With a struggling economy and the cost of tuition on the rise at many colleges and universities across the nation, students are requesting more financial aid.
There has been a 16.3 percent increase nationally in the number of students filing federal student aid forms during the first half of 2008 compared with the same period last year.
“There is always a need for financial aid. There has been an increase in filing and awarding aid,” said Devon Wiggins, financial aid and scholarships director.
Due to the credit crunch, student loan providers are modifying their business practices to adapt to a changing market.
“The economy has caused a reduction in financial aid lenders. Many lenders have exited the business. Students that had these lenders previously had to switch,” said Wiggins ” A lot of incentives, such as free payments for paying on time, are no longer available as well.”
Previously, the interest rates on loans taken out by students, called Stafford Loans, and those taken out by parents, called Plus Loans, were variable, adjusted each year to reflect current market conditions, good when interest rates are going down but bad when they’re going up.
The new college aid law, recently signed by President Bush, makes the loans fixed rate. Interest rates will now be locked in for the life of the loan, just as rates are increasing.
“Interest rates on students loans are low compared to other loans,” said Wiggins “The rates do fluctuate, but there has been no drastic increase.”
The new law allows undergraduates to borrow more from the government and makes federal parent loans more flexible. It also allows the Department of Education to buy federal student loans from lenders so they have cash to make more loans.
Unlike federal student loans, private loans are not guaranteed by the federal government. While guaranteed student loans carry a fixed rate of 6.8 percent, there are no limits on the interest rates and fees private lenders can charge. Some have variable rates of up to 19 percent.
“Here at Tyler Junior College, we encourage students to steer away from private loans, so that hasn’t been an issue for us,” said Wiggins.
Not only is it student loans that are effected by the recent economic downturn, many national scholarship participants have been cutting back their funds or pulling their programs altogether.
“Scholarships are funded based on the performance of the TJC Foundation’s investments. Now more than ever it is extremely important for donors and friends of the college to continue their support of TJC and our students,” said Shelby Brown, scholarship director.
Many students are also focused on landing scholarships to help pay for tuition instead of taking out loans.
“Certainly everyone is aware of the higher costs of education. Students who are already on a scholarship and those who wish to apply for one, may be more cognizant of their grades and what is required in order to keep scholarships,” said Brown.