Daily Aid 16: The Coming Financial Aid Crisis, Part 1
Daily Aid 16: The Coming Financial Aid Crisis
Let’s pull together a few threads quickly.
KSBY said that 8.9 million students filed for financial aid in the first half of 2008, up 16% from the year before. (7,672,000)
Salem, Oregon’s Register Guard reports complete depletion of their state financial aid budget of $72 million, with aid requests up 18%, 7% for traditional 4 year universities and 23% for community colleges.
The Chronicle of Higher Education reports Congress may need to pump $6-billion more into the Pell Grant program next year, an increase of more than 40 percent, to meet its promise of a higher per-student benefit at a time of increased enrollments and tougher economic conditions, an Education Department official has warned.
The New York Times cited government data showing that 800,000 more students had applied for Pell Grants through July than had done so by that point in 2007, and that that could result in a shortfall of up to $6 billion.
Inside Higher Ed reports up to 32% increases in federal financial aid applicants in 2008.
When you sit down and look forward into the future, into 2009, it rapidly becomes apparent that more and more students are applying for and qualifying for financial aid at a time when less aid is available. Appropriations for grants and federal student loans are relatively unchanged, while private student loans (non-government student loans) are less available due to the credit crisis.
Let’s assume that the 16% trend holds. Next year, 10,324,000 students will file the FAFSA if you assume at 16% increase in applicants again, which is not unreasonable given that joblessness has increased and many large companies such as Lehman Brothers have simply gone bust.
If 800,000 extra students can cause a shortfall of $6 billion in Pell Grants, then 2,652,000 extra students will cause a short fall of close to $20 billion.
Put another way, Congress allocated $14 billion to fund 7,672,000 Pell Grants at roughly $1,824 per student.
If increases in qualified financial aid applications spike as predicted, the amount allocated per student drops to $1,356 per student - nearly $500.
For a lot of low income students, $500 is a make or break amount, enough that it will decide whether the student attends college or not.
This is clearly a major problem in the making. In ordinary times, asking for an additional $20 billion for higher education from Congress is difficult at best, because Congress simply places higher education at a lower budgetary priority than other national priorities. However, we’re not in ordinary times. We’re about as far from ordinary times as you can imagine. Congress and the Federal Reserve Bank are spending every available dollar trying to bail out major financial institutions - the money for additional higher education spending simply isn’t there right now.
What you have, in other words, is a quickly approaching financial aid crisis, a college crunch of sorts, that will hit as soon as January 2009 rolls around and the filing window for the 2009 FAFSA opens. More students will be competing for fewer dollars than ever, and there’s a very real possibility that a significant number of students will not get aid even if they’re qualified, because federal aid is allocated on a first come, first served basis.
Here’s the lesson in all of this, in what you must do. Take the time now to start making preparations for filing your FAFSA in January 2009. Apply for as many scholarships as you can, because external scholarship availability hasn’t been affected by the economy yet. Plan to be incredibly aggressive in your quest for financial aid, because you’ll need to be. You’re competing with your fellow students more than ever for fewer dollars.
While I don’t want to encourage panic, I do want you, my listeners and readers, to be wholly prepared for what’s coming. It’s not going to be pretty, but if you’re prepared, forewarned and forearmed, you’ll weather this financial aid crisis better than most.
Update: Read Part 2 of the Coming Financial Aid Crisis.
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