2012 Changes in Student Financial Aid

I still consider myself a financial aid guru despite the fact that I haven’t worked in the field of financial aid in four years. Prior to my disability, I worked on and off in financial aid as a data entry clerk, a financial aid administrator, and a financial aid director – giving me over 10 years’ experience. At any rate, I’ve learned a lot and helped a lot of students accomplish their dream of earning a certificate or degree.

This year, there were some significant changes in financial aid, especially for graduate students. I’ve always maintained that the government cares more about students earning their associates or bachelor’s degree or a vocational certificate. Students continuing on to pursue their masters or doctorate degree really don’t matter, even if salary can increase drastically with graduate and post-graduate schools. As the priority is for students to pursue post-secondary education, the government offers Pell Grants, Supplemental Educational Opportunity Grants, State Need Grants, Worker Retraining Grants, etc. These same federal scholarships are not available to graduate or post-graduate students, which I will always maintain is a disservice to such students. The traditional student is dependent (according to the federal government) on their parents until the age of 23 or until he/she is married, has a child, earns a bachelor degree, is active military/veteran, or has been an orphan. Because these students are dependent upon their parents, their parents’ income is factored into the students’ need for federal financial aid. Conversely, students considered independent only have their income considered when determining financial aid.

What does this all mean? Well, dependent students having also their parents’ income possibly aren’t as needy as independent students who aren’t dependent upon parents’ income. Now, I say possibly as I acknowledge there are students who desperately need financial aid to achieve their dream of a college degree or certificate. Unfortunately, though, independent students pursuing a post-secondary education have to almost be poverty level before qualifying for government grants. Logically, then, one can understand why graduate students (defined as independent students) can have an even more difficult time financially completing their degrees. Well, now the government has made it even more difficult.

Up to this point, I have only mentioned federal grants. Many students, post-secondary, graduate, or post-graduate, also use federal loans to finance their education, and there are two types of loans – need-based, called subsidized loans; and non-need-based, called unsubsidized loans. Subsidized loans allow students to borrow money and have those loans not earn any interest until six months after graduation or withdrawal. They are need-based similar to federal grants; however, students do not have to be as needy as those who qualify for federal grants. While the maximum amount of these loans is limited to a certain amount, the total limited amount is determined by how much a school costs. On the opposite side, unsubsidized loans are awarded to anyone who applies and is eligible for federal student loans; however, unsubsidized loans start earning interest immediately. They are not related to need, so students with any income can qualify. Both types of loans have relatively low interest rates (less than 7%), so they are valuable regardless of the type of loan, but of course the subsidized loan is much more desirable.

What has changed? Starting on July 1, 2012, graduate and post-graduate students are no longer eligible for subsidized loans. The reason for this change is to ensure undergraduate students can still receive Pell Grants. Really? Graduate and post-graduate students have to suffer so that undergraduates can get grants that graduate and post-graduate students have never been able to get? But the rules regulating subsidized loans have also changed. Remember how subsidized loans don’t start earning interest until six months after graduation or withdrawal? The six-month grace period is going away. Finally, the ability to receive Pell Grants has changed. Previously, students had up to nine years of undergraduate studies where they could be eligible for a Pell Grant. Now, students are only eligible for six years. How can the nine-year or now six-month eligibility happen when only undergraduate studies are eligible for Pell Grants? Consider the student who can't make up his mind on what degree he wants and constantly changes majors or schools! Or, consider the student who takes longer than four years to graduate. There are other changes, but there are small and have very little effect on students – unlike these two aforementioned changes.

What can students do? I cannot stress enough that students should speak to their financial aid department at their school. These are knowledgeable individuals. They know how to counsel students on financing their school, where students should look for alternative financing, and the advantages/disadvantages of borrowing loans for school. And, one final note – fill out the FAFSA. It is the only way to be considered for federal financial aid, and it’s a free application.