"Improving college access and affordability are key to giving more Americans a chance at higher education and keeping America competitive," said Secretary Spellings. "Families need more information—sooner—about students' federal aid eligibility so that they can plan ahead for college. The FAFSA4caster gives families an important tool they can use to make decisions about the future."
Secretary Spellings' FAFSA tool is the newest development in a wave of government initiatives that seek to provide the economically underprivileged with improved access to higher education. By allowing students to see how much aid they qualify for the FAFSA4caster will empower them: as we've seen before, many students that live in low-income families actually avoid attending college simply because they fear debt accrual. Spellings new initiative will allow students to know exactly how much aid they can expect to receive well in advance, giving would-be-students valuable access to financial planning capabilities.
Update on Student Loan Scrutiny and Pell Money
In addition to the FAFSA4caster, New York Attorney General Andrew Cuomo has also been gaining a lot of media attention. Previously, we've discussed how the New York AG is investigating the relationship between financial aid offices of colleges and universities, and lending institutions that specialize in student loans. Since the last time we mentioned the investigation, there have been quite a few developments; most recently Cuomo announced that he plans to sue one lender, that he alleges repeatedly offered financial incentive to more than 60 schools nationwide in order to gain preferential business:
"This kickback scheme was widespread and took place from coast-to-coast, at colleges, large and small, public and private," said Mr. Cuomo, in a statement. "This lawsuit is just the beginning of an investigation that will show that lenders put market share above fair play."
Cuomo isn't the only one looking into the ties between lenders and colleges: Today, Senator Kennedy announced that at least 14 loan providers will receive inquiries that seek to identify whether the institutions in question offered kickbacks to colleges and universities. In a statement, Kennedy said:
"When students take out loans to pay for college, they should be assured that the relationship between the school and their lender is free of bias or conflict of interest"
By dis-articulating any relationships that may exist between loan offices and lenders, the initiatives of Kennedy and Cuomo will force lenders to promote their services to prospective students in new, more competitive ways. It follows that the increased competition will result in lower interest rates for students.
The exact effect that these investigations will have on the business of student loans remains to be seen. We will continue to monitor and update as the issues develop.
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