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.
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