More aid and debt relief set for cash-strapped college students

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More aid and debt relief set for cash-strapped college students
BY ROBIN ERB • FREE PRESS EDUCATION WRITER • JANUARY 17, 2009

This year, there's a measure of good news for students and families now tackling scholarship applications and the Free Application for Federal Student Aid, or FAFSA.

A law passed in 2007 offers more affordable subsidized Stafford loans, and there's a bit of debt relief in store for some.

There would be meatier Pell Grants under the proposed $825-billion economic stimulus package unveiled Thursday, which also sets aside $490 million more for federal work-study programs.

And even for families who aren't necessarily lower income, federal loan limits have increased.

For all the headlines about the credit squeeze, "government loans are flowing," said Susan Dynarski, a public policy professor at the University of Michigan who has worked on national student debt issues.

Additionally, several Michigan universities are boosting their own need-based aid.

Western Michigan University, for one, has set aside an additional $3.5 million this year in need-based grants and scholarships by converting some merit-based aid to need-based aid.

Despite the tough economy, "Time has not stopped for these students. ... We can't tell them, wait for another few years" until the economy sorts out, said WMU President John Dunn.

Several Michigan universities have set aside emergency funds to help the most cash-strapped students. And at Michigan Technological University, President Glen Mroz sent an e-mail in December to all students, urging them to have their aid packages reassessed. In the following weeks, the school handed out about $70,000 more in grants and processed more than $1 million in federal and private loans, said Tim Malette, financial aid director.

For many students, unemployment or foreclosure hit home last semester, and "we were basically able to find dollars they hadn't connected with before," Malette said.

Michiganders not alone

Through Monday, the U.S. Department of Education has processed about 10% more financial aid applications compared to last year. Even as Wayne State University's enrollment declined by 4.7% in the fall, applications inched up more than 3% to 39,426.

"It's a sign of the times," said Judy Florian, financial aid officer at Macomb Community College, where enrollment swelled and requests for aid spiked 20% over last year. "Families need help."

The first way to get that, she and other aid officer say, is the FAFSA.

University of Michigan freshman Jazzmin Weathers, who -- with her father -- filled out the FAFSA last year, doesn't try to hide her feelings about it.

"Ugh, it's awful," she said of the process that began with the FAFSA. She and her father, Dale, then stitched together enough aid to cover all but about $4,000 of this year's U-M bill.

It meant a lot of time at the computer, and her father, a computer network engineer from Southfield, can chuckle about it now.

"There was this one scholarship, I literally drove it and hand-delivered it" to make the deadline, he said.

Application effort

The process can be daunting, financial aid officers say, but now more than ever is worth the time.

If passed, the stimulus package unveiled Thursday in Congress would increase the maximum Pell Grants from $4,731 to $5,350 this fall.

Meanwhile, interest rates on subsidized Stafford loans -- the ones based on financial need -- dropped to 5.6% for students this fall from 6.8% in 2007, and will continue to dip to 3.4% in 2011-12. The average 4-year college student who began school last fall is saving about $2,570 over the life of his or her loans, according to the U.S. Public Interest Research Group.

Additionally, a new federal Income-Based Repayment Program allows some student loan borrowers to adjust their loan payments according to their income.