By Christina Satkowski and Stephen Burd

You can't always believe what you read in the papers. That old saying has gained new currency this year with all of the misleading and panicked news coverage of the student loan credit crunch. Unfortunately, the same can be said of recent reports about Congressional efforts to simplify the process of applying for financial aid.

At issue are news stories reporting on a provision in the recently-passed Higher Education Act reauthorization legislation that requires the U.S. Department of Education to create a new "EZ FAFSA," a shorter version of the Free Application for Federal Student Aid (FAFSA) that tens of millions of students fill out each year to determine their aid eligibility. Recent articles in Congressional Quarterly, Education Week, The New York Times, and other publications leave the impression that the new bill streamlines the FAFSA -- from seven pages to two -- for all students.

But that's not the case. While the legislation introduces an EZ FAFSA, it makes it available to only those students whose family income is low enough that they already qualify for an expedited review of their finances when applying for federal financial aid. As a result, most aid applicants will still be stuck with the longer form.

Under the new law, students who will be eligible to use the EZ FAFSA include those whose families earn earn less than $50,000 a year and either are not required to file the long version of the 1040 federal income tax return or receive certain federal means-tested benefits such as welfare payments or food stamps. The federal government doesn't take into consideration the assets of families of students who meet these criteria.

By Jon Oberg

Congress deserves ample credit for approving a significant expansion in the GI Bill education benefits that veterans can use to pay for college. But as a veteran myself, I fear that the benefits are being oversold. Take a recent statement about the GI Bill made by a representative of the Iraq and Afghanistan Veterans of America: "It made going to school your full-time job. You worry about getting into school and you worry about getting as many degrees as you can but the government will worry about paying for it."

Fellow veterans: don't count on it. Although billions more will be spent annually in your name, you may not get as much help as you think. A lot of the money will disappear before you see it.

I used data from the most recent student aid databases (the 2004 National Postsecondary Student Aid Study) to see how veterans fared at four-year public and private colleges, as compared to other undergraduates. The results confirmed my suspicions that despite the government's help, most veterans have been stuck with large amounts of student loan debt and received little in the way of institutional financial aid (the country's largest source of grants) from the colleges themselves.

In short, many colleges have treated veterans as an afterthought. Some institutions have clearly used veterans' GI benefits to replace institutional aid dollar-for-dollar, and shifted the money they saved into merit aid for the kind of high-achieving students that improve their rankings. In such situations there has been no remedy for veterans, as the federal government has largely looked the other way. Many veterans have gotten the message and lowered their educational ambitions.

To celebrate Independence Day, Higher Ed Watch will be going on hiatus next week. But before we go dark, we thought we'd remind you of some important changes coming to federal student aid that will save students money and hopefully eliminate some of the worst abuses that have occurred in the Federal Family Education Loan (FFEL) program in recent years.

Most of these changes are the result of two pieces of legislation enacted in the past year: the College Cost Reduction and Access Act (CCRA) and the Ensuring Continued Access to Student Loans Act of 2008 (which we will refer to as the "bailout bill"). Both contain provisions that go into effect on July 1.

The most substantial changes are to the federal student loan programs and the interest rates charged on these loans.

Under CCRA, the interest rate on subsidized Stafford Loans -- which generally go to students from families making less than $80,000 and accrue no interest for the borrower while in school -- will halve over the next four academic years. As a result, borrowers taking out a subsidized Stafford Loan after July 1 will have a fixed interest rate of 6.0 percent, 0.8 percentage points lower than available today. [Borrowers with unsubsidized federal loans will continue to pay a 6.8 percent fixed rate] In subsequent years, interest rates will drop to 5.6 percent, 4.5 percent, and then 3.4 percent by the 2011-2012 academic year. After that, absent any further Congressional action, rates will return to the previous level of 6.8 percent.

By Art Hauptman

There is widespread agreement among financial aid analysts and practitioners that our country's student aid system is not working as effectively as it could be. Many believe that the solution to this problem is to have the federal government substantially increase the amount of money it spends on the existing student aid programs.

I disagree. The federal government currently spends roughly $40 billion for grants, college work study, loan subsidies, and tax breaks for college -- more than enough to achieve the programs' goals if they were operating effectively and efficiently. As I argued last week, the current structure of student financial support in this country needs to be changed in fundamental ways.

Higher Ed Watch has some questions for the Bush administration about its Fiscal Year 2009 higher education budget: [slideshow]

1) The Federal Family Education Loan (FFEL) program and the Direct Loan program show similar per loan costs for 2008 and 2009, with the FFEL program showing a slight cost advantage for the first time. However, page 364 of the Budget Appendix notes that costs are higher for the Direct Loan program, because it holds nearly 100 percent of student loans that have defaulted (under FFEL and Direct Loans) and have been rehabilitated through consolidation.

Can per loan program costs be accurately compared when high-default risk FFEL loans are dumped into the Direct Loan program? If OMB and the Department of Education corrected cost estimates for this bias, how would the costs change? Which program would be cheaper for taxpayers if costs were controlled for borrower differences?

2) Federal funds held by state guaranty agencies used to pay loan default claims under the Federal Family Education Loan (FFEL) program nearly doubled to $1.1 billion in 2007 from $579 million in 2006. Are the federal funds held by guarantee agencies in excess of what is needed to pay default claims, and if so, would the administration recommend recalling those funds?

When Congress returns from its recess next week, unfinished fiscal year 2008 education funding legislation will be high on the agenda. Fiscal year 2008 began on October 1 and funding subject to appropriations for the fiscal year has…

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Hillary Clinton Includes Two New America Policy Proposals in Her Education Plan

Two New America policy proposals: required multi-year tuition levels and greater use of endowments to

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There's been discussion in Congress recently about how the tax code can be better used to encourage college attendance among low-income students. One proposal being considered by the Senate Finance Committee is to make higher education tax credits refundable - and thus available to people who now do not benefit…

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While the threatened showdown between Congress and President Bush over the College Cost Reduction Act never materialized, a different fiscal fight between the two branches of government is looming, this one over annual appropriations spending bills.

Note: This post pre-dates Higher Ed Watch's shift to a new publishing system. For the complete original post, including any comments, please click here.

The massive college aid bill that Congress passed earlier this month is headed to the President for signature. As the newest member of the Higher Ed Watch team and a budget hawk, I thought I would point out some of the loose ends that are going to have to be…

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