Thereis no denying that college needs to be made more affordable. According to the College Board’s 2006 Trends in College Pricing report, tuition rates are 35-percent higher than they were five years ago, after adjusting for inflation. The average tuition fee at a four-year public college is $5,836. Although 60-percent of students receive some type of financial aid, they are still responsible for financing their housing, textbooks, transportation, and other living expenses. With increasing numbers of students seeking loans to help relieve the burden, they are at increasing risk for exploitation. As the investigation into shady arrangements between universities and lenders continues, Congress may be giving the student-loan industry a long overdue makeover. With that in mind, we present a few CliffsNotes on the issue, and a look at another way life experience could cost you: the all-important internship.
Dubbed by Congress the “single largest effort to help students pay for college since the GI Bill,” the College Cost Reduction Act of 2007 (HR 2669) takes aim at large government subsidies given to private lenders, reinvesting the money — about $19 billion to be exact — directly into federal student-aid programs. The bill would increase the purchasing power of Pell Grants, halve the interest rate of government-backed loans, and provide loan forgiveness to federal-loan borrowers who “serve full-time in areas of national need” (the professions included in this category vary between the House and Senate versions).
Sponsored by Representative George Miller (D-CA), chairman of the House Education and Labor Committee, HR 2669 passed the House on July 11 in a 273-149 vote.
“This bill is a remarkable step forward in our efforts to help every qualified student go to college,” said Miller in a press release issued by the House Education and Labor Committee. “With this bill, we are saying that no one should be denied the opportunity to go to college simply because of the price.”
On July 20, the College Cost Reduction Act passed the Senate, which also approved a reauthorization of the Higher Education Act sponsored by Senator Edward Kennedy, chairman of the Senate HELP Committee, in a 95-0 vote. SB 1642 proposes an increase in Pell Grants, the creation of an “EZ FAFSA,” and a phase-out of the paper FAFSA form.
HR 2669 will now go to conference committee to reconcile the differences in each chamber’s version. Among the senators appointed to the conference are three Democratic Presidential candidates: Senators Dodd, Clinton, and Obama.
Bush’s aides have already threatened a veto, stating that the legislation “fails to target aid to the neediest students currently in college and creates new mandatory Federal programs and policies that are poorly designed and would have significant long-term costs to the taxpayer.”
“Of course, anytime you reduce interest rates, it’s a good thing for students … but there are other things to look at,” said UTSA’s Assistant Vice-President of Financial Aid and Student Services Lisa Blazer.
According to Blazer, the cut in subsidies may eliminate benefits offered by private lenders, which could in fact hurt student borrowers.
“They are not bringing any new money into the program,” said Blazer. “The question is, can lenders ultimately afford these cuts?”
Between now and any sort of new financial-aid legislation, Blazer advises students looking to use private lenders to research thoroughly and not rush when selecting a lender. Different lenders offer different benefits for signing and some benefits may only be available based on sparkling credit (cue that new car advertisment with “zero-percent financing”).
Keep in mind that websites often cannot give an exact quote and the real interest rate may be higher than that enticing number on the website.
“I’ve seen loans from 7-8 up to 10-11 percent, but sometimes depending on credit they can get up to 14-15 percent,” said Blazer.
— Stephen Keller
The higher they climb
If you’re like the millions of middle-class students pursuing a four-year (or more) college education, you’re probably going to be left with tens, maybe hundreds, of thousands of dollars in debt. To whom will you be in hock?
Look no further than Sallie Mae, the largest student lender in the nation (racking up about $8 billion a year), the main culprit responsible for turning students upside down and shaking every penny they have out of their pockets. Sallie Mae was created as a government-sponsored entity in 1972, but became fully privatized in 2004, and offers both federal and private loans. New York Attorney General Andrew Cuomo recently uncovered Sallie Mae’s collusion with some institution’s financial-aid officers, giving them kickbacks and incentives for putting Sallie Mae on the schools’ preferred-lender lists.
With federal assistance stagnant and tuition steadily on the rise, private student loans have become the fastest-growing source of college financing. Unlike federal loans, whose interest rates are regulated by the feds, private-loan rates are based strictly on the market and can run as high as 20 percent. Private loans usually don’t offer students reduced deferments for hardship or loan forgiveness for low-income workers. If you’re thinking that in a worst-case scenario you could declare bankruptcy because of overwhelming student-loan baggage, think again. Bankruptcy “reforms” passed in 2005 makes that option almost impossible.
Don’t rely solely on your student-aid office or the first lender that approaches you through phone or mail. You need to do your own research. Spend time in the financial-aid office and ask about federal loans, grants, and scholarships. If you must take out a private loan, take the time to find the best lender with the best rate, and if possible, a secured rate. It’s never too late to see what is available for you. Many students withdraw or drop to part-time before classes start, so additional grant or scholarship money could be available at the last minute. I took the time to do this, and for my last year in college, I don’t need a penny from a private lender.
— Jessica Ramos
Paying for internships
For today’s college students, internships are more important than ever. Although some internships offer little more than an opportunity to become experienced coffee-brewers and photocopiers, many give hands-on experience that proves more valuable than classroom lectures. According to MonsterTRAK’s 2007 Entry Level Job Outlook survey, 78-percent of prospective graduates plan on completing internships during their college careers. Most students painstakingly build impressive résumés, cross their fingers, and hope to stand out among the sea of qualified applicants. How else can a student to get noticed?
Well, if they have an extra $6,499-$8,999 to spare, they could enlist the help of the University of Dreams summer internship program. The program offers all of the traditional services that college career-service departments do, as well as guaranteed placement in students’ fields of choice. The seven-year-old company uses its connections to arrange interviews for their participants with more than 400 companies in 20 different industries.
There’s one more catch: You have to apply to get in. Admittance to the program is highly competitive; only 873 out of 6,200 students were accepted this year. Applicants are admitted based on their grades, extracurricular activities, and whether University of Dreams thinks they can successfully place the student in his or her desired industry. According to the company’s website, there haven’t been any participants from San Antonio universities, but the University of Texas at Austin ranks fourth for having the most program alumni.
Why is there such a strong market for career-placement services when most colleges and universities have career centers that offer students résumé-proofing, mock interviews, and free access to job boards that list internships?
Eric Lochtefeld, CEO and founder of University of Dreams, says it’s because his company isn’t about getting just any internship; it’s about getting your ideal internship. Sadly, most of these dream internships are unpaid.
“I would tell anybody that’s just trying to get an internship, to do that on their own,” he says. “But if you want to have one working for MTV Europe, we might be the company for that.”
He’s not kidding. The company’s website boasts big-name participants such as NASA, the New York Yankees, 20th Century Fox, and Google. Besides being put in contact with an array of big-time companies, students in the program are given the choice of interning in one of 10 fastest-paced cities around the world. Think internship gone summer camp. Students are housed on college campuses, have planned weekend activities, and attend career seminars.
Susan Dollar, director of career services at the University of Texas-San Antonio, says programs like the University of Dreams take opportunities away from other students who don’t have the money.
“There really is not a reason to have to pay for help to find an internship,” Dollar says. “A student’s first choice for selecting an internship should be going to their career-services department and seeing what is available. Second choice would be looking for an internship online.”
Dollar says UTSA students have free access to hundreds of paid internships listed in the school’s database.
The difference in the majority of internships listed on college career-service databases and the University of Dreams is in the types of majors they cater to. Most college databases list a plethora of internships in the math, science, and technology fields, while they lack listings in the liberal-arts department. Conversly, most of University of Dreams’ internship opportunities are in liberal-arts’ fields, such as advertising, fashion, publishing, and music.
Connie Kuwamoto, director of career services at the University of the Incarnate Word says students can get any opportunity they are determined to get. “It’s really about going to the company that you want to work for and explaining, ‘I am not here to sharpen pencils or to get coffee,” she says. “I really want to be an asset to you.’”
— Ashley Gwilliam