by Lynn O’Shaughnessy, link here

What schools offer the best college financial aid?

Last month, I wrote this post: 51 Colleges with the Best Student Financial Aid.

Please take a look at the list because it includes schools with awesome financial aid policies that will reduce your stress about how you will pay for college. Researchers from the University of Pennsylvania and Amherst College assembled the names of colleges and universities that offered financial aid packages that didn’t include student loans.

You can also find a list of schools with great college financial aid at ProjectOnStudentDebt.org.

But here’s a problem: The list of colleges with the best student financial aid is in flux. The days of no-loan financial aid programs could be ending for many middle-income and affluent families. In fact, at least two colleges on the list of the 51 Colleges with the Best Student Financial Aid, wouldn’t even qualify anymore.

Last week Williams College announced that it was reducing the eligibility for its gold-plated college financial aid help.  Dartmouth College announced yesterday that it was ending its no-loan student financial aid policy. From now on families with incomes above $75,000 will have to borrow some of the tab.

I suspect the announcements will keep coming.

It was hardly a surprise that elite colleges, which traditionally offer the best financial aid, would start rolling back their cushy financial aid programs. You see these colleges launched these aid programs back in late 2007 and early 2008 –  right before the stock market collapsed and endowments started tanking.

When the no-loan financial aid policies first began in 2007, elite institutions didn’t want to be left behind so within a breathtakingly short period many super selective colleges and universities piled on. Now that Williams and Dartmouth have made their moves, I wouldn’t be surprised if many more colleges become stingier.

Lynn O’Shaughnessy is the author of The College Solution, an Amazon bestseller, and she writes a college blog for CBSMoneyWatch. Follow her on Twitter.

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Next Webinar is…

Tuesday, December 8th, 2009 at 7pm Central Time

Register Below

College Finances 101 has now come to the web. Attendees have been praising this ground breaking presentation for years; now you can participate in the comfort of your own home or at work.

In 90 minutes, I will cover the most important aspects of minimizing your students’ costs for college. You will learn…

• How parents can often send their children to expensive private colleges for less money than a state school.
• How to fix lost money caused by popular college savings plans.
• How to identify schools that give you more free money.
• The great myths and misconceptions about college funding that can cost you thousands of dollars.
• What assets are penalized 4 times higher than others when applying for help.
• Why waiting one year can cost you as much as $5,000.

“The information Mr. Anderson shared was
incredibly eye opening.” — Tricia Christiansen, Guidance Counselor,
Hampton-Dumont HS, Hampton, Iowa

“What an eye opener! We wish we had
attended this seminar sooner. This seminar has given us ideas and
information but also hope…” — Dave & Maria Sullivan, Rock
Island, Illinois

“He has provided our families with
invaluable information. Scott does an excellent job…” — Linda
Cutler, Guidance Counselor, Rockridge High School, Taylor Ridge,
Illinois

“Listening to all the options available
to pay for college encouraged us that we don’t have to sacrifice a
quality education because of a lack of money.” Pastor Scott & Tonya
Culley, Silvis, Illinois

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Income Based Repayment (IBR) for Federal Stafford, Grad PLUS, and Consolidation Loans is a new option this year for college borrowers.  This tool has been talked about for years, but it finally came into being in 2009.  In essence, IBR is a system designed to make payments on federal college loans more manageable, particularly for those students who have just graduated and have limited income and resources.  It’s design is not limited to new graduates however, it can also help those with federal college loans no matter how long ago they were taken out if they meet the income and family criteria of the program.

The formula for determining IBR payments is not terribly complex, but it’s far easier just to show you the table developed by the federal government.  Keep in mind that this table will be adjusted every year as it is based in part on the annual poverty line.

There are four primary benefits to borrowers of the IBR program:

1. Payments are lower than the standard 10 year payment program, and likely lower than other available payment programs as well.
2. The government will pay for up to three years of interest on subsidized Stafford loans if your IBR payment does not cover your total interest payment.
3. If you qualify for IBR payments for 25 years and meet certain other requirements, any remaining balance on your federal loans can be canceled after the 25 years of payments.
4. If you work in public service for 10 years and qualify for IBR payments, you may be eligible for forgiveness of your remaining loan balance.  For information on public service loan forgiveness, please read the Loan Forgiveness for Public Service Employees Fact Sheet.

There are also disadvantatges to the IBR program:

1. You will likely pay more interest while paying off your loans under IBR as compared to standard payment programs.  In other words, it will cost you more in the long run.
2. You must submit annual documentation verifying your income and family eligibility for the IBR program.  If the documentation is not provided, your payments will revert to the standard 10-year payment plan.

For more information on the IBR program, check out the Income Based Repayment Fact Sheet.

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Last week, I got on my College Financial Watch soapbox and blasted the lack of financial literacy in this country as a prime contributor to the problem of student debt.  Later in the week, I was part of an online discussion again discussing what is reasonable for a student to borrow for college.  I recommended that the student get a copy of Rich Dad, Poor Dad by Robert Kiyosaki and improve his financial literacy.  I never knew that recommending someone beef up their financial knowledge would be so vehemently criticized, but it was.

In January of 2008, President Bush formed the Advisory Council on Financial Literacy.  In May 2008, the council conducted a nationwide youth financial literacy contest on the web.  Over 46,000 high school students participated.  The students had to answer 35 basic questions about money, banking, and financial products.  The average score was 56%.  Did you follow that?  As a whole, our students are failing financial literacy.  And we wonder why there is such a high level of student debt.

Do you want to know what is even more tragic.  The online discussion I mentioned above was at a website dedicated to helping students get into college and provide answers for financial aid questions.  There are people out there who are acting like they understand finances, but are actively trying to keep students in the dark.  Now the action is likely out of ignorance, but the motivation does not matter a hill of beans to the outcome.

We have to face facts.  The majority of students and adults as well in this country are woefully undereducated when it comes to personal finance.  Before you start complaining about student debt, you need to get yourself and your student educated on the matter.  That is why I am now including two books from Robert Kiyosaki in my Recommended section at www.RealCollegeSavings.com

Rich Dad, Poor Dad

and

Rich Dad, Poor Dad for Teens

Go get these now.

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Students graduating with college debt is the topic of “A Steep Climb for Indebted College Grads” in the most recent issue of Business Week magazine.  It tells of the horror stories of students graduating with mountains of college debt… $50,000; $75,000; $100,000 in debt before they ever get a job.  This is insane!

Towards the end of the article, there is a story of one young woman who graduated with $160,000 in private loans alone… just for her bachelor’s degree.  I assume she probably has at least another $15,000 in public loans on top of that.  This has got to stop!  At least she had the maturity to say “I have to deal with the consequences.”

There are two demons to blame for this astronomical rise in student debt.

First… students really have no understanding of debt and what it does to you.  A few years ago, I was in a conversation with a student who asked me if $100,000 is a lot of money to borrow.  I had to do a double take at the question alone.  We need to better educate students on the nature of money.  Honestly, I think Rich Dad, Poor Dad by Robert Kiyosaki should be required reading in every high school.  I would be in far better shape if that book was available to me 25 years ago.

Second… the ideal of the “Best” college is killing our kids.  Students and parents alike have this perverse idea that there is only one “best” school for them, or only a handful.  Typically, this handful of schools comes out of some beauty pageant list, such as the “Best Colleges” issue of US News and World Report.  Students have got the idea that if they don’t get into one of only a small selection of colleges, then their future is shot.  Then when they do get into that one college, they put the rest of their life in hock to pay for it.

NEWSFLASH — There is no “Best” college.  There is only the best colleges for you.  Notice that colleges is plural, not singular.

This expectation of only one or two schools are the right schools is absurd and must come to an end.  There are over 3,000 colleges and universities in the United States.  It is a very easy process to find 6 to 10 very good fit schools for any student at a bare minimum.  And these schools will not break the bank when the student graduates.

I challenge all of the parents, students, guidance counselors and teachers reading this post to take a stand against these two pervasive problems.

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