South Carolina’s Demand for college loans grows as sources of aid go untouched

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Demand for college loans grows
Some sources of aid go untouched by families
BY ANNA SIMON • CLEMSON BUREAU • JANUARY 3, 2010

CLEMSON — College students struggling with growing financial needs in 2010 have a new, streamlined online financial aid application, yet experts fear many will miss out on free money.

South Carolina’s largest universities are preparing for a major shift as federal student loans move from a bank-based system to a direct loan program and are assuring students that loans will be available.

Families that have suffered layoffs, furloughs or other hardship can ask for more assistance but face competition as schools try to stretch limited dollars to meet a growing need in a challenging economy.

“We are going to be dealing with the same amount of money,” said Marvin Carmichael, financial aid director at Clemson University.

Furman University increased its financial aid budget “primarily in anticipation of increased need from families,” said Bill Berg, vice president for enrollment.

The first step for families seeking scholarships, grants and student loans is the Free Application for Federal Student Aid, or FAFSA. Submit the FAFSA “as early as possible even if you have to estimate,” said Keith Reeves, associate director of financial aid at Clemson.

“You can go back and correct it after you’ve done your taxes,” he said. “That way, you can meet deadlines and get the fullest consideration for any available financial aid.”

The improved form, online at www.fafsa.gov, is shorter than in the past because it automatically skips unnecessary questions as you go, Reeves said.

Yet many families won’t file and could miss out on need- and merit-based scholarships and grants, said Martha Holler, spokeswoman for Sallie Mae, one of the nation’s largest education lenders.

At least $168 billion in federal student aid will go to students based on the information they file on their FAFSA forms. “It’s the way to get cheap and free money,” Holler said.

Last year, 24 percent of families — 26 percent in the South — didn’t file a FAFSA, according to a study by Gallup and Sallie Mae.

When asked why, 39 percent said they didn’t feel they needed financial aid, 30 percent said they didn’t think they’d qualify, and 18 percent were unaware of the program, Holler said, citing the three most common responses.



File even if you don’t think you’re eligible for financial aid, Reeves said. “You may be eligible for a subsidized Stafford loan, which is interest free while the student is in school plus six months after they leave school.”

Falling Family Income

Families making less than in the past should contact the school’s financial aid office and ask for a professional judgment review, said Mark Kantrowitz, publisher of FinAid.org and FastWeb.com, a free scholarship matching site.

Families must provide written documentation, such as a layoff notice, and a short letter summarizing specific circumstances that have changed from the past year, Kantrowitz said.

More money is available this year for lower- and lower-middle income families that qualify for Pell grants, Carmichael said. The maximum increased from $4,731 to $5,350 this year, and some federal loans are higher as well.

Because LIFE and other state lottery-funded scholarships help many in-state Clemson students with college costs, those hardest hit typically are non-residents, Carmichael said, adding he’s seen some out-of-state students “go home because they can’t pay the bills.”

The University of South Carolina anticipates more student need and is “always looking for more funding for scholarships. That’s a priority,” said university spokeswoman Margaret Lamb.

The two-year-old Gamecock Guarantee is an example.

The program guarantees that students from the state’s lowest-income families and who meet entrance requirements will have tuition and technology fees covered for four years of study. It “is helping to remove the financial barriers that have kept many South Carolina students from being able to attend the University of South Carolina,” said Scott Verzyl, assistant vice provost for enrollment management.

Furman and Clemson both launched giving campaigns to help students in need this past year.

Furman United raised $350,000 last year — including $40,000 raised by student organizations — and has an additional $400,000 goal for this year.



“We hope we don’t need it, but we probably will,” Berg said. “We’re expecting this coming year to look at lot like last year in terms of families’ economic needs.”

Direct Lending

USC, Clemson and Furman are preparing for a potential overhaul of the federal student loan system from the bank-based Federal Family Education Loan Program to the Federal Direct Loan Program that provides money directly from the U.S. Department of Education. Legislation approved by the House waits in a Senate committee behind health care.

“Regardless of what happens in Washington, loans will be available to students just like in past,” Carmichael said. “There’s still a lot of debate on the issue. Clemson is preparing to convert to direct lending, and it may be (changing) regardless of what comes out of the legislation.”

Loans “are not in jeopardy,” Carmichael said. “The source may change. There may be different players, but the loans will be there.”

USC will move from the bank-based system it has used for 30 years to direct loan to ensure secure funding and avoid the volatility of the credit markets, said Ed Miller, director of student financial aid and scholarships. The change “will provide stability and assurance that our students will have access to the resources to fund their education,” Miller said.

Furman has updated its software and is “geared to go to direct lending if that’s what we need to do,” Berg said.

Students at schools that change from FFEL to direct lending need to fill out a new master promissory note that they should get from the school along with their financial aid awards, Kantrowitz said. Students should see little change beyond that because the government awarded contracts to service loans to the four largest FFEL lenders, including Sallie Mae, Kantrowitz said.

Other differences include a lower direct loan interest rate of 7.9 percent on federal Plus loans for graduate and professional students and parents of undergraduates, compared to 8.5 percent under FFEL, and Parent Plus loan approval rates are slightly higher with direct lending, Kantrowitz said.

In general, loan origination is smoother with direct lending, but the repayment process runs smoother under FFEL, Kantrowitz said.