Obama Administration Sets Higher Ed Priorities in State of the Union Address
President Obama reiterated his position on paying for higher education last month in his annual State of the Union Address to Congress, in addition to unveiling several new proposals related directly to the cost of higher education.
In his first State of the Union speech, Obama called on Congress once again to pass H.R. 3221, the Student Aid and Fiscal Responsibility Act, which would replace the FFEL Program with the Direct Loan Program. The proposed legislation has passed through the House of Representatives and now awaits a vote in the Senate.
Other new administration budget proposals include:
- Limiting a borrower's payments to 10% of their income
- Forgiving all remaining student debt after 10 years for those in public service and 20 years for all others
- Making permanent the new $2,500 American Opportunity Tax Credit
- Increasing Pell Grants
- Cutting costs at colleges and universities
- Revitalizing community college programs
How the President's budget and policy proposals develop will be determined by a series of negotiations between Congress and the administration. The Senate's action on H.R. 3221 already has been delayed for several months because of its focus on and debate over controversial new national health care policies.
The Good News
By Teena Cooper
Ready for some good news? I've found that if I look closely enough, it's out there. Of course, there are plenty of sobering reports as well, but my goal here is to focus on the positives in our work and among current events.
Job market improving for graduates
First off, it looks like there's a glimmer of hope in the job market for graduating students. While the jobs outlook for new college graduates remains tough, there are signs that it is improving, according to results of monthly polls conducted by the National Association of Colleges and Employers (NACE).
The latest poll covers employer expectations for the first quarter and shows an increase in those who expect to hire college graduates this year. Approximately one-third of the employers polled in December said they expect to increase their college hiring, compared to 28% in November and 26% in October. Currently, 26.7% plan to reduce college hiring - a lower percentage in reduced hiring than has been reported for several months, according to NACE.
Smaller banks step up for students
Even though some larger banks have opted out of the private student loan business, community banks and local credit unions are stepping up to the plate. The Independent Community Bankers of America is now launching a program called iHelp, a nationwide lending program that will allow students to apply for loans up to $10,000 per year through community financial institutions. As more small local institutions join student lending, college students will have even more options for private loans.
Help for financial aid professionals
Several questions on the Free Application for Federal Student Aid (FAFSA) are geared to unique student groups, and those students often need special help completing the form. To assist financial aid professionals with the task, NASFAA has updated and expanded its "tips for foster youth" to include tips for special populations who might have trouble with certain FAFSA questions. NASFAA's easy to download tool highlights questions that may be difficult for certain students and offers answers to some common questions. The Special Populations: Tips for Completing the FAFSA - available as a PDF download - includes answers to questions from single parents, wards of the court, foster youth, emancipated youth, homeless youth, and more.
There you have it - a bit of good news to brighten your professional day. If you come across any positive industry reports to share with colleagues, we'd love to publish them in Outlook. Please send your news to me at teena.cooper@college-assist.com.
Tax Credits for Higher Ed
Take Advantage of New Higher Education Tax Benefits this Year
This year, new tax benefits for higher education offer substantial savings to students and parents on their 2009 tax filing. New benefits include two key changes in effect only for 2009 and 2010 under the American Recovery and Reinvestment Act.
529 plans
Tax-free college savings plans and prepaid tuition programs (called 529 plans) can be used to buy computer equipment and services for an eligible student during 2009 and 2010. Though contributions to 529 plans are not deductible, there is no income limit for contributors. 529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Typical qualified expenses include tuition, required fees, books, supplies, equipment, and special needs services. For someone who is at least a half-time student, room and board also qualify.
For 2009 and 2010, the federal government has added to the list of qualified expenses computer technology and equipment or Internet access and related services to be used by the student while enrolled at an eligible educational institution.
Hope Credit
In addition, the new American Opportunity Tax Credit modifies the existing Hope Credit for 2009 and 2010, making it available to a broader range of taxpayers by expanding income guidelines. The list of qualified expenses also now includes required course materials. Some of the credit's key features are:
- Tuition, related fees, books, and other required course materials generally qualify. In the past, books usually were not eligible for education-related credits and deductions.
- The credit is equal to 100% of the first $2,000 spent and 25% of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses.
- The full credit is available for taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less (for married couples filing a joint return, the limit is $160,000 or less). The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.
Though most taxpayers who pay for post-secondary education will qualify for the American Opportunity Tax Credit, some will not. The limitations include a married person filing a separate return, regardless of income; joint filers whose MAGI is $180,000 or more; and, finally, single taxpayers, heads of household, and some widows and widowers whose adjusted gross income is $90,000 or more.
The new Tax Benefits for Education section on IRS.gov includes tips for taking advantage of education deductions and credits. It also includes a special section highlighting 529 plans and frequently asked questions.
Draft Cohort Default Rates Sent, Appeal Process Under Way
Last month the U.S. Department of Education sent draft 2008 cohort default rates to schools and announced its appeals process. The Department issues draft rates before it publishes the final rates to allow schools to review, appeal, and change their data if it is incorrect.
Schools challenging their data can visit the eCDR Appeals website for a listing of frequently asked questions. The site also contains user guides for the challenge and adjustment processes - as well as a user guide for the registration process - and links to demonstration sessions for first-time users.
The calculation for the 2008 draft cohort default rates is a head count of borrowers who enter repayment during a federal fiscal year (FFY) compared to the number in that group who default by the end of the next FFY. The federal fiscal year runs from October 1 to September 30. The Department publishes cohort default rates annually for all schools, lenders, and guarantors participating in FFEL and Direct Loan programs. Federal Perkins Loans have cohort default rates as well.
The rate includes borrowers of subsidized and unsubsidized Stafford Loans and old SLS Loans (Supplemental Loans to Students), and consolidation loans made to pay off Staffords and SLSs in the same FFY that those loans entered repayment. The cohort default rate does not include PLUS loans.
A loan is considered to be in default when the borrower has not made payments on the loan for 270 days or has not made payments sufficient to prevent the loan from reaching the 270th day of delinquency. In FFELP, the guarantor must also have purchased the loan as a defaulted loan.
For sample calculations and a complete description of how CDRs are calculated, download the College Assist learning brief "What You Need to Know About Cohort Default Rates" from our website at www.college-assist.com. Choose "Schools," then "Financial Aid Resources," and "Reference Tools."
If your school has questions regarding the Department's electronic CDR appeals process, you can e-mail fsa.schools.default.management@ed.gov, call the Portfolio Performance Division Hotline at 202.377.4259, or refer to the Cohort Default Rate Guide at www.ifap.ed.gov/DefaultManagement/finalcdrg.html.
Spring Cleaning: Dust Off Those Old Credit Reports
Cleaning out closets, organizing the attic...why not make ordering a new credit report part of the spring cleaning ritual? At least once a year, we should all (not just students!) find out what creditors are saying about us, how our payment history looks to others, and whether we need to take steps to tidy up our financial condition.
Every year, each of the three credit reporting agencies - Equifax, Experian, and Trans Union - is required to give borrowers a free, current credit report.
To order a free report
- Go to www.annualcreditreport.com
- Call 1.877.322.8228
- Write to Annual Credit Report Request Service, P.O. Box 105283, Atlanta, GA 30348-5283
Building a financial future
Credit reports generate a credit score - the better the history, the higher the score. Your credit score is not included in your free annual credit report. Go to www.myfico.com to order your credit score.
Things that might lower a credit score are:
- Late payments
- Loan default
- Bankruptcy
A lower credit score means:
- Potential difficulty getting more credit cards and buying a car or house
- Paying higher interest than other people
To improve your credit score
- Always make on-time payments
- Pay off balances whenever possible
- Close accounts when they're paid off
Protection from identity theft
A credit report also is a good way to find out if you've been a victim of identity theft. If someone has stolen your personal information, you'll notice new accounts or charges that you didn't create, and you'll be able to take immediate steps to stop any more fraudulent spending.
Report suspicious activity
Report fraudulent activity immediately to any of the three credit reporting agencies. They will flag your report to ensure that creditors contact you before opening any new accounts.
Opt out of new offers
Remove your name from credit card mailing lists and opt out of unwanted offers by calling 1.888.5optout or visiting www.optoutprescreen.com.