Financial Aid – Simplifying the Struggle to Fund Education
More Americans than ever need specialized training or, preferably, a college degree to get a job. According to the Middle Class Task Force assembled by the Obama administration in an article titled “We Can’t Wait to Help America’s Graduates”, we currently have a “globally competitive, knowledge-based economy and higher education has never been more important. America cannot lead the 21st Century without the best educated, most competitive workforce in the world.”
Although this need for higher education is more apparent than ever, tuition is rising and budget cuts are limiting classroom enrollments. Alas, there is hope. Financial aid does exist and navigating the process has actually become easier over the past couple years.
President Obama has set a national goal that by 2020 the U.S. will have the highest proportion of college graduates in the world. To meet this goal, the federal government has made the following changes:
- Federal student loans can no longer originate through private banks
- Simplification of the Free Application for Federal Student Aid (FAFSA) form
- Interest rates for subsidized Stafford Loans have decreased from 5.6 to 3.4 percent
- Increased Pell Grant maximums – the current grant is $5,550 for the 2010-11 school year and starting in 2013, Pell grant increases will be tied to the Consumer Price Index plus one percent. Moreover, students may now get additional Pell Grant funding while attending summer classes in addition to the full academic year.
- Increase and expansion of the American Opportunity Tax Credit (formerly the Hope Scholarship Tax Credit) – the credit has been increased to as much as $2,500 per student per year and is now eligible for students in their third and forth years, in addition to students in their first two years.
However, despite historic investments in federal programs, it has been highly publicized recently that many of America’s graduates are struggling to manage their current federal student loan debt. The federal government has come up with some ways to help:
- Starting in 2012, a proposed federal loan repayment tax cap for students who qualify. Repayment should not exceed 10 percent of a borrower’s discretionary income. The current Income Based Repayment (IBR) plan caps payments at 15 percent.
- Also starting in January 2012, borrowers have the opportunity to consolidate loans and reduce interest rates.
- The White House and the Department of Education are encouraging colleges and universities through the Consumer Financial Protection Bureau to educate borrowers better before they apply for a loan with the Know Before You Owe project. This financial aid disclosure form outlines the type and amount of federal aid the student qualifies for and should make the total costs and risks associated with student loans more clear before enrollment.
Although the federal government is making an effort to provide financial aid relief, the true struggle exists with the rising costs of tuition and what institutions of higher education will do to ultimately curb the outrageous costs.