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Since Governor Brown released his proposed 2012-13 budget three weeks ago, we’ve delved further into what the proposed Cal Grant cuts would mean for California’s students and families. Our further analysis reveals just how damaging one of the cuts – which would raise the grade point averages needed to qualify for Cal Grants – would be.

The dramatic changes proposed by Governor Brown would lock out more than a third of applicants currently eligible for entitlement grants. These are students who have worked hard and earned the grades that the state has long promised entitled them to participate in California’s primary student aid program. These are also the students, research shows, for whom financial aid may make the biggest difference in terms of helping them persist and succeed in college. As they finally reach the point where they are ready to go to college, many will find their dreams shattered.

Three out of four applicants cut out would be prospective Cal Grant B students, who on average have family incomes well below the poverty line. And the majority of these students go to community colleges, where students receive too little aid and are already less likely to receive state grants.

At a time when the nation needs more college graduates, cutting financial aid for the students who most need it to succeed is penny-wise and pound-foolish. See more details on how this cut would affect California’s students and their families here.

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Since October 29, 2011, almost all U.S. colleges and universities are required to have “net price calculators” on their websites.  These new online tools can make it much easier for prospective students and their families to look past often scary "sticker prices" and start figuring out which colleges they might be able to afford. Armed with early, individualized estimates of what specific colleges would cost after grants and scholarships, students can discover that their dream school may be more (or less) affordable than they thought - before they have to decide where to apply.

To help spread the word about these new online tools, the Department of Education has launched a College Net Price Calculator Student Video Challenge. High school and college students are invited to produce and submit short videos about why net price calculators are a valuable resource during the college selection process. Submit your entry by January 31 for a chance to win one of three $1,500 cash prizes!

To find out more about net price calculators, visit our new net price calculator resource page, with links to our publications as well as resources from the Department of Education.

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This afternoon the Board of Governors of the California Community Colleges (CCC) endorsed the final report of the California Community Colleges Student Success Task Force, which lays out eight chapters of recommendations to improve student success throughout the community college system. The Board will present the recommendations to the California Legislature by March 2012.

While there is much to like in the Task Force report, we are disappointed by the lack of attention paid to overall college affordability and financial aid.  Our research has shown that CCC students are leaving hundreds of millions of dollars in federal grant aid on the table simply because they don’t apply for aid, even though total costs can exceed $17,000 per year and many students have such low incomes that they can’t contribute any amount towards college costs. We’ve also found that access to federal student loans is worsening in California in particular. Over 200,000 community college students – the largest number in any state – lack access to federal loans because their colleges have pulled out of the program.  These problems are not unique to California, but they are particularly serious in the CCCs.

The issue is simple. Financial aid supports success by providing students with the time they need to attend class and study, without having to work excessive hours to make ends meet or take fewer classes per term to make room for work.  As we detailed in our comments submitted last month, the lack of substantial attention paid by the Task Force to students’ affordability challenges is a major oversight, and one that we hope will be rectified in the next phase of work.

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Statement of Debbie Cochrane Program Director, The Institute for College Access & Success  

We are saddened to see more than $300 million in Cal Grant cuts in the 2012-13 budget proposal released by California Governor Jerry Brown earlier today. Cal Grants are a crucial lifeline for hundreds of thousands of California students who couldn’t afford to attend or complete college without them.

Some of these cuts take a common sense approach to increasing accountability for all types of schools and preserving affordability at the state’s public colleges. For instance, prohibiting state grant dollars from subsidizing students’ attendance at colleges where more than one in four student loan borrowers default on their loans is smart policy in any budget climate. Also, the Governor’s proposal would maintain maximum award levels at all public colleges, where the vast majority of students in the state are enrolled.

However, some of the cuts would fundamentally transform the program from a true engine of opportunity for students who need a hand to a reward for those already much more likely to attend and complete college.  In particular, the Governor would dramatically increase the required grade point average for Cal Grant B awards from 2.0 to 2.75. These grants go primarily to low-income students at community colleges. This change would pull the rug out from under the underrepresented students whose college success is central to our state’s economic recovery. This is a dramatic cut to student eligibility, and one that would happen so suddenly that students who have long counted on a Cal Grant would instead find themselves empty handed.

We will continue to analyze the effects of these and other Cal Grant proposals on students as budget negotiations continue in the coming months.

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To help students better understand how much each college would actually cost them, the Consumer Financial Protection Bureau (CPFB) and the U.S. Department of Education (Department) have developed a Know Before You Owe financial aid shopping sheet. This draft form takes an important step toward helping students and their families make more informed decisions about how to pay for college and which college to attend. As President Obama remarked in Ohio earlier this week, “You don’t want to owe and then know.”

We recently submitted comments on the draft financial aid shopping sheet, pointing out the most critical elements to include (such as the full cost of attendance and net price) and providing recommendations to make the form even more helpful to students. For example, we emphasize the need to avoid appearing to endorse risky borrowing through private student loans.

We encourage you to submit your own comments on the CFPB’s “Know Before You Owe” webpage. Tell the Department and CFPB what information you wish you had known before deciding where to go to college and how to pay for it. Your feedback is valuable!

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At a time when college students are graduating with record amounts of debt and facing the highest unemployment rate in recent history, it is not surprising that the national survey of young adults (18-34 years old) released today found strong bipartisan opposition to charging students with financial need interest on their federal loans while they are still in school.

Yet this is exactly what House Majority Leader Eric Cantor recently proposed, and some have speculated that the so-called Supercommittee may be considering this as a way to reduce the deficit.  However, this proposal would simply shift the debt burden from the federal government to young people and adults working to get the education and training they need to compete in today’s economy.

Removing the interest subsidy on federal Stafford loans for undergraduates with financial need would increase the cost of college by thousands of dollars at the same time that the interest rate on these loans is scheduled to double from 3.4% to 6.8%, further increasing student debt burdens.

Just how much more would eliminating the in-school interest subsidy cost students who take out the maximum subsidized student loan amount and graduate in six years?

  • The scheduled doubling of the interest rate alone will cost them $4,600 more if they repay over 10 years and $10,400 more if they repay over 20 years.
  • The doubling of the interest rate combined with the elimination of the in-school interest subsidy would cost them $6,250 more when they start repayment (after the six-month grace period), $13,250 more over 10 years, and $21,850 more over a 20-year repayment period.

Rather than entirely eliminating the in-school interest subsidy on subsidized student loans and directing the savings to deficit reduction, the Senate FY2012 Labor-HHS appropriations bill proposes eliminating the interest subsidy during the six-month grace period after a student leaves school and using those savings to fully fund the Pell Grant program.

How much more would eliminating the interest subsidy during the grace period cost students who take out the maximum subsidized student loan amount and graduate in six years, assuming the interest rate doubles, as scheduled, to 6.8%?  Allowing interest to accrue during the grace period would cost these students almost $800 more by the time they enter repayment, $1,100 more if they repay their loan over 10 years, and $1,450 more if they repay their loan over 20 years.

The Senate Appropriators proposed this change in order to fully fund the Pell Grant program, but the House Budget Committee is blocking the Senate from using all the savings to fund Pell Grants next year.  This means that students would face larger debt loads and the Pell Grant program would still have a $900 million budget gap in FY2012.

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Updated March 19, 2012 Since October 29, 2011, almost all U.S. colleges and universities are required to have “net price calculators” on their websites.  These calculators can make it much easier to start figuring out which colleges you might be able to afford.  They provide early, individualized estimates of what a specific college will cost after grants and scholarships: the net price is what you might have to earn, save, or borrow to go to that school.  These new tools can help you move beyond often scary “sticker prices” and discover that your dream school may be more (or less) affordable than you thought - before you have to decide where to apply. Here’s how you can make the most of net price calculators: Finding them on the college website (they won’t always be in the same place)
  • Some calculators are easier to find than others.  A few are posted on the college’s homepage, but most are in the Financial Aid section, which is sometimes under Admissions. Otherwise, try looking in Consumer Information or Disclosures, or search for the calculator within the site or by using an outside search engine like Google.
  • It’s not always called a “net price calculator,” so also keep an eye out for the keywords “cost,” “estimator,” and “financial aid.”
  • The Department of Education has posted net price calculator URLs, as provided by colleges, on its College Navigator tool (http://nces.ed.gov/collegenavigator) under “Net Price,” as well as on its resource page.
Answering the questions
  • Be prepared to encounter all kinds of calculators, from the simple (as few as 10 questions) to the complex (50 or more).  Some calculators ask questions that require you to dig up detailed financial information from your (or your parents’) tax returns, earnings statements, and bank statements.  If you don’t have that information handy, answer as best you can or try to skip the question.
  • Colleges cannot require you to provide your contact information. If you aren’t comfortable giving them your name, email address, or other information, you don’t have to.
Interpreting the results
  • The most important number on the page is the “net price” – the full cost of attendance minus grants and scholarships.  Make sure you focus on that dollar figure when interpreting calculator results and comparing colleges.  Some colleges also subtract their expectations of how much you’ll earn and borrow to get a smaller cost figure, but it won’t be called “net price.”

  Remember that grants and scholarships don’t need to be repaid,     while work expectations must be earned and loans repaid with       interest. That’s why work-study and loans are called “self-           help.” You don’t want to accidentally compare one school’s net     price with another school’s figure that includes loans and work-     study.

  • Be wary of estimates that include unrealistic amounts of self-help.  We have found calculators that subtract $20,000 or $30,000 worth of expected loans to get to what might be called a “final” or “out of pocket” cost figure of zero.  This can make colleges look more affordable than they really are.  It may look like you will have no out-of-pocket costs, but the costs are just delayed.
  • The results are only estimates and colleges can calculate them differently, so use them to make ballpark comparisons between colleges.  Don’t draw conclusions based on differences of several dollars or even several hundreds of dollars – talk to the schools’ financial aid offices to find out more.
  • The estimates are only for your first year of college and apply to a particular academic year (e.g., 2011-12). If you expect to enter college at a later date, know that the college’s costs and financial aid policies may change.
  • Not all grants and scholarships are available for all years of college.  You can contact the college’s financial aid office (or try searching its website) to find out whether you can expect the same amount of grant assistance after your first year.
  • As all net price calculators are required to tell you, the estimates are not final or binding financial aid awards.  To get an actual aid offer, you have to apply to the school for admission and fill out the FAFSA (Free Application for Federal Student Aid, http://www.fafsa.ed.gov/) to qualify for federal financial aid, and you may have to fill other applications for aid from your state or college. Net price calculators can help you decide whether to take those next steps.
For more information about net price calculators, please visit our Net Price Calculator Publications and Resources Page: http://ticas.org/NPC_resources.vp.html.

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As TICAS has long advocated, for students and families to make sound decisions about paying for college, financial aid letters must be clear, comparable, and consumer-friendly. On each of these fronts, there is significant room for improvement. As a step in that direction, the U.S. Department of Education held a public meeting earlier this month to gather input on how to improve financial aid award letters. We submitted written comments and participated in both the panels and small group discussions at the meeting.

What emerged from this month’s meeting was a broad and growing consensus about the need for consistent core elements and common definitions across award letters. There was also continued discussion, but less agreement, about whether or not there should be a single award letter format, and whether standards for award letters should be made mandatory at some point in the future. All of the panelists and all of the small groups of participants reporting out listed most or all of the following as critical core components for all award letters:

  • Realistic estimates of the full cost of attending college for one year, whether paid directly to the college or not; federal law defines cost of attendance as including at least  tuition & fees, room & board, books & supplies, transportation & miscellaneous personal expenses.
  • Grants, scholarships, and other aid that does not have to be earned or repaid, often known as gift aid.
  • Any remaining costs after gift aid is subtracted, commonly referred to as net price.
  • The types and amounts of loans, work-study, and parent/student contributions recommended by the college to cover the remaining costs, often called self-help.
  • Contact information for the financial aid office.

These are consistent with our recommendations  emphasizing the importance of key principles and elements. While there is broad consensus on the elements, there was vigorous discussion about what to call them. Some participants were particularly concerned that terms like “cost of attendance” and “net price,” may not be accessible to students and families. There was general agreement that the next steps need to include several ways of gathering consumer input directly from those who actually receive award letters—students and their families—and those who help them interpret them—counselors and advisors from schools and community groups. In his remarks, David Hawkins of the National Association for College Admission Counseling (NACAC) noted that students and families expect high school counselors to be able to help them with financial aid questions, including interpreting award letters, but this is an area where the counselors themselves feel they need additional assistance. Among the ideas for how to engage consumers, U.S. PIRG pointed out the Consumer Financial Protection Bureau’s “Know Before You Owe” page, which brought in over 18,000 comments on how to simplify and improve mortgage disclosures, as an example of an innovative and successful effort of this sort.

We encourage the Department to build on the clear consensus that emerged from this month’s meeting about key elements and the importance of consistent and consumer-friendly terminology. In particular, the Department should engage with consumers both before and after drafting model award letter formats and recommendations, gathering input about how best to help them understand college costs and options for covering them.

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The New York Times ran the editorial "Help Needed for Student Debtors" yesterday, reviewing the recently-released official two-year cohort default rates for fiscal year 2009. The rates show a sharp uptick in defaults, with 8.8 percent of student loan borrowers who entered repayment in 2009 defaulting by the end of 2010, up from 7 percent for those who entered repayment in 2008.

Following-up on an article that ran earlier in the week, the NYT Editorial Board also promotes the Income-Based Repayment program, that can help struggling borrowers remain in good standing, writing "the government needs to make sure that borrowers at risk of default have access to this program." Read the editorial and article

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