College aid threatened by uncertainty
Toolbox
By CRISTINA KUMKA Staff Writer - Published: November 2, 2008
With the nation sinking into a recession, paying for college could get a lot tougher.
For now, student financial aid experts say Vermont college students are better positioned than their counterparts nationwide.
But experts warn that some indicators show that it will be harder to get certain loans next year and even more difficult for students to pay off what they borrow.
Their advice: Students need to start saving money and applying for more grants and scholarships.
Erin Broderick, 17, is taking that counsel already. She is working to limit her college debtload as much as possible.
Broderick and her mother, Barbara, natives of Lebanon, N.H., toured Castleton State College recently hoping to get a good deal.
"I'm looking to not pay a lot later," said Broderick, a senior at Lebanon High School. "I'm doing my research on what scholarships and grants I could get and then I'm going to look into what schools are giving."
Barbara Broderick, who has been touring colleges in New Hampshire and Vermont with her daughter, reiterated her concerns about money.
"With the economy the way it is, it's going to be tough," Broderick said. "We don't want her, or us, to be in hundreds of thousands in debt."
According to college funding experts, the Brodericks have the right idea.
Applying for grants, scholarships and other "free" money to pay the majority of college tuition bills, then supplementing it with federally-backed loans is the way to go in an economically unstable lending environment, experts say.
The difference $230 million makes
At more than a year $11,000 on average, Vermont tops this year's national list of most expensive in-state public four-year college tuition. So it would seem that the state's college students face a tougher time getting their financial footing on solid ground.
But because the Vermont Student Assistance Corporation has remained stable as other student lending institutions in the region have faltered, students are still able to obtain loans.
Massachusetts lenders have stopped issuing private and federal loans to students because of limited capital to cover student borrowing, according to Thomas.
VSAC, however, an entity set up by the state to administer loans based on a family's financial need, obtained capital from KeyBank to keep cash flowing to students.
A $230 million capital commitment from the bank allowed VSAC to continue to fund loans and 125 scholarship programs across the state, according to Irene Racz, director of public affairs at VSAC. Another $160 million of recycled funds — money from people paying back their loans – was used to supplement the pool, she said.
Private loans are "always going to be a necessary part of college financing," according to Racz, but students should apply to schools that subscribe to federal loan programs because they are the most secure and offer the best payback options.
The federal government is stepping up to support organizations like VSAC, so if the market drops again, capital funding is there unconditionally, Racz said.
The "Ensuring Continued Access to Student Loans Act of 2008" gives students more borrowing power and allows them to obtain larger federal loans, according to Michael Thomas, interim president and chief executive officer of the New England Board of Higher Education. It also gives students more time to pay back those loans, he said.
New restrictions, however, will be imposed that may jeopardize how much money is available to a student, according to financial aid advisers at some area schools and a report in the fall issue of the New England Journal of Higher Education.
Fewer private loans will be granted, and stricter co-signer requirements and credit standards will be required before the government doles money out, according to the report.
"The high cost of education in New England, a continued reduction in private/alternative loans and more stringent credit standards could increasingly impede students' ability to borrow and remain in college," Thomas said.
"OK credit is not necessarily the best credit," said Teresa McCormack, assistant director of financial aid at Castleton State College.
"Students aren't having trouble unless they don't have a co-signer," she said. "It's not going to be as easy to get a student loan."
Kim Downs, director of student financial services at Middlebury College, recommends that students always apply for grant and scholarship cash from a high school grant program or a local charitable organization in their hometown.
"We're seeing more students applying for financial aid in the middle of the year because of a parent layoff or just the impact the current economy has had on families," Downs said.
Just in case: Preparation is key when money lacks
Financial aid advisers say it's important to apply early for loans, grants and scholarships.
Cathy Mullins, president of the Vermont Association of Student Financial Aid Administrators and director of financial aid at Landmark College, recommends starting the application process early for federal loans and private scholarships.
"For institutional aid, it's going to be harder," Mullins said.
According to Mullins, private colleges with large endowments — reserve funds specifically for student grants — will not necessarily look to cut the number of scholarships they give out but that doesn't mean they have a bottomless pot of money.
"It's not a rolling, endless supply of funds until the date of enrollment," she said. "You have to be really conscious of meeting deadlines."
Other advisers are telling students that some schools may just be too expensive.
Stephen Sampson, Rutland High School's head of guidance, said nearly all students in his office seek financial aid for college regardless of the country's economic climate.
Sampson said he predicts more students will attend college in state.
"Our position hasn't changed much," he said.
"Financing college education is one of the biggest commitments families will make aside from their house."
Sampson said he encourages students to apply first to safety schools and public or less expensive private schools in Vermont to save money.
Aid experts also recommend that students make a concerted effort to save money for college.
Erin Broderick doesn't want to have to make a choice between paying off debt and surviving in the workforce.
She's applying for a scholarship from her current employer, Best Buy, a grant from a co-op in Hanover, N.H., and anything available for a retired firefighter's daughter.
Though Broderick said she learned how to manage her money in a high school economics course, she said has applied an even more valuable lesson outside the classroom.
"I've always thought that if didn't have the cash for it, I didn't really need it anyway," she said. "I don't want to have to choose between paying for diapers or paying off my loans."
Contact Cristina Kumka at cristina.kumka@rutlandherald.com.
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