Daily Financial Aid News

From the New York Times:

In a move suggesting how the credit crisis could disrupt American higher education, Wachovia Bank has limited the access of nearly 1,000 colleges to $9.3 billion the bank has held for them in a short-term investment fund, raising worries on some campuses about meeting payrolls and other obligations.

On Monday, Wachovia announced that it would resign its role as trustee of the fund, and would limit access to the fund to 10 percent of each college’s account value. On Tuesday, Commonfund said that by selling some government bonds and other assets held in the fund, it had succeeded in raising its liquidity to 26 percent.

The University of Vermont, for instance, said that about half of its liquid operating assets — $79 million — were invested in the fund.

Commentary

Unsurprising, to say the least. Any financial institution with a solvency problem - and that’s an awful lot of them - will also pose liquidity (cash) problems for its customers, from IndyMac losing 50% of deposits above the FDIC insurance limit to Wachovia locking down a fund. I’m sure thousands of college presidents and CFOs are checking right now to see how vulnerable their institutions are.

What does this mean for you? Any float - any flexibility - that a university might have been able to give to students behind at all on payments just went out the window. Expect colleges and universities to be exceptionally rigorous in enforcing payment deadlines, which means that staying on top of your financial aid package and student loan disbursements will be critical to avoid any kind of penalty from the bursar’s office.

Hopefully, colleges and universities will also diversify their liquidity pools as well, so that they won’t be caught off guard the next time something like this happens. Given the current state of the economy, that may be in the near future.

Is your money safe? If your money is in FDIC insured checking or savings accounts, or in FDIC insured CDs or Treasury bills and bonds, under the $100,000 FDIC limit, then your cash is 100% safe. It may get locked up for a couple of days if your bank fails, but generally the FDIC has processed failed banks very quickly, usually on a Friday, so that when Monday rolls around, the bank is open.

If you have a lot of money in a 529 investment plan, you’ll want to get in touch with your financial planner to see how it’s invested and how soon before you need it. If you’re looking at least at a 10 year timeframe (your kids are 7 or 8), then chances are the impact of this economic shock will be mitigated before then. If you need the money soon, contact your financial planner today.

Scholarship Update

The Admissionhook.com College Essay Scholarship is an essay contest. This award is part of AdmissionHook’s ongoing mission to help students get into and pay for the college of their dreams. There are two ways to win the scholarship. First, you can create an account and submit your essay. If your essay is one of the top 5 vote recipients, your essay will be reviewed by a committee and the winner will be notified within 14 days of the close of the scholarship contest. Second, students can create an account and vote on other student’s essays (they can also vote on your own). The registered user who votes on the most essays as of the scholarship deadline will receive a $500 scholarship.The Deadline to apply for this scholarship is 12/15/2008.

Details at our free college scholarship search site.

Jobcast

A reminder, we’re hiring. Check out our jobs page for lots of different opportunities for you to join the team and change the world just a little.

One subtle tip for job hunting. Make sure, please, that you read the job ad carefully. We’ve put in some ads a requirement to only send a plain text resume. Why? Because [a] our virus and spam filter is less likely to discard it, [b] you’re less likely to send an infected attachment from your PC (we’ve had no fewer than 5 different viruses come in via infected resumes and [c] we’re checking attention to detail.

It’s a super easy filter to specify something relatively minor like a format requirement for a job listing. If, for example, plain text is specified, any email that comes in with an attachment can be immediately discarded without even reading it, saving the hiring manager a tremendous amount of time.

Be aware of this - read the listings!