Daily Aid 110: Financial Aid Cause and Effect

Home » Economics 101, Focus on Financial Aid, Scholarship Update

Daily Aid 110: Financial Aid Cause and Effect

8 April 2009 1 views No Comment

Daily Aid 110: Financial Aid Cause and Effect

Student Financial Aid News

Increased federal student aid, especially to middle-class families, is contributing to the rising cost of higher education, a report by the Center for College Affordability and Productivity says.

The report concludes that federally backed loans should be offered to only low-income families, not expanded to help more middle-class families, and that “the expanded tuition tax credits in the 2009 stimulus bill are probably a step backward.”

Commentary

Economics 101 – the more a customer has to spend, the higher you can raise your prices. Conversely, the less a customer has to spend, the lower you must take your prices in order to sell anything.

Now, where this report goes astray is that it lumps all federal student loans together instead of breaking out subsidized Stafford loans from other forms of federal student loans like PLUS loans.

Again, the way out of spiraling tuition is likely going to be things like online degrees which can rapidly increase supply, because decreasing demand for higher education seems unlikely in the near future.

From NASFAA and the Monitor:

“Student debt in the United States has surged in recent decades, with outstanding federal student debt now topping $500 billion. The share of young adults carrying some educational debt has almost tripled since 1983, according to economist Ngina Chiteji,” The Christian Science Monitor reports. “At the same time, defaults are on the rise. Between 2006 and 2007, the proportion of borrowers who were supposed to enter repayment for the first time and who instead defaulted went up – from 5.2 percent to 6.9 percent, according to a Department of Education report last month. That percentage is the highest in more than a decade. And the 2008 and 2009 default rates are likely to be much higher.”

Commentary

Pretty astonishing, isn’t it, the amount of total student debt? This is why we continue to urge you to borrow responsibly according to the 10% rule – borrow no more than you can afford to pay, 10% of your income once you graduate. That works out, at least for federal student loans and loans with 10 year terms, to be no more than your first year’s estimated salary after graduation. Never borrow more than that total to avoid saddling yourself with unmanageable amounts of debt.

Check out any of the salary finder tools online to research what your likely salary will be based on profession and geography.

Scholarship Update

HACU applauds your initiative in searching for a scholarship! We hope that we will be able to assist you in defraying some of your college expenditures. Each scholarship has specific criteria, so please review each one carefully.

However, all scholarship recipients MUST meet all the following criteria:

1. Demonstrate financial need.
2. Meet the specified criteria for the scholarship to which they are applying to.
3. Be attending a HACU-member institution (excluding international members) both when applications are completed and when scholarship awards are made.

Details at our free college scholarship search site.

Did you know that I get a good deal of my new scholarship info every day from Twitter? Read this blog post on how to locate scholarships with Twitter, and follow @winscholarships for our Scholarship Points extra codes!

Did you enjoy this? If so, please consider subscribing for free to get it delivered to you. Subscribing for free means you don’t have to remember to download it every day.
+