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The White House released a Treasury Department report yesterday showing that the American Opportunity Tax Credit (AOTC) helped more than 8 million students and families cover college costs last year, and called on Congress to permanently extend this tax credit, which is currently scheduled to expire at the end of 2010. We agree that the AOTC should be made permanent, but it also needs to be improved. Because of the way the AOTC is currently structured, an estimated one million low- and moderate-income students are not eligible for the AOTC despite having financial need. Most of these students attend community colleges.

Here’s the issue in a nutshell: the AOTC covers up to $2,500 in college tuition, fees, textbooks and supplies, and it is 40% refundable so that students with low incomes can benefit. However, we estimate that one million low- to moderate-income students at low-cost schools are ineligible for the AOTC because their grant aid covers these specific expenses, even though they still have unmet financial need relative to their full cost of college attendance.

By better coordinating the AOTC and Pell Grants, many more students struggling to pay for college would be able to benefit from both the AOTC and Pell. We look forward to working with the Administration and Congress to both extend and integrate the AOTC to help make college more affordable for millions of Americans.

 

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On Friday, more than a month into the academic year and 100 days after the deadline, the California Legislature passed and the Governor signed a long overdue state budget. We are pleased that the enacted budget leaves the state’s vital Cal Grant program intact.

Cal Grants helped almost 300,000 Californians cover the costs of college last year, but the budget delay has left many of this year’s recipients in limbo. With the budget in place, we hope state agencies will move quickly to deliver the long overdue grants to the students who were promised them so they can stay and succeed in college. 

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Lauren Asher testified before the U.S. Senate Committee on Health, Education, Labor & Pensions for the hearing on the Federal Investment in For-Profit Education: Are Students Succeeding? Lauren Asher's testimony begins at 62:20.

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Today the Institute for College Access & Success joined with three national student groups (the United States Student Association, U.S. PIRG, and Campus Progress) in submitting public comments to the U.S. Department of Education regarding proposed regulations to define gainful employment. Federal law requires career education programs that receive federal student aid to “prepare students for gainful employment in a recognized occupation.” The proposed rule defines what this means so the law can be enforced, and it is urgently needed to protect students and taxpayers from career education programs that routinely saddle students with debts they cannot repay and degrees they cannot use. These comments express support for the Department’s efforts to define gainful employment and focus on strengthening the draft regulation in areas where the stakes for students and taxpayers are most pronounced. Read the comments

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As reported today in the Sacramento Bee, many of California’s college students are once again starting the school year without the grant funds they were promised would help cover their costs. Until the Governor signs a budget for 2010-11 no state funds can be distributed, including those going to the over 335,000 low-income students who have qualified for Cal Grants – the state’s need-based student financial aid program.

Some institutions, such as those in the public and private four-year sectors, are able to front the funds or allow students to enroll before they receive their grants, but most California community college (CCC) students do not have a similar safety net. While the majority of Cal Grant dollars received by students who attend four-year institutions go towards tuition and fees, CCC students’ grants help pay for education-related expenses like books, rent, and food. Without this critical source of funding, students may no longer be able to attend, be forced to incur more debt to stay in school, or have to find additional work to cover their basic needs.

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The Department of Education released a lot of new information today pertaining to its July 26 proposal to define “gainful employment.”

The data is extensive and eye-opening. One thing that jumped out at us right away was the difference in student loan “repayment rates” by type of college. At public colleges, 54% of borrowers were paying down the principal on their loans, compared to 56% of those from private non-profit colleges. But at for-profit colleges, only 36% were paying down their student loans – which means that almost two-thirds of them couldn’t. At the University of Phoenix alone, that amounts to almost $2.8 billion in federal student loan debt that isn’t being paid down.

Read the data and analysis 

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The U.S. Department of Education posted average net price data for thousands of individual colleges to its College Navigator web site last week. This is the first time such data have been publicly available and comparable at the college level. Meanwhile, colleges are working to meet a new federal requirement for “net price calculators” to give students individualized estimates of college costs and aid. This increased focus on net price should help students and families make more informed choices, but only if the new information helps them understand what they will actually have to pay, now or in the future.

Discussions of college costs often focus on the “sticker price” of tuition and fees. However, the full cost of attendance includes other expenses such as books, transportation, and room and board (or basic living expenses). The “bottom line cost” for students and their families is the part they will have to cover from work, savings, and loans: in other words, the full cost of attendance minus any grants or scholarships.

In the Higher Education Opportunity Act of 2008, Congress adopted this bottom-line definition of “net price” and mandated disclosures through College Navigator (campus averages) and “net price calculators” (individualized estimates) on all college websites. While the calculators will not be mandatory until October 2011, many colleges are already developing or using them.

At the recent National Association of Student Financial Aid Administrators (NASFAA) conference, there was considerable discussion of these calculators among aid administrators, as well as companies and organizations hoping to help colleges set up their calculators. StudentAid.com, the Voluntary System of Accountability (VSA), the College Board, Noel-Levitz and the U.S. Department of Education are all developing tools to help colleges implement calculators that comply with the new requirements. Those discussions and an early look at some of the some of the calculators already out there raise a few concerns about how helpful they will be to students and families.

We believe that for these calculators to be effective, they must:

  • be easy to find and use
  • highlight the “bottom line cost”
  • provide reasonably comparable results across colleges

However, federal requirements allow colleges a great deal of flexibility in both the content and location of these calculators It would be a shame if colleges undermine the spirit of the law by burying the calculators deep on their websites, or by obscuring the “bottom line cost” figure required by Congress and highlighting other figures instead. For example, some calculators highlight the cost of attendance minus student work-study earnings and loans and parent loans as well as grants, so that the highlighted price comes out to zero for every student! CCC Graph

Work-study and loans are important resources for covering college expenses, but they do have a cost. Work-study wages must be earned, and loans must be repaid with interest. Highlighting a low “out of pocket cost” distracts from the very real – if delayed – costs of these forms of financial aid. Obscuring the distinction between aid that doesn’t have to be paid back, and aid that must be earned or repaid, does students and families a real disservice.

We look forward to analyzing the net price data in greater detail and participating in the ongoing discussion about the best ways to ensure that consumers have the information they need to make informed college choices.

-Matt Reed, Program Director and Diane Cheng, Research Associate The Institute for College Access & Success

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After_the_FAFSA Last week, we released After the FAFSA: How Red Tape Can Prevent Eligible Students from Receiving Financial Aid. While past reports have discussed ways that the Free Application for Federal Student Aid (FAFSA) can be simplified and improved, After the FAFSA looks at how the complicated process after students submit their application can keep them from getting grants for which they would otherwise qualify. Analyzing the data of 13 participating California community colleges, we found that one out of three likely Pell Grant-eligible applicants didn’t receive a grant. The 13 colleges together spent between $1.7 and $2.5 million attempting to verify student information, yet very few verified applicants became ineligible for Pell Grants.

The colleges we studied are in California, but this is a national issue at all types of schools. Since releasing the report, we’ve heard from others outside California with similar concerns about this issue. One college even disclosed an internal report they did on verification at their school, which they agreed to let us share, stripped of identifying information. As we documented in After the FAFSA, this college also found that the vast majority of its verification activity had relatively little effect on student aid eligibility.

Both reports raise important questions about the federal aid application process, including the unintended consequences of federal verification regulations and the way schools implement them. We cited both reports in our recent comments to the Department about its proposed new verification regulations, which could increase administrative burdens for some colleges and students without necessarily improving safeguards for taxpayers. Instead, the Department could reduce both application errors and student obstacles by enabling all applicants to transfer their IRS information (data from 1040 tax forms, or W2 forms for those with very low incomes who do not have to file) directly to their FAFSA.

Read After the FAFSA 

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On July 1, 2010, the U.S. Department of Education implemented two fixes to the Income-Based Repayment program which make borrower's student loan payments more affordable: Married Borrowers: When married couples both have federal student loans, they will no longer face higher IBR payments than their unmarried peers. For married borrowers who file their taxes jointly, lenders will factor in the couple's total federal student loan debt, as well as their total income, to calculate payments. Originally, IBR did not recognize that joint income has to cover both spouses' federal loan payments, resulting in payment requirements up to twice what two equivalent single people would have to pay. Baseline Debt: IBR eligibility will be based on either the balance when the loan first entered repayment or on the current loan amount, whichever is greater. This will allow borrowers whose loan balances have increased (often due to accrued interest during periods of deferment or forbearance) to qualify based on what they actually owe.

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Trophy U.S. News & World Report has chosen two of the Institute for College Access & Success' projects College InSight and the Project on Student Debt for their top ten list of the best college websites!

See the entire list here

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