Daily Aid 25: Surveying the economic landscape

15 October 2008 1 views No Comment

Daily Aid 25: Surveying the economic landscape

Student Financial Aid News

The Wal-Mart Foundation, the chain store’s philanthropic arm, announced today a $4.2-million grant to the Institute for Higher Education Policy, which will use the money to support programs that help students who are the first in their families to go to college succeed at minority-serving institutions.

The grant continues the philanthropy’s recent emphasis on helping first-generation students, including millions of dollars in grants, announced in February, to the Council of Independent Colleges, the American Association of Community Colleges, and 20 individual colleges.

Under the grant announced today, 30 colleges will each receive $100,000 awards from the institute as well as other forms of support.

Commentary

Great to see continued support for higher education from the private sector. One of the fears I’ve had about the scholarship world is that as the economy declines, so would scholarship commitments. Kudos to Wal-Mart for continuing to commit to higher education.

From NASFAA:

“As the financial world waits for frozen credit markets to thaw, higher-education officials say college students will face unprecedented scrutiny from private lenders as the United States reels from its sharp economic downturn,” eSchool News reports. “Students seeking to attend the nation’s largest universities whose loan applications come with credit-worthy cosigners likely will have little trouble obtaining financing, experts say–but community college students with scant or checkered credit histories might be driven to nontraditional payment policies. If loans become scarce, colleges might have to establish pay-over-time systems, in which students have an entire semester to pay for classes. Because that requires colleges to absorb the risk, instead of a third-party lender, some financial experts say many institutions would be reluctant to embrace such a model.”

Commentary

I think eSchool is overly optimistic in its assessment that even creditworthy students and families will have little trouble obtaining private student loans. Based on many of the fundamentals underlying the economy – metrics like the TED Spread, LIBOR, and the CBOE VIX, market instability remains a large issue and shows no sign of abating despite the best efforts of governments and industries.

This is one of the reasons I’m so absolutely adamant that you be hunting for scholarships all the time, that you be responsive and responsible in your education financing. In the worst reasonable case scenario, the mortgage debts that have caused much of the economic issues won’t finally clear out until late 2011 or early 2012; if you’re graduating between now and 2012, you owe it to yourself to graduate with as little debt as possible, because there’s no guarantee that the job market will have fully recovered and resumed strong growth. Graduating with minimal debt means less to repay once you enter the work force.

If things improve before then, even better for you – you’ll graduate with minimal debt and be that much better off.

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