1.3 Million More College Students Applying for
Federal Financial Aid This Fall as
Unemployment Hits Five-Year High
Last update: 1:39 p.m. EDT Sept. 8, 2008
PHOENIX, AZ, Sep 08, 2008
(MARKET WIRE via COMTEX) --
As the economic downturn
continues and families face
tighter budgets, ongoing
troubles in the student loan
markets, and a national
unemployment rate that just
hit its highest level in five years,
more students are struggling to
pay for their college education.
The Labor Department reported on September 5th, 2008 that the national
unemployment rate spiked to 6.1 percent in August -- 9.4 million unemployed
Americans -- up from 5.7 percent in July and the highest the unemployment
rate has been since September 2003. Employers cut 84,000 jobs last month,
bringing the total number of jobs eliminated since January to 605,000.
For months, financial aid experts have warned that the weak economy and
rising unemployment, combined with ever-spiraling tuition costs, tanking
housing values, and more stringent credit requirements on virtually every
source of financing, from home equity loans to credit cards to credit-based
private student loans, would lead to more families being unable to afford their
college bills. And now, a 17-percent increase in the number of students
applying for federal financial aid appears to be bearing out those concerns.
Recently released data from the U.S. Department of Education reveals that
the number of students submitting the Free Application for Federal Student
Aid (FAFSA) for the current 2008-09 academic year jumped to 9 million from
7.7 million in the 2007-08 academic year.
The Education Department uses the FAFSA to determine a student's eligibility
for federal grants and student loans. Students must submit a FAFSA each
year -- providing income and asset information -- in order to qualify for federal
financial aid such as Pell Grants, Perkins student loans, and Stafford student
"What we are seeing is more people filling out requests for financial aid, and
for those who do, more people are qualifying and the aggregate need is
increasing," said Richard Toomey, associate vice provost at Santa Clara
Squeezed by spiraling unemployment and soaring food and gas prices,
families are dealing not just with less available income to put towards college
expenses but with the continuing credit crunch that's rendered many other
financing options unavailable. Parents who have turned, historically, to home
equity loans, credit cards, or college savings plans and investment portfolios
now find themselves in a depressed housing and stock market, with no equity
left in their house to borrow against and with investments that have taken a
nosedive in value.
Even those parents who have enough value left in their house to draw upon
face an uphill battle to qualify for a home equity loan. Lenders, still reeling in
the aftershocks of the subprime mortgage meltdown, have tightened the credit
and income requirements required to qualify for home loans. Similar credit
tightening has spread throughout the financial sector, including the student
loan industry. Lenders of non-federal, credit-based private student loans
have raised qualifying credit criteria to the point where only those students
with the best credit scores will be eligible; a number of lenders have stopped
offering student loans altogether.
The jump in FAFSA applications this fall
indicates, to some, that families who before have been able to afford to pay
for their children's college tuition without relying on federal college loans or
grants may now be turning to the federal government for financial help.
"Students who haven't needed assistance before are coming in," said
Toomey. "You had to expect that this was going to happen with all the news of
companies laying off thousands of people."
Genwich Life Services LLC
"Successfully guiding multi generational families through life stage planning"