SOURCE: NextStudent
September 08, 2008 13:39 ET
1.3 Million More College Students Applying for Federal Financial Aid This Fall as Unemployment Hits Five-Year High
PHOENIX, AZ--(Marketwire - September 8, 2008) - As the economic downturn continues and families
face tighter budgets, ongoing troubles in the student loan markets, and a
national unemployment rate that just hit its highest level in five years,
more students are struggling to pay for their college education.
The Labor Department reported on September 5th, 2008 that the national
unemployment rate spiked to 6.1 percent in August -- 9.4 million unemployed
Americans -- up from 5.7 percent in July and the highest the unemployment
rate has been since September 2003. Employers cut 84,000 jobs last month,
bringing the total number of jobs eliminated since January to 605,000.
For months, financial aid experts have warned that the weak economy and
rising unemployment, combined with ever-spiraling tuition costs, tanking
housing values, and more stringent credit requirements on virtually every
source of financing, from home equity loans to credit cards to credit-based
private student loans, would lead
to more families being unable to afford their college bills. And now, a
17-percent increase in the number of students applying for federal
financial aid appears to be bearing out those concerns.
Recently released data from the U.S. Department of Education reveals that
the number of students submitting the Free Application for Federal Student
Aid (FAFSA) for the current 2008-09 academic year jumped to 9 million from
7.7 million in the 2007-08 academic year.
The Education Department uses the FAFSA to determine a student's
eligibility for federal grants and student
loans. Students must submit a FAFSA each year -- providing income and
asset information -- in order to qualify for federal financial aid such as
Pell Grants, Perkins student loans, and Stafford student loans.
"What we are seeing is more people filling out requests for financial aid,
and for those who do, more people are qualifying and the aggregate need is
increasing," said Richard Toomey, associate vice provost at Santa Clara
University.
Squeezed by spiraling unemployment and soaring food and gas prices,
families are dealing not just with less available income to put towards
college expenses but with the continuing credit crunch that's rendered many
other financing options unavailable. Parents who have turned, historically,
to home equity loans, credit cards, or college savings plans and investment
portfolios now find themselves in a depressed housing and stock market,
with no equity left in their house to borrow against and with investments
that have taken a nosedive in value.
Even those parents who have enough value left in their house to draw upon
face an uphill battle to qualify for a home equity loan. Lenders, still
reeling in the aftershocks of the subprime mortgage meltdown, have
tightened the credit and income requirements required to qualify for home
loans. Similar credit tightening has spread throughout the financial
sector, including the student loan industry. Lenders of non-federal,
credit-based private student loans have raised qualifying credit criteria
to the point where only those students with the best credit scores will be
eligible; a number of lenders have stopped offering student loans
altogether.
The jump in FAFSA applications this fall indicates, to some, that families
who before have been able to afford to pay for their children's college
tuition without relying on federal college loans or grants may now be
turning to the federal government for financial help.
"Students who haven't needed assistance before are coming in," said Toomey.
"You had to expect that this was going to happen with all the news of
companies laying off thousands of people."
About NextStudent
NextStudent, Federal Lender Code 834051, is dedicated to helping students
and their families find affordable ways to pay for college. NextStudent
offers one-on-one education finance counseling and has a portfolio of
highly competitive education finance products and services, including a
free online scholarship search engine, private student loans, and
information on federally guaranteed parent and student loans, student loan
consolidation programs, and college savings plans.
For more information about NextStudent and its student loan programs,
please visit our website at www.nextstudent.com.