Thanks to its approximately $1.44 trillion loan portfolio, the U.S. Department of Education is often perceived as strictly a lender of debt, but it also disburses financial aid that doesn’t need to be repaid.
Unfortunately, that so-called gift aid is on a steep decline, according to our review of eight years of education department data.
Even worse, federal grant awards are tapering off faster than enrollment. That means 1.6 million students would have received grants for the 2017-18 school year if aid had decreased at the same rate as college admissions.
|Academic Year||Percentage of Students Who Received Federal Aid||Undergraduate Enrollment||Students Who Received Federal Aid|
- Between 2010-11 and 2017-18 academic years, the decrease in students receiving grants was nearly 2.2 million (23.6%), while the decrease in enrollment was about 1.2 million (6.4%).
- About 42% of undergraduate students received a federal grant in the 2017-18 academic year, compared with about 52% in 2010-11. That drop means that students were 18% less likely to receive a grant in 2017-18 than they were in 2010-11.
- The average grant amount awarded to students was $3,771 for the 2016-17 academic year, the last year for which data was available. A student who receives four years of grants could expect to receive about $15,000 in tuition assistance from these programs.
- Student borrowing has also decreased dramatically during the same period. About 52% of enrolled students took out loans for the 2010-11 school year, but only about 38% borrowed for 2017-18. Adjusting for declining enrolment, nearly 1.8 million fewer students took out loans in 2017-18.
- Interestingly, parent borrowing was static. About 4.6% of parents took out loans under their name (but for their children) in 2010-11, and 4.6% of Moms and Dads did the same in 2017-18.
Popular Pell Grant program suffering the sharpest decline
|Academic Year||Total Number of Students Who Received at Least One Form of Aid||Pell Grant Recipients||TEACH Grant Recipients||AC Grant Recipients||SMART Grant Recipients||Iraq and Afghanistan Service Grant Recipients|
While the Academic Competitiveness and SMART grant programs expired after the 2010-11 school year, the Education Department’s menu of other grant awards has also fallen off considerably since the 2011-12 academic year.
Pell Grants are awarded to the most financially needy students as determined by the Free Application for Federal Student Aid, or FAFSA. As the most commonly offered grant, Pell awards have dropped off by about 22% over eight years.
Though a smaller sample size, TEACH Grants, which help aspiring teachers fund their education in exchange for postgraduate service in low-income schools, have also decreased steadily. Only the Iraq and Afghanistan Service Grant, aimed to help the children of deceased service members, increased over the period we surveyed.
1.6 million fewer students received grants in 2017-18
|Enrolled undergraduate students||-1,158,427||-6.4%|
|Students who received federal aid||-2,199,431||-23.6%|
|Percentage of students receiving aid||-9.5%||-18.3%|
You might say that, of course, fewer grants are being awarded because there are fewer students on campus hoping to receive one. However, grant awards are declining faster (down 18.3% over eight years) than enrollment (down 6.4%).
If these two factors had declined at the same rate, 1.6 million additional students would have received a grant for the 2017-18 school year.
Over the more recent five-year span, this trend is nearly as strong: About 1.3 million students were left without grant funding.
Federal loan borrowing also on the decline, but not for parents
On a more positive note, students are relying less on Uncle Sam for financial aid that needs to be repaid (with interest). When adjusting for declining enrolment, nearly 1.8 million fewer students took out loans for the 2017-18 academic year than borrowed for the 2010-11 campaign on campus.
While student borrowing was slowing, parents appear to have borrowed direct PLUS loans at the same rate over time. There were about 829,000 parental loans in 2010-11, compared with about 776,000 in 2017-18, representing a 6.4% drop-off that matches the 6.4% decrease in undergraduate enrollment.
Students borrowing in their own name, however, decreased. Undergraduate loans fell by 33% — from about 9.4 million to almost 6.5 million — over the eight years under consideration.
Why federal financial aid might be waning
Pell Grants — the majority of gift aid handed down by the federal government — are proven to open the door to college to students who might not otherwise be able to afford it.
Here are two possible explanations for the downturn in Pell awards.
1. Rising household incomes
When a student completes the FAFSA, it pumps out the EFC, or Expected Family Contribution. That’s the amount the federal government believes the student and their parents could reasonably put toward their cost of attendance. The EFC also decides whether the student is eligible for a Pell award and for how big of an award.
Award maximums fluctuate annually. Still, as incomes rise — median household earnings rose by about 11% between 2010 and 2017, according to the Federal Reserve Bank of St. Louis — EFCs climb as well. When that happens, one side effect is that some families could find themselves no longer eligible for Pell awards.
2. Lower enrollment of low-income students
Students receiving Pell Grants make up 60% of the campus populations of for-profit colleges, according to the Center for American Progress. As more and more for-profits fall off the map, however, fewer low-income students may not enroll at all, reducing the overall need for Pell Grants.
The rise of the free-college-for-all idea during the election season could eventually turn the tide.
The Pell Grant program’s future is also likely to be affected by legislation in the near future. President Donald Trump’s latest budget proposed wiping out the Pell Grant program’s surplus of funds. A congressional panel, meanwhile, pushed forward a spending bill in May that would increase annual Pell awards by $150 per student.
Federal loan borrowing could also see an uptick, as the Education Department plans to reduce interest rates for direct loans made in 2019-20.
Where to find additional forms of financial aid for college
If you’re pursuing a higher degree, you might be understandably alarmed by dwindling federal grant awards. Using the FAFSA4caster can help you predict your access to Pell and other grants.
If federal grants prove inaccessible or insufficient, there are a host of other ways to pay for college without borrowing, including:
- Grants from your state
- Scholarships from your school and private organizations
- Federal work-study programs
- Off-campus side hustles
- Income-share agreements
If you’re in a bind and need to borrow, weigh private student loans alongside your federal options. Banks, credit unions and online lenders sometimes beat the government’s interest rates if you’re a creditworthy borrower or cosigner.
Just keep in mind that private loans don’t feature government-only protections, such as income-driven repayment, mandatory forbearance and loan forgiveness programs.
Interested in refinancing student loans?Here are the top 9 lenders of 2021!
|Lender||Variable APR||Eligible Degrees|
|1.88% – 6.15%1||Undergrad & Graduate|
|1.88% – 5.64%2||Undergrad & Graduate|
|2.50% – 6.85%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|1.99% – 6.59%5||Undergrad & Graduate|
|1.88% – 5.64%6||Undergrad & Graduate|
|1.90% – 5.25%7||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|2.13% – 5.25%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.48% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Refinancing Loan Cost Examples
These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.
One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.
© 2021 Earnest LLC. All rights reserved.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for SoFi.
Fixed rates from 2.49% APR to 6.94% APR (with autopay). Variable rates from 1.99% APR to 6.59% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
6 Important Disclosures for Navient.
7 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.75% Fixed APR with AutoPay.
8 Important Disclosures for PenFed.
Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.