Financial Aid Viewpoints Approaches to increase support efforts towards students and schools
ModeratorMisti Ruthven, Colorado Department of Higher Education Financial Aid Panelist: Curt E. Martin, Director - Financial Aid Colorado Mesa University Philip R. Schroeder, Director – Financial Aid Adams State College Thad Spaulding, Director – Financial Aid Community College of Denver
Is there truly intelligent life in the universe? (or at least in Washington D.C.)
So…what does this have to do with financial aid??Another point of view…
The "Self-Operating Napkin" is activated when the soup spoon (A) is raised to mouth, pulling string (B) and thereby jerking ladle (C) which throws cracker (D) past parrot (E). Parrot jumps after cracker and perch (F) tilts, upsetting seeds (G) into pail (H). Extra weight in pail pulls cord (I), which opens and lights automatic cigar lighter (J), setting off skyrocket (K) which causes sickle (L) to cut string (M) and allow pendulum with attached napkin to swing back and forth, thereby wiping chin.
Rube Goldberg's cartoons became well known for depicting complex devices that performed simple tasks in indirect, convoluted ways. (sound familiar?) • Again..so what does this have to do with financial aid??
It’s easier to discuss the origins of the universe and our place in it.. or decipher a Rube Goldberg invention than it is to explain financial aid to a student and their family!! (or anyone for that matter!)
What types of loans are students borrowing? In July 2009, FFELP was eliminated by Congress. Establishing the Federal Direct Loan Program for all Title IV institutions.
Direct Subsidized and unsubsidized loans. The private loan market is still a last resort for most low income students. • Mostly Stafford (Unsubsidized) Large increase over the past 3-4 years • Any and all, but there are significant signs of slowing, see chart
How did this affect students? • It really didn’t! • Students could still borrow funds to pay for college. Subsidized, unsubsidized and Plus. • The student loan limits, both annual and life-time aggregate limits didn’t change. • Interest rates only changed from prior legislation. • Students became more aware of who they borrowed money from and what company serviced the loan(s). • Yes, they lost some minor benefits. (most didn’t know they existing anyway).
How did if affect institutions? • Most institutions made a smooth transition from FFELP to DIRECT Lending. (not all) • It eliminated the complexity of multiple lenders , guarantors, processes and systems. • One lender, one system. (sort of..) • However, in some cases it shifted administrative burdens from other areas of institutions to the F/A office.
What changes do we see in the average borrower indebtedness? • Increases! Especially over the last 3 years -19,000 - 25,000 in 4 years aggregate. • The costs for school are going up, but perhaps not as dramatically as borrowed aid would warrant. We have a uniform increase for loans across the board. • Student loan debt for those who graduated in 2010 from Colorado institutions was $22,017. The national average debt was $25,250.
Right or wrong…or somewhere in between? • Changes in loan programs had little or no affect on student indebtedness or a students ability to borrow. • The Bennett hypothesis (the amount of federal financial aid support increases – the cost of higher education increases) Other sources are evaporating, therefore the federal pool of funding has become even more important. • Economics and societal shifts largest drivers of costs.
How are you advising students on borrowing? • We do what we can. Our forms have repayment rates on them, we talk about loans quite a bit in Financial Literacy and Default Prevention, students must see counselors to request increases to loans. • Total financial management. • Very little or minimal as required by regulation. The administrative burden imposed on financial aid administrators has kept many from focusing on students and helping them understand what has happened and what will be happening to them.
How have your institutions rates moved over the past few years? • UP - along with the national average. • Increase follows economic trends. • Spiked in the 2007 cohort year, declining slowly (16% to 15.2%).
How have the shift to 3-yr rates affected you? • Hard to explain to upper administration. • Shifted frame of reference…freaks everybody out. • Added anxieties. Similar to rearranging the deck chairs on the Titanic.
What are you doing to manage them? • Hired a Default Prevention and Financial Literacy guru, we have a default management plan and task force. Learning a lot about the students who fall into default. • Most institutions have implemented Default Prevention Management Programs, however, limited resources and available staffing levels have made it difficult to administer effectively. • Hired a debt management/ financial counselor.
What additional private sector support could you use? • Better communication with students in regard to servicers (loans for borrowers still split) - Financial management tools. • Cohort Default Rates. • Take over the default prevention management programs from institutions.
Federal Aid Programs (Loans and Grants) What’s going well? • At least we still have them…for now. • Processing is quicker. • The stuff they aren’t cutting is going well.
What’s Not going well? • The stuff Congress is cutting, lots of rules in the past 3 years. • Regulations changing VERY fast, worse than 80’s, increased reporting and oversight. • Pell grant eligibility limits, SAP changes, Verification, program cuts-losses, multitude of regulatory changes and lack of clarification.
Challenges with State Aid Programs • Colorado ranks number 1 in the race to the bottom. A recent article by Thomas G. Mortenson, Senior Scholar at The Pell institute for the Study of Opportunity in Higher Education, projected Colorado to lead the pack in the race to the bottom. Of all states, Colorado could cease funding Higher Education by 2022 or sooner. • Thad- truly a sad state of affairs.
Explain unique situation in Colorado Programs • Education not viewed as very important, low taxes, nothing else to subsidize state income. • Schools are left to fund themselves, do we really have a public Higher Ed system? • Government foresight is limited to special interests, and education is not one of them, or at least perceived as one of them.