Today we released a new analysis of federal financial aid application rates and receipt at the California community colleges (CCCs), where we found that many students who are likely eligible for federal aid are not applying for it. As a result, CCC students are leaving behind as much as half a billion dollars in federal Pell Grant awards that could help pay for many education-related expenses.

There are several theories as to why community college students in California are applying for federal financial aid at low rates. Some say it’s because CCC students are more likely to attend part-time, and that part-time students everywhere are less likely to apply for aid than full-time students. Some say that Californians have higher incomes, and aren’t eligible for as much aid as students elsewhere. Yet, when looking at a variety of subgroups of community college students in California and other states – including full-time students and those who are likely eligible for Pell Grants – CCC students are still less likely to apply for federal aid than comparable students in the rest of the country.

Reasonable people can disagree about what causes this problem and how to solve it, but the bottom line is that California needs more college graduates and a stronger economy – and can’t afford to pass up hundreds of millions of dollars that could go towards supporting both.

CCC Graph


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We recently attended the U.S. Department of Education’s negotiated rulemaking on “program integrity,” which is supposed to put some teeth back into the regulations that determine which colleges can – and can’t -- participate in federal student aid programs. Only students at participating colleges and in eligible programs can get federal grants and loans. Some of these regulations apply mainly to for-profit schools, which have the highest student debt and default levels and get most of their revenue from taxpayer-financed student aid.

Since the last rulemaking session, the topic of ‘gainful employment’ has gotten a lot of attention. Put simply, it’s the idea that college programs designed to prepare students for specific kinds of jobs (e.g., auto mechanics, chefs) actually do, and that the majority of students who attend those programs aren’t left high and dry at the end of the day with only a lot of debt and a worthless credential to show for it.

Some people are calling the Department's proposals a form of “price control”, saying that they would effectively cap the amount students could borrow, which would in turn cap the tuition colleges could charge for these programs. Putting aside the question of the Department’s specific proposal for now, since when did merely questioning the return on investment – both the student’s and taxpayer’s – become an attack on the free market? For more on just why we need better rules in this area, check out this new item from Higher Ed Watch: Students vs. Shareholders at Publicly Traded Career Colleges.

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The California Community College System and for-profit Kaplan University recently announced an agreement allowing community college students to enroll in online Kaplan courses for $215 per credit. Although this price is 42 percent less than the normal Kaplan sticker price, it is still more than $1,000 per class (a Kaplan class is typically five or six credits), or more than 10 times what it costs at a community college (a typical-four credit course at a community college costs just over $100). A few thoughts and questions come to mind:

1. If the legislature raised community college fees from $26 per credit to Kaplan’s discounted cost, it would bring in eight times more tuition revenue, or almost $3 billion more in 2008-09. With that kind of money, I imagine the community colleges could afford to educate their own students. (Just to be clear, we’re not advocating this approach.)

2. Students who take advantage of this agreement can then transfer into one of Kaplan University’s bachelor degree programs. How about the students – about 64,000 in 2008-09 – who transfer to the California State University or University of California? What assurances do they have that their Kaplan credits will count towards transfer to CSU or UC? With Kaplan’s tuition topping UC’s by 64 percent and CSU’s by 222 percent, does taking advantage of this agreement with Kaplan lock students into higher priced education beyond community college as well?

The state promises affordable college access and then points students to pricy for-profit colleges to get community college credits. Did someone somehow get two of the Governor’s 2010 goals – privatizing prisons and protecting higher education – mixed up?  

Click here to read the California Community College and Kaplan University Press Release

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CIS Screenshot For the third year in a row, Governor Schwarzenegger has proposed cutting a key component of the Cal Grant program. This is a cut that students and our state cannot afford. Just two days ago the governor said in his ‘State of the State’ speech, ‘We can no longer afford to cut higher education.’ Yet he now proposes to cut a critical source of higher education funding for high achieving, low-income students already struggling to keep college within reach.

The Governor would suspend all new competitive Cal Grants, which go to students who apply after the March 2 deadline, and/or graduated from high school more than a year before applying for a grant. There are already a limited number of these grants available, and demand for them jumped 42 percent in 2009-10, when 245,400 qualified applicants vied for just 22,500 competitive Cal Grants.

The San Jose Mercury News covered this issue in their weekend edition.

Read the article here.

Read the Institute's statement here.

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CIS Screenshot The New York Times profiled our new report Student Debt and the Class of 2008 on their education blog The Choice. Our latest analysis of student debt by state found college seniors who graduated in 2008 carried an average of $23,200 in student loan debt. Meanwhile, unemployment climbed from an already challenging 7.6 percent in the third quarter of 2008 to 10.6 percent in 2009 – the highest third-quarter rate for college graduates aged 20 to 24 this decade. Debt levels vary widely by state, with some Midwestern and New England states facing the highest debts.

Click here to comment on the blog post

Click here to read the report

Other outlets that have covered our report include:

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CIS Screenshot Today we are launching a unique new web site for higher education data and research. College InSight ( will be a valuable resource for anyone interested in college affordability, student debt, economic and racial diversity, student success, and other important issues in higher education. The site replaces and improves upon our previous campus-level data site,

College InSight provides user-friendly profiles with detailed information for almost 5,000 U.S. colleges and universities, and aggregates data to create totals and averages for states, types of schools, and other groupings. Compare colleges, states, and more based on important issues:

  • Affordability: tuition and the total cost of attendance; how students cover costs through federal, state, and college grant aid, as well as student loans; average student debt levels; colleges' use of need- and merit-based aid.
  • Diversity: data on the racial and ethnic diversity of both students and faculty; indicators of student economic diversity, such as the percentage of undergraduates who received federal Pell Grants and the income distribution of students who applied for financial aid.
  • Student success: graduation rates and the number of degrees and certificates awarded.

Please check out the site, and use it to find information the next time you're looking for college-level data. We will be continually making improvements to the site, and welcome your feedback and suggestions.

Visit College InSight

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In California and nationally, very few former foster youth make it to or through college, and cost is a major obstacle. A new report shows that despite federal and state programs and policies intended to help them afford college, surprisingly few California foster youth who apply for student aid receive all the grants they should.

Together, federal Pell Grants, state Cal Grants, and jointly funded Chafee Grants can add up to almost $12,000 for a foster youth at a California community college, $16,000 at a California State University, and more than $20,000 at a University of California campus. Of identifiable California foster youth who filled out a FAFSA (Free Application for Federal Student Aid) in 2008-09, 84 percent were eligible for a Pell Grant, 17 percent were offered a Cal Grant, and just nine percent received a Chafee Grant, which is specifically for foster youth. Only four percent of these very low-income students received all three grants.

Our report, Hopes & Hurdles: California Foster Youth and College Financial Aid, examines the reasons behind this trend, from a lack of awareness about financial aid options to barriers within the aid programs themselves that pose particular challenges for foster youth. “The financial aid system isn’t working for foster youth,” said Debbie Cochrane, the report’s lead author and program director at the Institute for College Access & Success. “These students have beaten the odds to go to college, but not being able to get the grants they need puts their future in jeopardy.”

Early deadlines and GPA requirements make it harder for foster youth to get Cal Grants. Due to instability in their home and academic lives, these students are less likely to make college plans and apply for financial aid by the program’s March 2 deadline. In addition, many have attended multiple high schools, which must quickly cooperate to calculate a student’s GPA. Funding for Chafee Grants is so limited that fewer than half of the eligible applicants receive one. Also, Chafee Grants often arrive so late in the semester that students may have already fallen behind in classes or dropped out because they could not afford to buy books or pay their rent.

“Life in the child welfare system creates serious hurdles for foster youth who want to go to college, and problems with the way essential programs like Cal Grants and Chafee Grants operate can put higher education even farther out of reach,” said Cochrane.

The report recommends guaranteeing Cal Grants for foster youth; increasing cooperation between counties, the California Department of Social Services, and the California Student Aid Commission; extending foster care supports to age 21; and improving the funding and administration of Chafee Grants.

Read the report

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On Wednesday, September 23, the House Judiciary Committee's Subcommittee on Commercial and Administrative Law held the first ever hearing about student loans and bankruptcy, "An Undue Hardship? Discharging Student Loans in Bankruptcy." Lauren Asher, president of the Institute for College Access & Success testified as an invited witness.

Over the past decade, the private student loan market expanded dramatically along with the overall credit market, fueled by easy access to capital. As with subprime mortgages,lenders marketed private loans very aggressively and financed them primarily through securitization, maximizing short-term profits regardless of borrowers’ actual ability to repay. There were no regulations to limit the dangers of private loans or to restrict the way they targeted young people with no borrowing experience. Prospective borrowers were not even entitled to clear information about actual terms and costs that would enable them to shop around before signing a promissory note. Private student loans remain largely unregulated, Congress included some basic disclosure requirements in the HEOA will go into effect early next year.

Private student loan volume began mounting well before the change in bankruptcy law: it increased eight-fold between 1997 and 2005, and it peaked at $19 billion in academic year 2006-07. Student Lending Analytics, which monitors industry trends, projects that volume in 2009 will be $10-12 billion. This drop parallels changes in the larger economy due to the credit crunch, which hit the private loan industry hard in the fall of 2008. While quite a few lenders left the market and private loans are now more likely to require a co-signer and a higher credit score than in recent years, private student loans are still available. Sallie Mae continues to make a third of its profits from private loans, and they along with Chase, Citibank and other major lenders offer and actively promote their private loan products. As these lenders work to expand their market share, credit unions have entered the field and seek to position themselves as a source for more affordable private loans.

In a particularly disturbing development, some large, for-profit colleges have begun making a lot of their own private loans directly to high-risk students. For example, in a recent call with investors and analysts, Corinthian Colleges, Inc. said it plans to make $130 million of such loans in the current fiscal year, on top of $120 million last fiscal year. They fully expect a shocking 56 to 58 percent of the borrowers to default. Yet they consider these loans good investments because they will increase enrollment and with it a profitable flow of federal grant and loan dollars that outweighs the planned writeoffs. Corinthian owns more than 80 colleges across the U.S. through its Everest brands. According to the Associated Press, ITT Education Services, Inc. also expects to make $75 million in loans directly to its students this Calendar year, and Career Education Corp. expects to reach $50 million.

These are attempts to get around market corrections that have appropriately reduced access to subprime private loans for very high risk borrowers, and to justify prices for-profit education and training programs that may exceed federal aid limits. As mentioned above, Sallie Mae has stopped lending to these types of schools because of similarly high default rates and other questionable practices. But whether the source is their own school or an outside lender, the students who are sold private loans they cannot afford are stuck with them even in bankruptcy, while the lenders are free to move on.

Read Lauren Asher's oral testimony

Read Lauren Asher's written testimony

Read the coalition letter

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The Project on Student Debt has released Private Loans: Facts and Trends, using data from the U.S. Department of Education’s National Postsecondary Student Aid Study (NPSAS), a comprehensive nationwide survey conducted every four years. Our analysis from 2007-08 reveals that two-thirds of private loan borrowers did not take out all they could in safer, more affordable federal loans. The fact sheet also found that a majority of private loan borrowers in 2008 attended schools with tuition and fees of $10,000 or less, and that African-American students were the most likely to take out private student loans.

Like credit cards, private loans usually have variable interest rates that are higher for those least able afford them – as high as 18 percent in 2008. But unlike credit card debt, private loans are nearly impossible to discharge in bankruptcy. They also lack important consumer protections that come with federal student loans. Private loan borrowing has slowed since the credit crunch, but these risky loans remain available from major lenders.

Among the findings:

  • While experts agree that private loans should be used only as a last resort, the share of private loan borrowers who could have borrowed more in federal Stafford loans increased dramatically, from 48 percent in 2003-04 to 64 percent in 2007-08.
  • Private loan borrowing is not limited to students at high-priced schools. In fact, the majority of private loan borrowers (63 percent) attend colleges with tuition and fees of less than $10,000.
  • Among all racial and ethnic groups, African Americans are now the most likely to borrow private student loans. The percentage of African-American undergraduates who took out private loans quadrupled between 2003-04 and 2007-08, from four percent to 17 percent.

For more information about private loans, please visit Private Student Loan Publications and Resources

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