Prior to the economic crisis, the most recent Department of Education studies reported that over 12 million undergraduates receive financial aid each year; never mind the fact that the number of students pursuing a college degree is also growing year after year. Now, start estimating the number of college-bound families affected by a bad economy; parents that have lost their jobs, home values that have diminished, personal investments depleted… and the reality is that students who might have traditionally been able to afford college will struggle to do so with empty savings accounts and depleted equity lines.
Now, factor into the equation lenders leaving the federal student loan marketplace, budget cuts at schools, college endowments that have shrunk, an alternative student loan marketplace that is non-existent, and the fact is that there are fewer financing options than only a year ago. And, so, you are left with an unbalanced equation. On the right hand side, steady increases in college costs since the early 1990’s + a federal lending program that hasn’t grown at the same rate of public/private tuition increases. On the left hand side, shrinking savings accounts, home values, personal investments and alternative financing options.
Perhaps there is help on the way? But in the meantime, students who play it smart and get started early can get ahead. Families with more information and a better understanding of the complexity of financial aid will gain an advantage in a process that awards students on a first-come, first-serve basis. ConnectEDU is making sure our families have the tools and guidance to get to the front of the line.
The National Association of Student Financial Aid Administrators confirms that the majority of college students received financial aid last year and, some sources have reported that large dollars of scholarships and aid went unclaimed. In the shadow of this year’s aid crunch, I participated this week in a Mississippi Public Broadcasting discussion (mp3 audio file) on the general trends swirling in the marketplace. Now more than ever, students are being more pragmatic in their approach to their education. They are considering all their options, including a search for schools that are more aligned with their budget. We see it within our network of high schools … figures such as the number of students logging into our finance tools, the allocation of public universities and two-year college options on student’s college lists by comparison to a year ago, as well as the average tuition of this year’s group of students vs. last year. It’s evident that the financial crisis is having an impact.
On the college side, higher education is taking a closer look at the “business as usual” approach; they are actively exploring creative options. Community Colleges are bracing for increased enrollments and working to develop programs to move the best and brightest forward. Private four-year schools are evaluating their institutional aid policies to reach the most deserving candidates. Public colleges are pursuing cost cutting exercises such as solutions like electronic transcript programs, in an effort to cut operational costs and free up funds.
As far as the help that is on the way, the current economic bailout plan, “The American Recovery & Reinvestment Act” – the incoming administration's $850B stimulus package – does appear to be poised for passage. And the plan does include some welcome news for college-bound families:
- Increase in the Pell Grant by $500 per recipient (from $4,850 to $5,350)
- Increase of $490M to be made available to students via college work-study programs
- Federal student loan limit increase on unsubsidized Stafford loans by $2,000
- A $50M investment into the Department of Education to improve and simplify the student loan and financial aid process
The reality is that this is new territory for all involved – colleges, families, even the federal government. We don’t have a formula to follow or an equation to plug into. We must, however, remain focused on the best interests of our students, and making the efficiency changes necessary to help our institutions succeed. We can continue to provide higher education to the next generation, but it will require – as the Obama plan aptly names it – a “21st Century” update to the very dated process that we use today. It doesn’t take a math genius to figure that out.