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I'm glad Secretary Spellings is taking a step forward: developing specific examples and proposals forces people to think and be creative in response. But I have to admit that the sample form raises a lot of questions about what the Department's proposal is, and whether it will require legislation to implement. Are a student's own earnings going to be completely eliminated from the eligibility formulas? The form asks for the student or the parent's income, not both. One minor point about the "26" questions: in some cases the numbers were removed but the number of questions remained the same (for example, the two questions about selective service registration have one number on the new form but two numbers on the old form). Counted by the same method as the 106 on the old form, the sample form has 41. But focusing on the raw number of questions is sort of like looking at test scores without context. Families don't mind having to answer easy questions like their street address or whether they have other children already in college. The goal should be to eliminate the difficult, show-stopper questions that require the applicant to do research or to be a tax expert. To accomplish that goal, the Department will have to go beyond this first step. Congress last year paved the way for the Secretary to work with the IRS on a system that, with the taxpayer's permission, would feed information directly from the tax form into the financial aid application process. Yet there is no evidence in this announcement of any IRS cooperation. The form still asks applicants to find numbers on particular lines on their tax forms. -Bob Shireman

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The California Postsecondary Education Commission (CPEC) recently took a look at how affordable a community college education really is for students and their families. The Institute for College Access & Success submitted the following comment to the Commission prior to their September 23-24 meeting, where the report was discussed.

Commissioners: The Institute for College Access & Success conducts research and advocacy geared toward helping students access and succeed in college, regardless of income or background. A primary focus of the Institute is looking at college affordability issues within California, and for community college students specifically. We would like to commend the Commission for looking at this issue, which is rarely addressed in a broader context than the system's low fee levels. The report brings much needed attention to the fact that a CCC education is less affordable than it used to be, and that the problem is worst for the lowest-income students and families. We are concerned that the Commission's analysis of California community college affordability is too narrow. By focusing only on students who live with their parents, the analysis excludes the majority of students enrolled in the colleges, including four out of every ten full-time students. Also, the definition of "minimum costs" used throughout the report dramatically underestimates the costs that students face, or what the institutions themselves tell students about college costs. Using such a narrow focus minimizes the extent of the affordability problem at the community colleges. Financial aid is a crucial element in looking at college costs, and we are glad that the issue was broached in this analysis. By looking only briefly at grant aid amounts for students who receive it, and in tandem with the Commission's definition of "minimum costs", this again undercuts the true scope of affordability challenges for community college students. Specifically, the Commission's analysis failed to mention how relatively few community college students receive Cal Grants, the state's own need-based aid program, and how Cal Grant award levels have stagnated, worsening affordability issues even for the lucky recipients. We would welcome an opportunity to discuss these issues and concerns around community college affordability with Commissioners or Commission staff. Sincerely, Debbie Frankle Cochrane Research Analyst Robert Shireman President

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The Rethinking Student Aid study group released "Fulfilling the Commitment: Recommendations for Reforming Federal Student Aid," a report that evaluates the current federal student aid system, and develops a new strategy for financial aid programs. Members of the media have asked the Institute for College Access & Success' President Robert Shireman for his thoughts on the recommendations, and here's what he has to say:

There are enough specifics that the proposals could have legs. Too often these types of commissions produce unrealistic wish lists and vague exhortations. In contrast, this group took a more hard-headed analytical approach. They came up with some creative ideas and made some tough choices. The proposals are clear enough that policymakers could actually follow up. Of course, being specific and not asking for the moon also means that there will be dissent. The proposals will prompt the type of discussion that can yield actual improvements in college access and success. The savings proposal is the newest and most interesting. Telling a low-income family that some money has been put aside in an account sends a much stronger signal than telling them 'there's a program you can apply to.' Money in the bank, when the child is in middle school and still has high aspirations, will help parents and students to plan and prepare both financially and academically. In principle it makes a lot of sense to have just one loan program. But that subsidy shouldn't just be taken away. It should benefit students with improved help in repayment and more grant aid. The idea of increased loan limits needs to be approached carefully. We need to pay attention to how colleges may respond, and also how parents respond. It would be best to encourage parents to take on some of the burden before students take on more. An incentive fund for states makes a lot of sense, but it's been difficult for the idea to get traction. It's not very sexy. But given the huge state role in funding higher education, it's probably one of the most important things the federal government could do, if done creatively.

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By Deborah Frankle Cochrane, Research Analyst California's budget delays are affecting college students' ability to get their financial aid. In addition to more than 100,000 students who may face delays in getting the Cal Grants that they’ve been promised, there are 25,000 high-achieving, low-income students whose grants may or may not be funded at all. The Governor’s initial January budget proposal cut the already underfunded "competitive" Cal Grant program that serves those 25,000 students, most of whom go to community college, and its status has been uncertain ever since. During last year's budget crisis, some colleges were able to help students by providing the grant aid up front and getting reimbursed after a budget was signed. Others – largely the community colleges and California State Universities, where the majority of Cal Grant recipients attend – didn’t have the resources to help in this way, and students were left not knowing when they would have money to buy books. This year, the situation is worse. It’s already late August, and students' college plans may depend on whether or when the grant money they’re counting on will come through. The good news is that the competitive Cal Grant program is not eliminated in the Governor's latest budget revision, released earlier this week. This is a notable shift: the California legislature has already signaled its desire and intention to maintain the program, and the Governor’s change of heart means it is likely to survive. The bad news is that the students who need these grants still don't have the security they need to make plans, and it's not clear when they will. Have they put deposits down at campuses that they may not be able to attend? Have they registered for classes, not knowing how they'll pay for them? Or have they given up their spot, missed important registration dates, or decided not to go to college? These decisions will cost California, and these Californians, a lot more than a few thousand dollars.

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The San Francisco Chronicle August 14, 2008 Editor - "Students seek aid in record numbers" Aug. 11 highlights an important trend, but could leave readers confused about the availability of federal financial aid. While there are caps on how much you can receive in federal grants and loans each year, there are no limits on how many students can qualify for these important funding sources. And if students' financial circumstances take a turn for the worse, they should always let their college financial aid office know. In certain circumstances, such as a parent's job loss, the college can adjust the student's aid eligibility. Even if they don't qualify for more grant aid, federal loans can help both students and parents bridge unexpected financial gaps more safely and affordably than credit cards, home equity, retirement funds or private student loans. Debbie Frankle Cochrane The Institute for College Access & Success Berkeley

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By Laura Szabo-Kubitz, Research Associate The currently proposed cut to the Competitive Cal Grant program would disproportionately affect community college students, who make up 73% of the program’s recipients. While the legislature has demonstrated its commitment to these students by keeping the program in their own version of the budget, its fate will remain unclear until Governor Schwarzenegger signs a budget, in late June at the earliest. Students who stand to lose their grants under the current proposal tend to be older, with lower incomes and higher GPAs than other Cal Grant recipients. As a result of their age, many are no longer eligible for the Entitlement Cal Grant which requires that one must have graduated from high school within the past year. Over 69,000 financially eligible students applied for a Competitive Cal Grant by the March 2 deadline this year, and around 12,000 were tentatively awarded one. The California Student Aid Commission recently sent these recipients a postcard indicating that they may not receive their award due to the proposed budget cuts. We recently heard from one Competitive Cal Grant recipient who had received this postcard but was confused about what it meant for her. After being rejected for a competitive grant last year – as five out of six eligible recipients are – this woman, a single mother of five who had previously gone on welfare to care for her child who was ill with cancer, was finally able to pursue her dream of a higher education. But how can this hardworking, responsible woman make informed decisions about college if she doesn’t know how much aid she can expect to receive? How does she know whether to reduce her work hours, make childcare arrangements, or put down a deposit at the college she wishes to attend? All of this begs the question about the strength of the state's commitment to higher education and helping people improve their lives and the lives of their children by increasing their education and skills. And as this woman states quite eloquently, not only will her children’s lives improve if she is able to get an education, but the state will save money if she is able to exit the welfare system. This woman’s story clearly illustrates students', and particularly non-traditional students', need for timely, clear, and accurate information about financial aid to make good decisions about college-going choices. For $57 million in state savings, we're taking this ability away from 12,000 would-be college-bound students who, as more highly educated individuals, are likely to give back to the state and their families in many ways as residents, employees, and parents. The stakes are too high to play budget roulette with California's future.

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By Srikanth Sivashankaran, Research Associate Vassar College's plan to replace loans with grants for students with family incomes below $60,000 was the subject of several newspaper articles last week. Meanwhile, the University of Arizona is implementing its "Arizona Assurance," first announced in early November, to replace loans with grants for students with family incomes below $42,400. Unlike Vassar's, the Arizona initiative has not attracted much attention from major media in the last four months. This disparity in coverage is puzzling, considering the potential impacts of the two programs: federal data show that 428 applicants for financial aid at Vassar met the income criterion of the college’s new policy in 2006-07. At Arizona, that number was 4,281 – a tenfold difference that puts the absence of public institutions from the mainstream discussion of no- and low-loan announcements into glaring perspective. Financial aid pledges to limit the use of loans in financial aid at elite private colleges are significant. They represent real savings for some families, and a mounting consensus that an unmanageable debt burden is unacceptable. But policymakers and the media should not forget that students with family incomes below $60,000 are much more likely to attend public colleges and universities than private ones – at a rate of six to one in 2003-04 (the last year for which reliable data of this sort is available). The University of Arizona and other public institutions that have taken steps to reduce student debt burdens for low-income students deserve due credit. See here for a full list of institutions – public and private – that have instituted financial aid pledges.

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Lenders have made it clear that students with poor credit are less likely to be able to find a private student loan. Fortunately, students have good federal options. But for students or parents with good credit who decide they want a private student loan, have rates increased? Some analysts guess yes, but it is a difficult question to analyze. Unless lenders release their pricing policies (which they don't), the only way to find out if rates have, indeed, gone up is to get old and new quotes for the same person with the same qualifications for the same type of loan. We now have two such tests, me and a colleague. My colleague got quotes from seven lenders two years ago. This month she applied again to those same lenders. The results: four offered her a lower rate than two years ago, one offered a higher rate, one rejected her, and one had suspended operations. Combined with my results, this very small sample suggests that rates are unchanged or even down for people with good credit. There’s another way to look at this, though: What was the lowest rate my colleague found two years ago compared to the lowest offer now? By that analysis, she would pay a rate one-tenth of a percentage point higher now than two years ago. (That’s because the one rate that had gone up was the one that was the lowest before). An increase, but a very small one. Here are the details of my colleague’s loan offers. Two years ago (April 2006) My Rich Uncle offered her a rate of LIBOR plus 2.65 percentage points; now (March 2008) the rate is LIBOR plus 4.0, an increase of 1.35. In contrast, Access Group offered her the lowest rate this time around (LIBOR plus 2.75), a full 1.2 percentage points lower than that company’s offer two years ago. The rates from Bank of America, Sallie Mae, and Citibank had all dropped by one to two tenths of a percent. Education Finance Partners mysteriously denied her a loan this time, suggesting a co-borrower, while Loan to Learn has shut down its operations.

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Nearly a year ago, long before the current credit crunch, I spent some time reviewing the various methods of comparing prices on private student loans. I found that the "as low as" rates advertised on comparison sites don't tell the shopper very much. I also found that it is very difficult to get an actual rate quote for comparison purposes, because you have to complete entire applications, turn over personal details, and authorize credit checks. And those multiple credit checks from potential lenders can have the effect of hurting your credit score, because they create the impression that you are desperate to get a loan. Nonetheless, I persevered and got some actual interest rate and fee quotes, and the promissory notes to go along with them. With all the doomsday stories about the credit crunch, we decided it was time to see if we could confirm that even someone with good credit (still me, despite tempting fate with all those loan applications) would have a tougher time getting a loan or would face higher charges. So last week I went back to two of the lenders who had offered me loans last year, National City and Suntrust. I plugged in the same loan amount, degree program, and other details. Their responses seemed to take a day or two longer than last year, which may be a result of some of the layoffs in the industry. But both of them got back to me with rate quotes and promissory notes. The rate at National City was higher than last year, by the equivalent of about half of one percentage point (0.25 higher interest rate, 3.5% higher fee, 20-year term). But the rate at Suntrust was exactly the same as last year: the one-month LIBOR index plus 2.5 percentage points, with no fee. Now I'll see if I've ruined my credit rating by applying for these loans. Then I'll be able to test whether someone with bad credit can get a private loan. (Fortunately, even if my credit has been destroyed, I can always get Federal Stafford Loans because they require no credit check).

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By Deborah Frankle Cochrane, Research Analyst UPDATE: We’ve looked more deeply into the issue of community college loan program participation since this post was published. Please see the issue brief, Denied, for a more thorough analysis of this issue. ------------------ No one wants students to borrow unnecessarily or to borrow too much, but students who do need and want to borrow should be able to do so in the safest way possible. That is why the federal guaranteed student loan programs were created. The federal loan programs are entitlements, meaning that they were designed to be available to all students who apply for loans. Sure, loans are not as desirable as grants, but these aren't just any old loans. As one California community college financial aid administrator explains federal loan aid to students: "See what happens if you go into your bank and ask for a loan at the same fixed interest rate of the federal student loans. Explain that you don’t want to pay it back for a few years – or be charged interest in the meantime. And while you're at it, you want to be able to delay your payments in the future if you ever hit hard times." Clearly, the federal loan programs provide a more generous and safe way to finance an education than private student loans that offer none of these same benefits. But what about the colleges that don’t provide access to federal student loans? In our recent report, Green Lights and Red Tape, we documented the number of California community colleges that do not participate in federal loan programs, and questioned the decision to restrict access to this important source of financial aid. Looking at community colleges nationally, it is evident that this isn’t just happening in California: in ten states, half or more of community colleges do not provide access to federal student loans! Some colleges withdraw from the federal loan programs because too many former students have defaulted on their loans. There is a danger that excessively high default rates over several years can jeopardize a school’s ability to offer all federal aid, including grants. But under current rules, this is not an imminent threat to most community colleges. The vast majority of community colleges do offer loans and adequately manage their default rates, which suggests that withdrawal from the programs is an unnecessary precaution. Default rates are not the only rationale for restricting borrowing: financial aid offices often cite the need to protect students from their own choices. Their students, you see, may not fully understand the implications of borrowing. Some students, they explain, aren’t committed enough to their education to finance it through credit. We do not doubt for a minute that these sentiments reflect real aid office experiences and challenges. But if it's protection that students need, why take away the safest borrowing option, inevitably driving some towards risky private loans and credit card debt? Students and families rely upon college financial aid offices to provide informed advice about how to finance a college education. What should they make of statements like this (from a community college financial aid office’s web site), a typical example of how non-participating colleges address loan aid?

"Currently, our institution does not participate in the federal student loan program; however, you can independently get a private loan or non-certified loan to help pay for your educational expenses if you meet the lender’s requirements."

This isn't protecting high-risk students; it's throwing them to the wolves. Students and families trust college financial aid offices to provide informed advice about how to finance a college education. Neither this message nor the restriction of financial aid options helps the low-income and high-risk borrowers who financial aid offices serve.

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