College scholarship, grant changes leave parents, students and schools confused

Interest rates on the subsidized Stafford Loan doubled July 1 from 3.4 percent to 6.8 percent because of Congressional impasse. Subsidized loans go to those with financial need. A Senate compromise, which could be voted on this week, ties the loans to the U.S. Treasury 10-year borrowing rate. This fall undergraduates would borrow at 3.85 percent interest rates. Their rates would never exceed 8.25 percent. The House bill also links interest rates to the Treasury note. Differences between the two are expected to be resolved before students return to campus. The new terms are expected to affect loans originated after July 1.

Pell Grants

This federal program is for low-income students. Unlike loans, this money doesn’t have to be repaid. Recent changes include reducing the eligibility time from 18 semesters to 12 and tightening family income requirements to reduce the number of students who receive the maximum award amount. Students used to be able to receive two grants in one year to help pay for summer classes, but that option is no longer available.

HOPE Scholarship

This state program is supported by the Georgia Lottery and lawmakers overhauled it in 2011 to prevent it from going broke. The award used to cover all tuition but no longer does for the vast majority of recipients. The award is tied to lottery revenue, not tuition, so the amount will vary each year. As tuition costs go up, HOPE is expected to gradually cover a smaller percentage of this expense. HOPE recipients must earn and maintain a 3.0 grade-point average.

Paying for college has always been difficult, but recent changes and uncertainties have left Georgia students, parents and administrators wondering which end is up.

The latest confusion centers around the federally subsidized Stafford Loan, a program used by more than 220,000 Georgians. Interest rates on new loans doubled from 3.4 percent to 6.8 percent July 1 after Congress deadlocked on efforts to avoid the increase. The latest compromise, which the Senate is expected to vote on this week, would change the rate yet again.

Meanwhile, people are still grappling with adjustments to the Pell Grant, a federal program for low-income students. Between March 2009 and July 2012 the funding, eligibility requirements or payment options for Pell and similar federal programs changed at least half a dozen times.

Then there’s Georgia’s lottery-funded HOPE Scholarship, which lawmakers overhauled two years ago to prevent it from going broke. The award used to cover all tuition, but now payouts can fluctuate annually and likely will cover a smaller portion of costs each year.

Annual tuition increases just add to the topsy-turvy situation.

“It costs more to go to college and we’ve made it more difficult and confusing for students to get the help they need to pay for it,” said Tim Renick, vice provost at Georgia State University. “It’s been hectic trying to advise students and manage enrollment when the game plan keeps changing.”

Noelle Manzella plans to graduate from Kennesaw State University in December. The 26-year-old works as a waitress and uses Pell and Stafford. She has mostly attended college part-time to reduce her tuition costs, and she took two years off from school so she could work and build up her savings.

While frustrated with the process, Manzella realized she needs a degree to avoid a lifetime of waitressing.

“It’s crazy to keep changing the rules when we don’t even know if we’ll be able to find jobs so we can pay off our debt,” she said. “I feel like I’m being punished for trying to get an education.”

Subsidized Stafford Loans go to those who have financial need, with about three-quarters of the recipients coming from homes making less than $60,000 a year. Students apply for loans annually, and the increased rate applies only to new loans.

The Senate compromise would tie student loan rates to 10-year Treasury notes, which would result in interest rates of less than 4 percent for the new subsidized loans for this year. The plan would cap interest rates for undergraduates at 8.25 percent at any time. While the Senate deal would keep interest rates the same for the life of the loan, the bill approved in the House would reset the rates every year.

Democrats and Republicans have pledged to reach an agreement and have said the new terms will apply to all loans signed since July 1. But now is the time when families plan how to pay for college and must decide whether to stick with the federal loan or go with a private lender.

“This whole process is confusing and chaotic,” said Lanre Giwa, 24, a junior at Georgia State University.

She plans to graduate in 2015 with a degree in sociology. Giwa used to receive HOPE but after switching majors and earning a certificate in cosmetology she reached the maximum number of credit hours covered by the scholarship. Now she relies on Pell and Stafford and works two jobs to afford college and support her 6-year-old daughter.

Giwa has nearly $5,000 in college loans, but knows that amount will only get higher.

“Sometimes I don’t even know why I’m doing it,” she said.

Atlanta dad Charles Lawrence has years of college bills ahead. His son, Charles, will graduate from Fort Valley State University in December. One daughter, Akasha, starts at University of West Georgia this fall. Another daughter, Kahlia, will be an eighth-grader at Young Middle School.

The HOPE Scholarship helps, but Lawrence expects it will provide less and less support every year. He told his kids to apply for other scholarships and work over the summer. Loans may be unavoidable but the goal is to minimize the amount needed.

His son took out some loans and Akasha may need a small Stafford Loan. He will encourage Kahlia to start at a community college because the lower tuition would lessen her need for loans.

“It’s hard to keep track of all the changes and rules,” Lawrence said. “The only thing we know is that it’s just going to get more expensive.”