Obama bill makes financial aid application simpler for college applicants
by Nneka Enurah, July 29, 2009

(J.D.’s comments in red)

The Obama administration has requested billions of dollars in new scholarships and credit along with a less complicated financial aid application which looks to make a college education more accessible for students.

Experts say 16 million families struggle with the application process for federal aid and “an estimated 1.5 million enrolled students who are probably eligible for Pell grants failed to apply.” (One reason the myth of ‘we make to much money to qualify for aid’ is because a family fills out the FAFSA form incorrectly and they do not get aid. They then talk with a neighbor or friend, telling them they did not get aid so why bother. The second family then NEVER bothers to even try.)

The new bill aims to simplify the current Federal Application for Student Aid, eliminating questions that have no real bearing on a student’s eligibility for federal aid. The current form consists of 153 questions, and millions of students and their families find it difficult to complete the application. (The new proposed form eliminates 8 questions only if you are a dependant student.)

The bill also hopes to invest money into historically black colleges and universities as well as hispanic-serving institutions. Additional changes include an increase in the minimum amount of the Pell Grant, which is $490 now and will be raised to $690. It will also put $6 billion into Perkins Loans.

Although some feel the proposed changes will benefit students, Patrick Murphy, the director of Financial Planning at Elon University, said he believes some of the changes presented could be harmful.

One of the first concerns that Murphy has involves the asset cap of $150,000 for students requesting need-based aid. This cap would prohibit students from receiving any need-based grants, loans or work assistance.

“It is not difficult for a family that has low income to acquire assets of up to $150,000,” Murphy said. (As an example home equity, company stocks, an inheritance or a combination of these could easily top $150,000.)

The new cap, which would go into effect July 1, 2011, could exclude families that otherwise would qualify for need-based aid. (It is extremely important to shelter assets from the financial aid formula.)

The new bill also calls for drastic changes to the student loan program. Currently there are two ways in which students can get a loan. The school can act as the lender by direct lending, or a bank can lend the funds under the Federal Family Education Loan Program, FFELP.

Another issue that Murphy has with the proposed bill is that it plans to do away with FFELP. “Customer service would decrease if more schools were forced to handle all the loans themselves,” Murphy said. “Some institutions might not be able to handle the new work load.” (If schools are burdened with this the end result is tuition and fees will yet again increase placing this problem squarely on the shoulders of the consumers, students and parents.)

The bill will also eliminate subsidized Stafford loans to graduate and professional students after July 1, 2015. Murphy said currently, graduate students are eligible for $85,000 in subsidized loans and an additional $12,000 in unsubsidized loans.

Loans the government pays the interest on until a student is out of school are subsidized and are much more affordable in the long run. Eliminating unsubsidized loans as an option for graduate students could be a deterrent to students who would otherwise pursue graduate programs.

There are still a number of changes that must be addressed with the new bill.
“Elon University is going to do whatever it can do to make the transition unnoticeable to students and will continue to serve the students and their families to the best of its ability,” Murphy said.

J.D.’s comments: When was the last time the government got it’s grubby little paws on something and made it easier? The Higher Education Opportunity Act is a 432 page amendment of a 3,077 page document. How many more pages are they going to add? See it here- http://www.ed.gov/policy/highered/leg/hea08/index.html

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Is Paying for Your Kid’s Education Still a Top Priority?

In a perfect world, we wouldn’t have to rank one financial priority over another.

But now, more than ever, Americans are faced with many tough financial trade-offs. Paying off debt or saving for retirement? Raiding the 401(k) to pay the bills or putting them on a credit card? Trying to slog it out with a tough mortgage or walking away from a home?

New survey data from Country Financial highlights some of the tension parents are face when it comes to juggling their stressed retirement accounts and the ballooning cost of higher education for their kids.

Forty-seven percent of the 1,241 surveyed said that their children’s college plans are a higher priority than retirement savings, whereas 41% said that retirement savings came first. A majority (61%) said that the recession was not going to impact their plans for their children’s college education. Considering all of the belt-tightening — both from families and financial-aid offices strained by anemic endowments — we’ve heard about in the last few months, this is particularly astonishing. In spite of one of the worst economies in generations, parents say they’re still willing to shell out a lot for college education.

This is the first time in three years, according to the surveyors, that parents have put financing a child’s college education over saving for retirement. Last year, 47% of those surveyed put retirement over education funding and 42% put education funding as No. 1.

Financial advisers, who are already begging their clients to keep their eyes on the retirement prize, must be frustrated by this news — especially as federal options for student borrowing have expanded in recent months.

The belief is that college is still worth the cost pervades, with 79% saying that it’s a good investment. (Some economists beg to differ.) Interestingly, 65% of the respondents say the cost of college causes more worry than the thought of their child leaving home (24%).

original article here

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