FAP880: Economy, scholarships, shortfalls, free stuff

October 17, 2008

FAP880: Economy, scholarships, shortfalls, free stuff

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Student Financial Aid News

“It’s ‘the mother of all shortfalls,’ according to one Washington insider. Others worry that it may get lost amid the nation’s larger financial crises involving banks and mortgage lenders,” Diverse: Issues In Higher Education reports. “But one thing is increasingly clear: Fueled by a declining economy that has many low-income Americans returning to school, the Pell Grant program is facing a growing shortfall that soon may reach $6 billion. ‘It’s such a large figure that Congress and the administration cannot ignore it,’ says Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers.”

Commentary

As we’ve been talking about in The Coming Financial Aid Crisis, $6 billion is too conservative a number. Much, much more will be required, because you’re only now seeing the financial markets losses bleed into the real economy, into Main Street. Jobs are being lost, hours cut, raises forfeited, for the average American family. This in turn will sharply increase demand for financial aid and federal dollars will be hard pressed to keep up.

Be ready. Get your paperwork in order. Hunt scholarships year-round. File your FAFSA as early as you can.

Scholarship Update

National Association of Hispanic Journalists Scholarship. Students interested in journalism as a career can apply. Current high school seniors, college undergraduates and first-year graduate students who are pursuing careers as print, photo, broadcast or online journalists. Each scholarship has different requirements for eligibility. Please carefully review each to determine which ones you qualify for. Students must plan to attend a community college or university that is within the United States or Puerto Rico full-time for the entire academic year in order to be awarded an NAHJ scholarship. Students who attend or plan to attend colleges or universities outside of the United States or Puerto Rico are not eligible for NAHJ scholarships.

Details at our free college scholarship search site.

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Reminders
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+ Financial Aid Podcast Show Notes at FinancialAidPodcast.com.
+ Free scholarship search secrets eBook at StudentScholarshipSearch.com/ebook
+ Free college scholarships contests!
+ Open an FDIC-insured savings account today!
+ Stafford federal student loans at StaffordLoan.com
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+ Private student loan consolidation at StudentLoanConsolidator.com
+ FAFSA form tutorials and free help at FAFSAonline.com
+ The Financial Aid Podcast is a publication of the Student Loan Network.

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Daily Aid 20: A tomato in your financial aid

October 7, 2008

Daily Aid 20: A tomato in your financial aid

Student Financial Aid News

From Inside Higher Ed:

Community colleges and the government need to do more to make sure that community college students apply for federal student aid, according to a new report by the federal Advisory Committee on Student Financial Assistance. The report notes that many community college students are eligible for aid but never apply. In many cases, the report says, aid could allow the students to spend more time on their academic work and less time working to earn money — and such a shift in time could have a dramatic impact on completion rates.

Commentary

This is unsurprising. Community college students are the most likely to benefit from federal financial aid, since things like the Pell Grant can cover most of the cost of community college. Outreach is where the focus needs to be in order to increase awareness and eligibility for federal financial aid. The Student Loan Network, of course, is an avid proponent of all college students, regardless of need, filing the FAFSA to ensure that no aid opportunities are missed.

From NASFAA:

“Sen. Charles Schumer says particular attention needs to be paid during the current financial upheaval to make sure the student loan market is protected from the credit crunch,” the Associated Press reports. “The New York senator warned Monday that a tight credit market brings difficulties for students and their families looking to get private school loans to help cover tuition costs. He sent a letter to Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke asking that they pay particular attention to the student loan market as they go forward with the bailout plan approved last week.”

Commentary

No disrespect to the Senator from New York, but the uncomfortable truth is that the student loan world is no more insulated from the economy than any other industry, and as the economy continues to decline, so will everything connected to it.

The Treasury’s broad authority to buy up just about anything with the $700 billion bailout is vague enough to include private student loans, so if the economic crisis does become dire enough to severely impact financial aid, Secretary Paulson will probably attempt to intervene.

Scholarship Update

Central Christian College of the Bible provides a full-tuition scholarship for every full-time student. This scholarship drastically reduces the cost of attending college and provides students the opportunity to graduate without the burden of educational debt. This full-tuition scholarship may last for four or more years, so long as the student is enrolled as a full-time student. Also, this scholarship will increase with any future increases in tuition in order to ensure that 100% of tuition is covered by scholarship.

Details at our free college scholarship search site.

Eye on the Economy

Hat tip to Harvard professor Greg Mankiw and Jefferson’s Monticello for the Mortgage Lifter tomato story:

The Mortgage Lifter tomato was developed in the early 1930’s in Logan, West Virginia by a radiator repairman, M.C. “Radiator Charlie” Byles. Without any experience in breeding, he made a successful cross of four of the largest tomatoes he could find - German Johnson, Beefsteak, an Italian variety, and an English variety. Radiator Charlie sold the first seedlings of his new tomato in the 1940’s for one dollar each to customers who drove up to 200 miles for his famous plants that bore tasty tomatoes averaging two and a half pounds. With these sales, Charlie managed to pay off his $6,000 mortgage in only six years, and so the tomato was named Mortgage Lifter.

You may be wondering why this is at all relevant to financial aid. Here’s why. First, the fact that this tomato is being seen at farmer’s markets (Mankiw’s readers spotted this photo at the Dupont Circle market in Washington, DC) is indeed a sign of the times.

Second, and more important to you, this is a story of an average person taking charge of their situation at one of the darkest times in the American economy and creating prosperity for himself through innovation.

This is the lesson for all of us. As much as we all try to help, as much as companies like the Student Loan Network can, ultimately, your education is your responsibility to achieve and afford.

It’s also an inspiration. An average guy with a radiator repair history innovated enough to be able to make success during the Great Depression. He wasn’t a botanist or a Ph.D. He wasn’t a rocket scientist or from a privileged background, and yet made prosperity literally out of the dirt on the ground.

What will you do to innovate your way to prosperity in the current economy? How will you take charge of your financial and educational destiny?

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A chart to show the end of the credit crisis

September 16, 2008

When will this crisis end?

The good news:

There is an end in sight to the credit crisis and mortgage mess. The loans that have been issued in the past that are fueling this crisis will finally either stabilize or wither away.

The bad news:

It will take until 2012 to flush out all the garbage in the system, with the most action in 2011. Until then, economic instability is likely to continue.

Source: CSFB Mortgage Resets

What should you be doing?

The same thing the big banks are doing.

Trim expenses. Cut spending to the bone. “Lay off” discretionary expenses like cable TV. Save and hoard cash, in the sense of decreasing your spending and consumption. Cash is king, cash is immediately usable, and cash is effective. Shred your credit cards, use just a debit card, and watch your spending like a hawk. Consider the use of free monitoring tools like Geezeo, Wesabe, Mint, etc. to help manage your budget.

Raise capital. Capital = cash. Work for wage increases, change jobs to better paying industries, start side income streams, whatever it takes to get more cash coming in the door.

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.
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Reminders
+
+ Financial Aid Podcast Show Notes at FinancialAidPodcast.com.
+ Free scholarship search secrets eBook at StudentScholarshipSearch.com/ebook
+ Open an FDIC-insured savings account today!
+ Stafford federal student loans at StaffordLoan.com
+ Parent PLUS loans at ParentPLUSLoan.com
+ Graduate student loans at GradLoans.com
+ Private student loans available at any time - visit AlternativeStudentLoan.com
+ Private student loan consolidation at StudentLoanConsolidator.com
+ FAFSA form tutorials and free help at FAFSAonline.com
+ Get FAFSA news at the FAFSA blog

+ The Financial Aid Podcast is a publication of the Student Loan Network.

I want to hear from you! Email me at financialaidpodcast {at} gmail {dot} com, visit http://www.FinancialAidPodcast.com, or call 206-350-1208.

More financial distress on the way

September 12, 2008

Take a look at the frightening news coming out of Bloomberg:

Almost 16 percent of securitized Alt-A loans issued since January 2006 are at least 60 days late, data compiled by Bloomberg show. Defaults will accelerate next year and continue through 2011 as these loans hit their three- and five-year reset periods, according to RealtyTrac Inc., an Irvine, California-based foreclosure data provider. About 3 million U.S. borrowers have Alt-A mortgages totaling $1 trillion, compared with $855 billion of subprime loans outstanding, according to Inside Mortgage Finance, a trade publication in Bethesda, Maryland. Of the Alt-A borrowers, 70 percent may have exaggerated their income, said David Olson, president of mortgage research firm Wholesale Access in Columbia, Maryland.

Let’s do some quick math here. 16% of $1 trillion = $160 billion.

Now, take the major investment houses. Merrill, Morgan Stanley, Lehman. Many of these places traded in securities leveraged on Alt-A loans, to the tune of up to 30x.

That’s almost $5 TRILLION.

As the Alt-A mortgages decay, if the 16% past 60 days late turn into defaults, there’s just not enough money in the economy to bail out those mortgages or the securities built on them.

Who’s going to be at most risk for these loans?

Wachovia Corp. (ticker: WB), with $122 billion, and Washington Mutual Inc. (ticker: WM), with $52.9 billion, were the U.S. lenders with the most option ARMs on their balance sheets at the end of the second quarter, according to regulatory filings. Both ousted their chief executive officers, Wachovia in July and Washington Mutual on Sept. 8, over failure to stem mortgage losses.

As Lehman Brothers did with Campus Door, expect that if these banks run into trouble, they’ll sacrifice any student loan services they have in the interests of survival.

This roller coaster ride is far from over, unfortunately. Buckle your seatbelts - we’re on the ride until at least 2011.

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I want to hear from you! Email me at financialaidpodcast {at} gmail {dot} com, visit http://www.FinancialAidPodcast.com, or call 206-350-1208.

Economic effects of 9/11

September 11, 2008

As we commemorate 9/11 today and remember all that has happened since that day 7 years ago, I thought I’d do something different in terms of commentary on the day and highlight the economic impact of the day. I’d urge you to read the Congressional Research Service’s Economic Effects of 9/11 white paper. It’s a bit dense, economically, but provides some retrospective on the government’s actions.

Putting aside the wars overseas and their significant costs, the 9/11 attackers also caused our government to act recklessly with regard to our financial policies. The end result was that the government kept interest rates artificially low for far too long following 9/11, creating the housing bubble and mortgage mess that is now unraveling, impacting all aspects of consumer and commercial lending.

7 years after 9/11, Osama Bin Laden’s attack on the United States is still having effects. Today it’s students who can’t get private student loans, lenders who can’t issue federal student loans, and consumers whose house values are dropping sharply.

As we move forward, as we commemorate the day, we also must take some time to reflect on what we want of our leaders and our government. No matter your political beliefs or what parties or causes you support, please ask for vision of your elected and appointed leaders. Had the government, instead of panicking on 9/11 and rushing to appear as if it were doing something, anything, taken a step back and been more thoughtful in its economic approach to the attacks, we might not still be victimized by them 7 years later.

For all those who lost loved ones on 9/11, my sympathies and condolences remain firm and unwavering.

For everyone else, especially as we’re in an election cycle right now, please shelve all the surface political spin and bluster and dig into the economics of the people you’re about to elect. It’s vital that we elect public officials at every level of government who have vision, leadership, and a strong understanding of how money works in a capitalist society.

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.
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+ The Financial Aid Podcast is a publication of the Student Loan Network.

I want to hear from you! Email me at financialaidpodcast {at} gmail {dot} com, visit http://www.FinancialAidPodcast.com, or call 206-350-1208.

Loan-Topics.com

FAP880: Economy, scholarships, shortfalls, free stuff

Daily Aid 20: A tomato in your financial aid

A chart to show the end of the credit crisis

More financial distress on the way

Economic effects of 9/11

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