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2006: A look back - A look ahead  
  Change was the name of the game in 2006 while the biggest push for reform in 2007 will be aimed at college-related debt.
 College financing
 Personal finance calendar  Personal finance calendar 

College financing in 2006: A year of change

New grant programs. Higher interest rates for student loans. A permanent tax exemption for 529 savings plans. In the college financing arena, the hottest trend in 2006 seemed to be change itself. A little tinkering here. Some sweeping overhauls there. What it all means depends on your personal circumstances. But no matter where you are today -- whether salting away money for your toddler's future higher education or working nights to foot the bill as a cash-strapped undergrad -- it's worth reviewing this year's most important changes and trends in the college money game.

Debt and rising costs
Tuition at both public and private institutions continued to climb at a pace that outstripped inflation for the 2005-2006 academic year. According to The College Board's annual report, Trends on College Pricing, the tab at four-year public schools rose 7 percent to $5,491. At private four-year colleges and universities, costs increased nearly 6 percent to $21,235. But as any college student -- or any parent saving for their youngster's future education -- knows, these most recent increases are just part of a long, on-going ascent.

No wonder, then, that student debt emerged as this year's most pressing focus for reform. Colleges, consumer groups, lawmakers, lenders and even Secretary of Education Margaret Spellings called for solutions to debt relief. Consider this: In 2004, the latest year for which data is available, two out of three students graduating from four-year colleges had debts averaging $19,200. In 1993, fewer than half of all grads left school with debt and it typically ran $9,250.

This year, The Project on Student Debt, a nonprofit policy research group based in Berkeley, Calif., led much of the effort to reduce post-college debt loads. With the support of higher education groups and lenders, the group formally petitioned the Department of Education to make five reforms.

Proposed changes include simplifying deferment applications for individuals who need to temporarily suspend loan repayments due to hardship situations, limiting student-loan payments to a manageable percentage of an individual's income and shielding borrowers who suffer hardship from high interest rates. It also seeks to have remaining debts canceled for borrowers in hardship situations who've made regular payments for two decades.

While it's unlikely the Department of Education will enact every proposal as written, the federal agency does have the power to make reforms without an act of Congress. That means there's potential for some lightning-quick changes, at least by Washington, D.C., standards, says Robert Shireman, president of The Project on Student Debt.

"We could see some relief for borrowers in the spring of 2007," he says.

Paying it off: Loans and grants
This year, Congress authorized two new awards for undergrads who qualify for federal Pell grants.

-- Posted: Nov. 1, 2006
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