When you need college financial aid, what programs will be available? Many students and their families are wondering what to expect over the next decade. Some trends are evident today.
Federal financial aid programs are moving in three directions. Recent tax credits through the Hope Scholarship and the Lifetime Learning Tax Credit are allowing parents or students to pay a portion of college costs through tax savings. The maximums on these programs are scheduled to rise in coming years. The current credits of $1,000-1,500 will increase to $1,500-2,000, providing many families with the ability to at least cover the majority of tuition costs at public 2-year colleges. Maximums for federal Pell grants are likely to be raised as well. At the same time the Pell Grant will remain primarily available to low-income families. No dramatic changes should be expected in the college work study programs. Federal student loans will be used to meet a larger percentage of student financial need as college costs continue to outpace increases in available grants and scholarships. Use of non-need based loans will rise at an even faster rate as families turn to these programs when all other options have been exhausted.
State-supported financial aid has been shifting toward merit-based grants and scholarships. New programs in Washington State and elsewhere are rewarding the best students with money for college. As a result, need-based, low/middle-income grant programs may not be receiving as much increased support as state dollars focus on the new merit-based programs.
Institutional aid from the colleges and universities will continue to be an excellent source of support for many families as long as college endowments continue to do well in financial markets. With college enrollments on the increase through the next decade, most higher education institutions should be in better financial situations. Institutional aid should remain evenly split between merit and need based programs.
Private scholarships from corporations have been reduced through many recent mergers. At the same time, as the baby-boom generation moves toward retirement, a greater number of new scholarship foundations are being initiated. In the Pacific Northwest, many individuals making fortunes in the software industry are directing some of their wealth into new private scholarships. About 80% of these new scholarships focus on student merit. With the use of the Internet to provide access to private scholarship listings and applications, competition for these awards may increase as more students become aware and gain access to these funding sources. Scholarships supported by local communities are also on the rise through programs like Dollars for Scholars. These programs are providing a way for small towns and communities within cities to provide direct support to their college-bound students.
While most of the trends noted above are positive, one major demographic factor must be considered. The number of college students will increase over the next decade to record numbers by the year 2007. Will the increases in financial aid match the increases in the number of students seeking aid? It is likely that enrollments will out-pace aid increases leaving more students to compete for fewer dollars. Students and families who plan carefully to take advantage of available aid will be rewarded as they find themselves at the front of the line for financial aid. Those who don't plan carefully, will be forced to seek low-cost colleges and rely on more and more borrowing.