The Decline of Federal Financial Aid
The Federal Financial aid program, Stafford loan program and Pell grant program have all come under fire recently for several issues. These issues pertaining to higher interest rates, inability for students to maintain pay off times and the rising cost of tuition. The federal financial aid has also come under fire for offering fewer amounts of financial aid in regards to the increased amount of tuition at several colleges and universities. The result has been a decline of federal financial aid popularity with students entering college. The following are a few reasons that students are now looking away from federal financial aid and towards other options including savings plans, grants, scholarships and private loans.
Increased Tuition Offsets
One of the reasons that students are looking away from federal financial aid and causing the decline of the federal financial aid system is due to the fact that colleges are increasing tuition on a yearly basis. This increase has seen an almost double amount in the past decade alone. Unfortunately, federal financial aid is not keeping up with the tuition increase. For example, semester tuition at a four year University may cost $22,000. However, the federal financial aid offered for a student for that semester may only need three quarters of that were only half of that amount. This means that the student is still left with having to pay out-of-pocket for some of the expenses or come up with other financial means to cover these expenses. The end result is that the student is left with out-of-pocket expenses as well as a student loan repayment for the federal financially taken out cover even part of the expenses of the tuition.
The eligibility rates for federal financial aid programs have seen some drastic changes in the past decade. A student who would have been able to receive full federal financial aid in the early 90s is only able to receive partial financial aid or less depending on their income. For students who come from a household defined as the working poor, they may not be eligible for any type of financial aid. In other words, the federal financial aid system has not kept up with the reality of eligibility of students and the needs of students going into college. This means that that students who are eligible for other forms of eight are not eligible for federal financial aid and therefore are looking to other means to cover college if they decide to go college of all.
The repayment of federal financial aid has become very blurred in recent years. Though there are several deferments that are offered to help students who are unable to pay their federal financial aid loans immediately, the problem has come in with the amount of individuals that are seeing their student loans sold to different companies. For example, a student may start out with Citibank as their loan processor. However, over the course of several years that student loan may be handed off to as many as a dozen different loan processors and the student may never know. In fact, it is currently not regulated that the student be notified of who their loan processor is directly. This means it is up to the student to try to find out, however they may find out who the loan processor is only to have the loans sold again. Each time the loan is sold a new processor steps in and that new processor may at a different interest rate that the student is unaware of. These issues have led many students turning away from federal financial aid to the high risk of the loan not being capable of being repaid or the fact that the student may not have the responsibly in their hands to obtain the proper information to repay the student loan.
The fact of the matter is that students are now looking away from federal financial aid and to more responsible financial options that will allow them to either pay out-of-pocket, cover all the expenses through scholarships or grants or to find a more reasonable student loan option that will allow them to keep up with who owns their loan and who to contact in case of an emergency with their federal financial aid or with financial aid for their student loan.
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