financial aid

Type: Private
On the web: http://www.collegeloan.com

Making the grade is up to you, but making the payment can be a collaborative effort. College Loan Corporation, one of the nation's top student loan providers, has helped more than 800,000 borrowers pay their college bills since its inception in 1999. The company has traditionally financed its lending through the issuance of debt. However, it has been unable to secure financing due to the ongoing credit crisis and suspended funding of new private student loans as well as federally backed loans (such as Stafford, Perkins, and PLUS loans) in 2008. College Loan Corporation currently manages more than $10 billion in student loans.

Officers:
CEO: Cary Katz
SVP Operations: Michael Boyd
CFO and Director: John Falb

Competitors:
Nelnet
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Student Loan Corp.

Despite the fact that college tuition rose much more rapidly than either consumer prices or family incomes during the 1980s and 1990s, few college students paid the full cost of higher education during this period. Those who attended public colleges and universities paid relatively low tuition, with state taxpayers funding much of the cost of running these institutions. Students enrolled in private colleges and universities generally paid significantly higher tuition, but that tuition was rarely high enough to cover costs, which have traditionally been subsidized by private donors.

Over half of all undergraduate students - and over 70 percent of those who attend full-time - receive financial aid to help pay their tuition. Most of this aid, which adds up to almost $70 billion a year, comes from federal or state governments or directly from the institutions. It may be in the form of grants (which do not have to be repaid), loans, or work. Some aid is based on financial need, while other aid is awarded on the basis of academic qualifications, athletic ability, or other personal characteristics.

Need-Based Aid

Historically, the driving force behind student financial aid has been the goal of providing access to higher education regardless of a student's ability to pay. The value placed on equal opportunity in American society, combined with the role of education in determining occupational and financial success, has created strong support for devoting both public and private funds to subsidizing students who would otherwise not have the means to continue education beyond high school. Although a decreasing proportion of student aid is based purely on financial circumstances, need-based aid remains the core of the financial aid system.

"Ability to pay" and "financial need" are not precise concepts, but an elaborate system has developed to direct funds toward those who need them most. The current approach to measuring need dates back to the mid-1950s, when a group of colleges established the College Scholarship Service of the College Board. They developed a standardized system of measuring family ability to pay, which allowed them to distribute their funds more equitably. This system has evolved over time and continues to guide the financial aid systems of many private nonprofit colleges and universities. Since 1986, Congress has legislated a formula for determining eligibility for federal need-based aid funds. This formula also provides the basis for aid allocation in many states.

Under both the congressionally mandated Federal Methodology (FM) and the formulas used by most colleges and universities, need is defined as the cost of attending college less the Expected Family Contribution (EFC) - which is determined by the need-analysis formula - a federal methodology that determines how much families/students can afford to pay and is used to allocate federal funds. (For students who are not dependent on their parents, only the student's financial resources are considered.) Students apply for aid by filling out the federal government's Free Application for Federal Student Aid (FAFSA), as well as any additional forms required by the schools to which they are applying. FM focuses on current income levels, family size, and the number of family members in college, though many institutions collect additional information from applicants and measure financial strength using a formula that, like the College Board's, relies on both income and assets in addition to relevant family circumstances.

Federal Aid

The federal government provides about three-quarters of its $48 billion of student aid in the form of loans. Half of this amount is in the form of subsidized loans to students. Students determined through the Federal Methodology to be eligible for need-based aid either borrow directly from the government (William D. Ford Direct Loans, usually called simply Ford Direct Loans) or take federally guaranteed loans from banks or other private lenders (Federal Family Education Loans, or FFELs). The government pays the interest on these subsidized loans while the student is in school.

In the 1990s, non-need-based loans became an important component of the federal student aid system. Forty percent of federal education loans are now in the form of unsubsidized student loans. Introduced in 1992, these loans are available without regard to financial need, and interest accrues on them during the college years. The federal government also provides non-need-based loans to parents of undergraduate students.

The largest federal grant aid program, the Pell Grant, is the main source of aid targeted directly at the most economically disadvantaged students. By the year 2000, almost 4 million students a year received an average of about $2,000 a year under the Pell program, which provided maximum grants of over $3,000. Funding for Pell Grants increased about 15 percent in real terms during the 1990s, but the growth was almost entirely in the number of recipients, not in the size of the average grant. In 2000, the maximum grant covered less than half as much of the cost of attending both public and private four-year institutions as was the case in the mid-1970s.

In addition to a variety of other smaller grant programs, the federal government provides about $1 billion in work-study aid, which subsidizes student employment during the academic year. Like Pell Grants and subsidized student loans, work-study funds are need-based and are distributed on the basis of eligibility as determined by the Federal Methodology.

Since 1998, the federal government has supplemented these explicit student aid programs with taxbased subsidies to college students. The Hope Scholarship and Lifetime Learning Tax Credits are nonrefundable tax credits that reduce the federal income taxes of students or their parents who are paying tuition. These credits benefit those who earn enough income to pay income taxes, but whose income falls below the legislated maximum. In other words, they are directed primarily toward middle-income students. The subsidies provided by these tax credits exceed the amount of federal grant aid to students.

State Aid

State subsidies for higher education come in the form of the relatively low tuition levels enjoyed by all students at public colleges and universities. However, states also have grant programs to assist students in covering their college costs. State grant aid grew much more rapidly than federal grant aid during the 1990s. By the year 2000, nine states spent less than $2 billion a year on student aid, but South Dakota was the only state with no program in place. At the other end of the spectrum, five states provided more than $200 billion a year to their students.

As is the case with federal student aid, the proportion of state aid that is based on financial need was smaller in 2000 than it was in 1990. Georgia has set a national example with its merit-based program and many states appear to be following suit. Nonetheless, more than 80 percent of state aid is dedicated to undergraduate need-based programs, and many states still have only need-based grant programs.

Institutional Aid

Financial aid funded directly by institutions grew very rapidly in the 1990s, particularly in private non-profit colleges and universities, but also in the public sector. By 2000, about 20 percent of total student aid and almost half of total grant aid came from institutions. Financial aid, which used to be viewed only as a subsidy to students, is now frequently seen as serving multiple purposes. In addition to using it to make college affordable for more students, many colleges and universities are devising strategies to use aid dollars to attract particular types of students by influencing students' choices among institutions. Many schools have increased the proportion of their grants and scholarships they award to students based on academic or other personal qualifications. On public campuses, over half of the student aid is now based on criteria other than need. However, at private colleges and universities, about 80 percent of the student aid is still based on financial need as determined by a need analysis formula.

Financial Aid and Affordability

Student aid covers more of the cost of college for full-time students than for part-time students, and it covers more for lower-income students than for higher-income students. Grant aid reduces the amount students have to pay for education, while loans reduce liquidity constraints but impose repayment burdens after college. In other words, because of financial aid, different students pay very different amounts for the same educational experience. The student aid system is complicated, with aid coming from a variety of different sources and allocated based on a variety of different criteria. While it is difficult to measure precisely the impact of the aid system, it is clear that the availability of student aid has significantly increased the number of students who have the opportunity to continue education after high school, and also broadened the choice of institutions available to many students. Nonetheless, there is considerable evidence that financial aid has not succeeded in making higher education affordable for all qualified low-income students.

Bibliography

The College Board. 2000. Trends in Student Aid, 2000. Washington, DC: College Entrance Examination Board.

King, Jacqueline. 1999. Financing a College Education: How It Works, How It's Changing. Phoenix: American Council on Education/Oryx Press.

National Association of State Student Grant and Aid Programs. 2000. 30th Annual NASSGAP Survey Report. Albany, NY: National Association of State Student Grant and Aid Programs.

National Center for Education Statistics.2002. Federal Support for Education: Fiscal Years 1980 to 2001. Washington, DC: U.S. Department of Education.

— SANDY BAUM

• Student Loan News Blog Student loan news for parents and students

Student financial aid refers to funding intended to help students pay educational expenses including tuition and fees, room and board, books and supplies, etc. for education at a college, university, or private school. General governmental funding for public education is not called financial aid, which refers to awards to specific individual students. Certain governments, e.g. Nordic countries, provide student benefit. A scholarship is sometimes used as a synonym for a financial aid award.

Contents 1 Types of financial aid 1.1 Merit-based 1.2 Need-based 2 Debt vs. grants 2.1 No loan financial aid 2.2 Loan cap 3 In the United States 4 Outside the United States 5 References 6 External links 7 See also

Types of financial aid

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Financial aid may be classified into two types based on the criteria through which the financial aid is awarded: merit-based or need-based.

Merit-based

Merit-based scholarships include both scholarships awarded by the individual college or university and those awarded by outside organizations. Merit-based scholarships are typically awarded for outstanding academic achievements, although some merit scholarships can be awarded for special talents, leadership potential and other personal characteristics. Scholarships may also be given because of group affiliation (such as YMCA, Boys Club, etc.). Merit scholarships are sometimes awarded without regard for the financial need of the applicant. At many colleges, every admitted student is automatically considered for merit scholarships. At other schools, however, a separate application process is required.

Athletic scholarships are a form of merit aid that take athletic talent into account.

Need-based

Need-based financial aid is awarded on the basis of the financial need of the student. The Free Application for Federal Student Aid (FAFSA) is generally used for determining federal, state, and institutional need-based aid eligibility. At private institutions, a supplemental application may be necessary for institutional need-based aid.

Debt vs. grants

No loan financial aid

In 2001, Princeton University became the first university in the United States to eliminate all loans from its financial aid packages. Since then, many other schools have followed in eliminating some or all loans from their financial aid programs. Many of these programs are aimed at students whose parents earn less than a certain income — the figures vary by college or university. These new initiatives were designed to attract more students and applicants from lower socioeconomic backgrounds, reduce student debt loads, and provide the offering institutions with an advantage over their rivals in attracting commitments from accepted students. As of March 25, 2008, the list of colleges and universities offering such no-loan financial aid packages includes the following

School	No-loan financial aid for families meeting these eligibility requirements:
Amherst College	No max of income
Arizona State University	Arizona residents with family income of up to $60,000 [1]
Bowdoin College	No max of income [2]
Brown University	Family income below $100,000 [3]
Caltech	Annual income below $60,000 [4]
Claremont McKenna College	No max of income [5]
Colby College	No max of income; all students [6]
Columbia University	All students eligible for financial aid regardless of family income[7]
Cornell University	Annual income below $75,000
Dartmouth College	Annual income below $75,000 [8]
Davidson College	No max of income
Duke University	Annual income below $40,000[9]
Emory University	Annual income below $50,000
Haverford College	First-year students with financial need. [10]
Harvard University	Annual income below $60,000
Lafayette University	Annual income below $50,000[11]
Lehigh University	Annual income below $50,000[12]
MIT	Annual income below $75,000[13]
University of Maryland, College Park	Maryland resident with 0 EFC. [14]
Michigan State University	Michigan resident with family incomes at or below the federal poverty line. [15]
Northwestern University	Family income lower than approx. $55,000. [16]
North Carolina State University	Income less than 150% of the poverty line. Requires the family to have "limited assets," regardless of state residency. [17]
University of Chicago	Students who demonstrate financial need and whose annual family income totals $75,000 or less.[18]
UNC Chapel Hill	200% of federal poverty line ($24,000 to $37,000)
University of Pennsylvania	Annual income below $100,000 [19]
Pomona College	No max of income [20]
Princeton University	No max of income
Rice University	Annual income below $80,000
Stanford University	Annual income below $45,000
Swarthmore College	Anyone with financial need [21]
Tufts University	Annual income below $40,000[22]
Vanderbilt University	No cap.[23]
Vassar College	Annual income below $60,000.[24]
University of Virginia	200% of federal poverty line ($24,000 to $37,000)
Washington and Lee University	No max of income
Washington University in St. Louis	Annual Income below $60,000[25]
Wellesley College	$60,000[26]
Wesleyan University	$40,000[27]
College of William and Mary	$40,000 (VA residents only)
Williams College	No max of income
Yale University	No max of income

Loan cap

Some universities have opted to have a "loan cap" program, which is a maximum loan — either per year or for the four years combined — designed to reduce the cost of attendance for low-income and middle-class students. The following schools have a loan cap program:

School	Loan Cap for students meeting these eligibility requirements:
Brown University	Family earning less than about $125,000: Caps total loans to $3,000 per year. Family earning up to $150,000: Caps total loans to $4,000 per year. Family earning up to $150,000: Caps total loans to $5,000 per year.
University of Chicago	"Those whose families make between $60,000 and $75,000 will have 50% of their loans replaced."[18]
Cornell University	Undergraduates with family incomes less than $120,000 will have loans limited to $3,000 per year.
Duke University	Undergraduate students with family income between $40,000 and $100,000 will have their loans limited on a graduated basis ($1,000 to $4,000 per year) and loans "frozen" at the freshman level. [9]
Emory University	"Annual assessed incomes of $50,000 to $100,000 who demonstrate need for financial aid. The program caps total need-based loans at $15,000, assuming on-time progression toward graduation with up to eight semesters of study."[28]
Grinnell College	"Beginning in the 2008-09 academic year, need-based loans for all eligible students will be capped at $2,000 per year."[29]
University of Maryland, College Park	Students with need-based financial aid will have their loans capped at $15,900 for their four years of attendance.[14]
Middlebury College	Family income below $40,000: $1,500 per year; family income $40,000 to $80,000: $2,500 per year; family income above $80,000: $3,500 per year. [30]
Rice University	Students with a family income below $60,000 will not have loans. Families with incomes over $60,000 will have their loans capped at about $14,500.
University of Virginia	200% of federal poverty line ($24,000 to $37,000). Loans are capped at 25% of the in-state cost of attendance, regardless of state residency.

In the United States

The United States, federal government provides need-based federal aid called Federal Student Financial Aid, which is composed of different programs, grants, and scholarships, work and loan programs including Federal Pell Grants, Federal SEOG Grants, SMART Grants, Academic Competitiveness Grants (ACG Grant), Federal Work-Study Program, Federal Stafford Loans (in subsidized and unsubsidized forms), Federal Perkins Loans, State Student Incentive Grants and Federal PLUS Loans. Federal Perkins Loans are made by participating schools per annual appropriations from the U.S. Department of Education, whereas Federal Stafford Loans and Federal PLUS Loans are made by participating lenders under the Federal Family Education Loan Program (FFELP). The U.S. Department of Education serves as a lender and guarantor under the William D. Ford Direct Loan Program.

To qualify for federal student aid, a student must file the Free Application for Federal Student Aid (FAFSA). The FAFSA uses a calculation taking into account income and assets to determine a student's Expected Family Contribution (EFC) toward his or her college education for that year. Colleges use the EFC to decide what types of financial aid a student is eligible to receive. Students must complete the FAFSA each year to be considered for financial aid and must complete an entrance and exit survey.

The EFC also takes into consideration any participation in college savings or pre-paid tuition plans. In the past, financial aid officers weighed pre-paid tuition plans more heavily than other 529 college savings plans when determining a student’s eligibility. In February 2006, Congress passed legislation to treat both types of plans evenly.

State governments also typically provide some types of need- and non-need-based aid, consisting of grants, loans, work-study programs, tuition waivers, and scholarships. Individual colleges and universities may provide grants and need- and merit-based scholarships. Students requiring financial aid beyond what is offered by their institution may consider a private (alternative) education loan, available from most large lending institutions. Typically, education loans obtained through the federal government have lower interest rates than private education loans.

Institutions may also offer their own student financial assistance, in the form of need- or merit-based aid, as well as endowed scholarships (with varying need and/or merit-based criteria). Some schools may only require the FAFSA; some may also require an additional need-based analysis document, such as the CSS/Profile, to apply for such funds to apply a more stringent need analysis for the rationalization of institutional funds.

Outside the United States

Many national governments provide student financial assistance subsidies, i.e. student benefit, for students attending a university, although proposed policies to change such subsidies have engendered considerable debate in several countries, such as Canada, the United Kingdom, Germany, and Scandinavian countries. The heavy reliance on private subsidies, as in the United States, is not as widespread, although this may be changing.

In Germany, the main source of financial aid is provided by the Bundesausbildungsförderungsgesetz, colloquially known as BAFöG.

References

1. ^ Student Financial Assistance
2. ^ Bowdoin Eliminates Student Loans While Vowing to Maintain its Com, Campus News (Bowdoin)
3. ^ 07-105 (Financial Aid Changes)
4. ^ Caltech Press Release, 12/11/2007, Jean-Lou Chameau
5. ^ News Release, News and Events, Claremont McKenna College
6. ^ Colby College | News & Events | Colby Replaces Loans With Grants, Allowing Students to Graduate Without Debt
7. ^ Columbia News ::: Columbia Expands Financial Aid
8. ^ Dartmouth News - Dartmouth announces new financial aid initiative - 01/22/08
9. ^ ^{a b} New Financial Aid Support
10. ^ Haverford College News Room
11. ^ Lafayette strengthens financial aid
12. ^ Lehigh to enhance financial aid policy
13. ^ MIT to be tuition-free for families earning less than $75,000 a year - MIT News Office
14. ^ ^{a b} Interpretations, TERP Magazine Winter 2005
15. ^ Spartan Advantage Program | Office of Financial Aid | Michigan State University
16. ^ <Northwestern: Grants Replace Loans for Neediest Students>
17. ^ Pack Promise
18. ^ ^{a b} The University of Chicago: Odyssey Scholarships
19. ^ Penn Admissions: Paying for a Penn Education
20. ^ Pomona College : News@Pomona
21. ^ Swarthmore College :: Financial Aid :: More about Swarthmore's
    Expanded Financial Aid Program
22. ^ Tufts E-News: Tufts University Eliminates Loans for Lower Income Students
23. ^ http://www.vanderbilt.edu/expandedaidprogram/
24. ^ Vassar College further strengthens commitment to access and affordability
25. ^ WUSTL to expand financial aid for low-income families
26. ^ Wellesley College Increases Financial Aid
27. ^ http://www.wesleyan.edu/cgi-bin/cdf_manager/template_renderer.cgi?item=57727
28. ^ Loan Cap Program
29. ^ Tuition and Financial Aid - Grinnell College
30. ^ Financial Aid

External links

• Financial Aid at the Open Directory Project
• Federal Student Aid - U.S. Department of Education

See also

• Scholarship
• Student benefit

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