What Kind of Federal Aid Should There Be for College?

Paying for College
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<p>Right now for those families with very low incomes, there is the PELL that maxes out at $5550 for those families with a zero EFC. For an automatic zero, the income level is $20 something thousand a year; otherwise factors like ages of parents, number of dependents enter the picture. </p>

<p>Other than that, the only thing else that the federal government guarantees are the Direct Loans to students. If the cost of attendence justifies it, a freshman student can borrow $5500 on his own if a family FAFSA has been filed. If the there is a need component in terms of EFC and COA, up to $3500 of this is subsidized by deferral of interest until after graduation or no longer a student, and the interest rate is far lower than the non subsidized loans. </p>

<p>Anything else has conditions to it. Parents have to qualify for PLUS with a certain minimum credit history. If turned down by PLUS, the student can get additional funds, freshmen up to $4k. </p>

<p>Seog and Perkins and work study are not guaranteed and it depends upon how much a college has to give out and how many students want it, whether any given student will get the money. </p>

<p>Any other money comes from the state, the colleges themselves, private lenders, or whatever resources families have. </p>

<p>For those families who do not have recent bankruptcies, foreclosures, payments more than 90 days late, up to the entire COA minus any other college aid can be borrowed through PLUS. Once the FAFSA is filed, it takes a matter of minutes to apply, and voila, a family making a very low income (maybe no income? Not sure because the app does ask if employed and where) can borrow a lot of money. And can continue to do the same every year without paying any of it back until after the kid graduates, and can continue this for multiple kids. With some private colleges charging $60K a year, that can add up to some megabucks. With the mortgage bubble, at least there is a house there, when the bubble burst. Here there is no tangible asset. In fact, I do know a parent who did this for his two daughters and died a year or so after the younger one graduated. Girls were a year apart and went to a private LAC. He was old and had a life threatening medical condition that made it likely that this would happen and he capitalized on it. Rare case, but, yes, it can happen. But more frequently, especially in this economic time, families simply borrow more than they can pay back. Maybe even in a lifetime. Not sure what the heck the government does when a parent borrows , say $200K, and is out of a job or making very little and cannot possibly make payments on all he owes. </p>

<p>So what should the government be offering for college costs? Should they have anything at all? Where should the line be drawn? Right now, PLUS for parents is most beneficial for higher income families that borrow from there despite the not so great interest rate and simply extend the period of college payments from the traditional 4 to, say 10 or more, in the future to make up for what wasn't saved in the past. Gives them a quick and easy alternative. No exhaustive application for loans, no selling of assets or investments, if you want to hold on to them.</p>

<p>Like it or not, for families whose incomes and assets are not at certain levels, these loans can do a lot of financial damage as well as damage to future opportunities when they cannot be repaid. Ruined credit or huge amounts owed, can keep you out of housing and certain jobs and opportunities. </p>

<p>We've seen a lot of discussion on these loans. We've also seen and suffered shock on what our EFCs are and in learning that for most of us it means "Every Friggin' Cent", in terms of what college is going to cost for our kids.</p>

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<p>I’m answering my own question with my own opinion. Just opinon, so blast away. </p>

<p>I think PELL works reasonably well. The amount is sufficient for most low income students to be able to go to a local state school or community college. It serves as a continuation of public education for those who truly cannot afford any money for college. </p>

<p>I think the amounts should be adjusted so that there is more equity among the states. Right now tuition can be very high for some areas so that PELL does not cover even the basic tuition, and is enough to cover some living, commuting, personal expenses for others. It all depends on what is available and what it costs. </p>

<p>I believe that those who are most needy should have their bases covered first, so I believe that any changes to the federal structure of college aid should start here. I believe that every student below a certain threshold income should be given a certain number of years to get a college education through something like PELL. I also believe that the amounts should be adjusted upwards for those who do not have a state college within commuting distance. This may come in to play when a student finishes community college. I feel that there should be some generosity in helping out such students who successfully complete enough college to make junior standing, and that the combination of guaranteed PELL, loans and workstudy should cover the cost for such student to board at a school if there is not a state school available to get one’s degree. </p>

<p>Now comes the part where i expect to get a lot of disagreement. I will tell you that I would personally be one of the first to suffer under what I am suggesting here. So not self serving, in the least. I am taking my family and personal situation out of the consideration.</p>

<p>I do not believe that federal student aid should be used for private schools. It’s not as though PELL is but a drop in the bucket for the costs of some of the privates. I think that the availablilty of federal loans, in particular, have been a major reason for the increases in private college costs. Let the schools provide the aid, including loans to the students they accept. </p>

<p>I have predicted for years, incorrectly, that the cost of college could not keep going up. That some schools will “fold” or lower their costs as more of the market, families, cannot afford them. For the most part, that has not happened, and I think it’s because a lot of the cost is being propped up by the availability of student loans. I believe the parent loans should only cover need and only be availabe to state schools.</p>

<p>The money saved by instituting these changes would go to shoring up state schools so that their quality would improve and more availability be there. States should get some sort of incentive for making college available for lower income students.</p>

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<p>I think Pell should be a total percentage of total tuition costs at the state public institutions… which would equalize the differences in tuition costs state to state. I also tend to agree that Pell dollars should not be used to finance private colleges and universities. If those colleges and universities have a “mission” to stratify their classes with lower income students, they can do that on their own dimes.</p>

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<p>Totally agree with Momofthreeboys. One of the major reasons for rising tuition at private colleges is because these schools know that the needs of low income applicants will be met with federal aid. They can charge whatever the heck they want and someone will pay it. This makes things very difficult for middle and upper middle income students, who are forced to cope with rising tuition and fees, but who do not qualify for aid to offset these expenses.</p>

<p>If federal aid were based on tuition costs at public universities, private schools would slow down the ridiculous annual tuition hikes.</p>

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<p>Momofthree…I think that would just cause various state schools to all raise tuition.</p>

<p>I think the Stafford loans need to change. CC students should be able to borrow little or nothing for frosh/soph years, and then borrow $15k per year for jr and sr year.</p>

6

<p>

I don’t know what type of PLUS loans other people have, but we had to start paying on a 10-year amortization for S’s freshman year loan this past March. I assume we will start paying on the sophomore loans around next March.</p>

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<p>

What would be your argument for this?</p>

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<p>Mom2 you might have something there that I didn’t think of…perhaps the federal aid could be tied to rising tuition costs. If state colleges raise tuition above a limited percentage they would not get the additional percentage. I’m not for raising the Staffords since the maximum right now is affordable for many if not the majority of college graduates who on average are in starting salaries closer to $30,000. Payments end up being around 10% of their gross which is doable.</p>

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<p>You can apply for deferment on the loans. What you are doing is the standard/default way to do it, and the same thing I, personally have done with our PLUS loans. But people are deferring them, which is permitted, till after graduation. Lerkin, another CC member, on another thread was proposing that requiring paymen tof each year’s amount when taken, as you and I are doing, be a requirement, so the process can be stopped when a family starts feeling the pinch and starts having trouble repaying the loan. Once a family get into arrears with the loan, another one is not permitted, but by delaying payment until after the student graduates, it causes a backlog, growing with not insignificant interest.</p>

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<p>Right now, anyone whose credit permits them to do so, can borrow up to the COA of his kid’s college,less any financial aid/merit award whether they need the money or not. It is my opinion that these funds are an integral reason for the spiraling costs of college, particularly the private ones. THat there are so many people artificially able to “afford” the high costs foc college, allow the costs to sky rocket and for colleges to spend money the way they have on buidlings and amentities that are making them increasingly luxurious. What this will do, is bring more people to evaluate college choices and cost more carefully and open the way for state schools to become the top choices. This is a model that CA has attempted to do and partially succeeded and is also the way most of the schools in the world work. THe top schools tend to be the public ones. I think this is happening with the debt bubble growing and the economy the way it has been–I see it here with more kids choosing to go to state school, even those from private high schools where graduates have tended to go to private schools in the past. Cost and the economy are driving the kids to the state choices. The effect will be accentuatied I think if this loan money dries up. On the other hand, those families, with the need will still be allowed to borrow putting them on a somewhat more level playing field in terms of choices. </p>

<p>Cuts in the PLUS and other programs, I’d like to see funneled to improving state schools. I think that the private schools are going to have to stand on their own merits, and the weaker ones will not remain, at least not at the costs they are now charging. Many will remain as commuter choices rather than as full spread universities.</p>

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<p>I like the tied to tuition idea considering full Pell covers just over 1/3 of the tuition (JUST tuition) at my public, instate U. </p>

<p>I also agree with allowing Stafford loans to be borrowed whenever. It also helps people like me who had a lot more in scholarship $$$ fresh year than after.</p>

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<p>I would leave the Staffords as is because there are kids out there whose parents won’t fill out FAFSA or who have the means and won’t pay, with some more flexibility due to first year outside scholarships. </p>

<p>I don’t know how I would work it, Romaning, in a case like yours. The Pell amounts would be tied to local schools, not to what the state flagship. The main focus would be to develop more and better local options for more students. Some of the community colleges are abominable and do an inadquate job preparing kids to transition to a 4 year school. The focus would be on shoring up the schools that would be most available to those with the fewest options. Sleep a way college, even to the state U would be a luxury. But for those who outgrow their local opportunities, the funds should be available for them to transfer to a state school and afford room/board.</p>

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<p>I don’t go to a state flagship. </p>

<p>Most in-state students can’t even get in to our flagship (I did but chose elsewhere). </p>

<p>As I said earlier, Pell doesn’t even cover 1/2 of TUITION let alone R&B. In my state, it’s not even about sleep-away being a luxury, it’s about straight up tuition being unaffordable even with Pell. I just looked up a local direction college (one that would be almost sort of commutable from my house) and Pell still covers just over half of tuition.</p>

<p>ETA: I think SVSU is the cheapest college in Michigan. Pell still doesn’t cover tuition.</p>

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<p>

You yourself have borrowed on PLUS loans. How would you reconcile your proposal with the fact that you would no longer be able to borrow yourself? In our case, S’s merit scholarships bring the cost of his private school down to the level of the state school to which he was accepted. Either way, we would have needed loans. In your plan, where would we have gotten them from? Or would we not have?</p>

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<p>This whole thread sounds like “keep the poor kids limited to the state schools so that the wealthier kids can pay less to attend the private schools”. </p>

<p>As OP states:I do not believe that federal student aid should be used for private schools. It’s not as though PELL is but a drop in the bucket for the costs of some of the privates. I think that the availablilty of federal loans, in particular, have been a major reason for the increases in private college costs. Let the schools provide the aid, including loans to the students they accept. </p>

<p>And Massmomm states: Totally agree with Momofthreeboys. One of the major reasons for rising tuition at private colleges is because these schools know that the needs of low income applicants will be met with federal aid. They can charge whatever the heck they want and someone will pay it. This makes things very difficult for middle and upper middle income students, who are forced to cope with rising tuition and fees, but who do not qualify for aid to offset these expenses.</p>

<p>Like sylvan’s kid, mine had merit scholarships that brought the private school cost way less than the public would have cost. </p>

<p>Would the OP’s proposal make an exception for kids who can earn merit scholarships but need the extra help from federal aid?</p>

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<p>KKmama, </p>

<p>Under cpt’s plan, private institutions that could no longer count on federal money covering part of the students’ costs would have the option of covering that difference themselves. Sort of a “put-up or shut-up” situation.</p>

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<p>Sylvan, yes, I borrowed from PLUS loans and it is pure gravy for me and people like me. As I stated in my first post, I am not looking for things that are “good for me” or for any particular person. I am looking at the system as a whole. When changing any system, and doing it on a cost effective way, nearly always means CUTS. And I am cutting. Why should PLUS, federally subsidized be available for those that have no need for it? Of course, I am using it and I love having it available. In my personal case, I wish the interest were lower. Heck, I’d take every penny I could if the rates were abit lower. Cheap borrowing money with flexible terms with life insurance tucked in there. If the kid or I die, the loan is forgiven. Can delay payment for a long, long time. It gives me great flexibility and in MY case and in the case of those in good financial shape it’s a very nice treat. And yet we have those whose EFCs are NOT being met even for state and local choices, and those who do not have local choices that are affordable. The money saved here can go towards beefing up lower cost programs. What PLUS primarily does is make the high cost schools more possible for more families. So they can then hike up the prices even more. It doesn’t make that much difference to a parent borrowing plus if the costs go up another 5% . But if they truly have to come up with that money outside of federally subsidized bubble that PLUS is, that is a whole other story. There are a heck of a lot of schools whose prices are kept up high and maybe even afloat because they are feeding at the federal teat. </p>

<p>So what benefits ME is not the point here. Or what benefits YOU or any other small group. I am looking at the system as a whole.</p>

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<p>

But the system is made up of you and me and all the other small groups who have to deal with the new reality your proposal entails. And of course, we want to know how we would do that. Simply taking a “that’s YOUR problem” approach doesn’t garner support for your proposals, unless the alternatives are obvious and attractive.</p>

<p>So how about it? play along here - you’ve just snapped your fingers and eliminated the Parent PLUS loan program for anyone who is borrowing to meet their EFC. Spring tuition will be due in a couple of months. Now what will we do?</p>

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<p>KKmama, a big reason that private schools, a good many of them anyways, are getting away with the prices they are charging is because of PLUS and other federal funding. The top schools and programs will continue to thrive because they will be worth the money they cost, and PLUS would remain, perhaps in an expanded way for those to borrow to meet FAFSA defined need. </p>

<p>By bolstering the state systems with more funds, those costs should go down or not rise as sharply, and those options be available to more kids. As Roman states, in her state PELL doesn’t even cover tuiton. The same in some other states. That means that those at the lowest end of the financial need spectrum have to come up with money to go to a state school. The costs don’t even end there, as there are transportation, books, and other issues involved with going to school, not to mention the time that is taken from the student to work to make some money towards living expenses. PELL is supposed to an amount given to students whose family situation are such that it covers IN ADDITION to other aid. What colleges have done, state and many privates, as well, is integrate that entitlement into their aid packages. It has become the basis of the cost, instead of the EXTRA it should have been to protect those at the most vulnerable end of the financial spectrum. And to some degree, so have all of the other federal aid programs. You look at an typical aid package and these schools proudly present to kids: The PELL grant (school didn’t give it to them), the Stafford loans, separated into SUB and UNSUB (again, the school had nothing to do with this), maybe some other federal monies which the school did apply for and get and have to put something into like the Perkins, and SEOG and work study. But work study? That is not really even an award. It’s a possibility and in some series when it is award to meet some of your need, the work option, getting a part time job is now dimiinished or eliminated as a way to meet the EFC! Then there is the infamous PLUS which is not an award at all, but an option that the parents might qualify for. </p>

<p>I’ve had to tell kids on this very board that they got NOTHING from the school after looking at the list of awards that the school has presented to them. What’s even more galling is that the EFC is put down there as money that the family/student has to come up with even after the school as pillaged the PLUS, the Staffords, taken away work opportunities with a work study award going towards the family need, and deecetively taking just what would meet need as a PLUS amount when really the famlly could possibly borrow upt to COA less other awards from there if they should so qualify, or get a big fate zero there if they don’t. </p>

<p>So I want to cover that base first. It’s so easy to say, go to community college, to local publics schools to those who don’t have the money for college. Well, the truth of the matter is that most of us don’t want to do that because those options are not very good. That is the sad truth. If the community schools were the quality of Harvard, we’d all be lined up to go there. But most community colleges do not have the courses, are not reliabe in providing the courses, do not have the depth and coverage in a lot of essential courses, do not have the programs for a lot of students. But they can. They can be set up to provide those programs that lead to good jobs, nursing programs, medical programs and for transfer to any four year college. They need the money and the structure to do so, and to attract the students that will be successful even as they have a section that will work on getting those students who really are not academically ready for college up to speed so that they can successfully make that transition. There are some CCs and local schools that are highly successful in doing this. There needs to be more.</p>

<p>By, the way, KKmama, a lot of your insights are valuable, in that your insights run contrary to a lot of popular opinon and things that I say as an auto reply, and forces consideration of other factors that don’t often get addressed on this board.</p>

<p>I don’t know what is fair in the way of merit scholarships, and have not looked at those as they are a private thing. I am looking solely on the federal support of our university/college system which is through PELL, DIrect Loans (PLUS and STaffords) and to some degree work study, Perkins and SEOG. Perkins and SEOG are limited enough that have little to say about them. Work study…well, yes, it can be a good thing when a school is located in a place that has few jobs for kids, but when given as part of financial aid package to address need, it hampers the kid’s ability to earn a portion of the EFC.</p>

<p>Those who are economically disadvantaged have that huge hurdle from the onset. That merit awards are pure gravy for the well to do, but can reduce aid for those who are needy is an issue. That a PELL grant reduces aid is a travesty since those are given to the absolute neediest and are deliberately set up not to be reduced. A student whose family can pay for everything has the Staffords as a nice buffer if things get tight So does the family. Plus the kid can always work a few hours for money above and beyond. Take a kids who has an EFC of $10K, well, coming up with that $10k is not going to be easy, especially when the school takes that Stafford money and puts it towards the need, and also gives the kid work study to meet some of theneed. So he can’t borrow on his own and he can’t work as many hours to get th emoney towards that EFC, and the kid with an EFC of 9999999, can get the Stafford as well as work for money in his own pocket.</p>

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<p>maybe the Plus loans should have annual limits…such as $20k per year…so that privates would either have to give more merit/FA or lower their prices.</p>

<p>I agree that if a private gives enough aid/merit to bring costs down to publcs, then the family should be able to do Plus. But, the idea of using Plus to borrow $200k+ only encourages privates to have out of control pricing.</p>

<p>I also think that Pell Grants should be loans first, and then upon completion it becomes a grant.</p>