely lose their jobs at the hands of our business leaders who either ship our jobs overseas or simply lay off workers because of their own failed leadership or their need to reap personal fortunes at the expense of their workers who created that wealth?

How free are we when we pay taxes to better this nation only to see that revenue shipped to foreign capitals to allegedly improve the lives of citizens of other nations?

How free are we when our elected officials violate their solemn responsibility to protect and defend the Constitution of the United States by tolerating and sometimes abetting violations of that document every day?

How free are we when our elected officials appear to have more loyalty to political parties than to the people of this nation?

How truly free are we as a people when we are angry all the time and consumed with vilifying neighbors and public officials who may harbor political or religious views that differ from our own?

You can answer these questions and others as you choose. But if you find that our freedoms are not enhanced by our government and that something else is afoot, then we as citizens, the sole arbiters of our common fate, need to do something about it. That is the job of each of us. You see, as the descendents of the Founding Fathers and those who came before us, we are also signers of that Declaration. If we don’t insist on adhering to the terms of that original contract we so readily honor, who will?

So during this time of celebration, it is also a time of reflection. In fact, it is always time to assess whether the original contact signed on July 4, 1776 still holds. It is time for us all to return to those marching orders found in that document, things that include phrases like, “But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such government and to provide new Guards for their future security.”

Just because our leaders of every political stripe extol our freedoms and parade about with flag pins on their lapels, it is our task as citizens to look beyond that easy rhetoric and behavior to determine whether the contract, ratified on July 4, 1776, has been violated in a manner described by Thomas Jefferson. If it has, we as the American people and as custodians of that extraordinary legacy, have some work to do.