The National Student Loan Data System (NSLDS) is the U.S. Department of Education’s online mega-database of federal financial aid accounts. This database keeps track of all federal student grants and loans (Title IV financial aid) awarded to students through the FAFSA program, including FFELP and Direct Lending student loans.

The information about all these student loans comes from the institutions that loaned or manage the money awarded to borrowers via the FAFSA, including banks, financial institutions, loan guaranty agencies, individual schools, and the U.S. Department of Education (Direct Loans).

The National Student Loan Data System provides you with a convenient way to check on the status of your FAFSA loan yourself, without having to go to a physical location or wait in line or on hold to speak to a bank teller or customer service rep. By logging in to the National Student Loan online database, you can see what your loan status is 24/7 and find information such as:

• the FAFSA grant and loan amounts you were awarded
• how much money was paid out to you or your school, and when
• what your FAFSA loan’s outstanding balance is
• whether you are up-to-date or falling behind on any required interest payments or loan repayments

You’ll need a FAFSA PIN (Personal Identification Number) to check your FAFSA loan status at the National Student Loan Data System site. If you filed your FAFSA online, you already have a PIN. If you mailed in a paper FAFSA, you’ll need to get a PIN before you can check your account status.

You can find more information about getting a FAFSA PIN and checking your FAFSA loan status on the Frequently Asked Questions (FAQ) page of the federal Student Aid website.

Nontraditional students often attend community college, which has the flexibility and affordability that work best for adult learners. There are almost 12 million fulltime and part-time nontraditional students from all walks of life pursuing degrees, professional certificates, and lifelong learning at community colleges from one end of the country to the other.

Nontraditional Students Depend on the Lower Tuition of Community College

The relatively low cost of community college is a tremendous benefit for nontraditional students, many of whom may be single parents, workers in lower-paying jobs, newly laid-off workers, or the first in their family to attend college. Despite some tuition increases, a recent College Board financial aid report noted that tuition and fees for an average community college are still only about 36% of the tuition and fees of an average four-year college.

Federal Student Loans for Community College: A Problem Revealed

Since community colleges provide a substantial higher education service to nontraditional students, you may be surprised to learn that many community colleges don’t offer their students federal student loans. That’s the discovery of the Project on Student Debt, who reported last month that approximately 900,000 community college students in 31 states could not get federal Stafford, Perkins, and PLUS loans because their schools chose not to participate in the federal loan program. (Download a copy of the user-friendly report here.)

The main reason seems to be the schools’ earlier bad experience with the consequences of high student loan default rates. In the 1990s, schools with very high default rates were penalized by being shut out of ALL of federal financial aid programs, including the invaluable Pell Grants that so many nontraditional students depend on. After a few close calls with losing their Pell Grants, those schools developed a little bit of paranoia about offering any more federal student loans.

The good news is that loan default rates have improved a lot since then and no community college has lost access to Pell Grants in many years. The bad news is that old fears die hard and today, thousands of nontraditional students end up having to take out private loans to cover the last of their community college costs when they can’t get Stafford, Perkins, or PLUS loans.

Private loans typically have higher interest rates, more borrower fees, and less protection than federal loans, and can turn into unmanageable debt for the students who can least afford it.

How to Find Out If Your Community College Offers Federal Student Loans

What can you do if you think you may need a student loan for community college? Before you apply, call the financial aid office of the community college(s) you’re considering and ask if they participate in the federal student loan program (Title IV). Be sure to ask specifically about loans (Stafford, Perkins, and PLUS loans), not just the financial aid program in general. (All eligible colleges participate in the federal grants program, but apparently they don’t all participate in the student loan program.)

If it turns out that the community college you were considering does not provide federal student loans, you may want to talk to other community colleges in your area until you find one that does. Community colleges fulfill a vital mission in the higher education service they provide to nontraditional students. Making federal student loans available to students who need them should be part of that mission.

Last Thursday, the U.S. House of Representatives approved a proposal to overhaul the federal student loan program. The proposal hasn’t provoked anything like the uproar over health insurance changes, but it’s had its fair share of fierce debate — and where there’s ideological debate, there’s often a loss of basic information.

Here are 5 things you may not know about the new student loan proposal:

1) Federal student loans only. The new changes to the student loan program will not apply to all student loans — only to student loans provided by the federal government. Those are: Stafford Loans (both subsidized and unsubsidized), Perkins Loans, PLUS loans for parents, and PLUS loans for graduate students. If the student loan proposal is approved in the U.S. Senate, then starting in July 2010, students who take out federal Stafford loans, Perkins loans, or PLUS loans will get them solely through the Direct Lending program. (The Federal Family Education Loan program, or FFELP, will stop operating.)

2) Application process won’t change. There won’t be any change to the way students apply for Stafford Loans, Perkins Loans, and PLUS loans. The application process will stay the same as it’s always been: filling out a FAFSA each year a loan is needed. The only difference students may notice is that the FAFSA will be simpler, with fewer questions and pages, and on the online form, the option to transfer financial information directly from the student or parent IRS income tax form.

3) Private banks can still offer private student loans. Free market competition is not being eliminated — private financial institutions and commercial student-loan lenders will still be able to offer all the private student loans they want. They just won’t be middlemen for federal student loans any more, or get the federal government subsidies that rewarded them for offering student loans with the low interest rates, low fees, more inclusive application rules, and greater protection that the federal government required.

4) A few private institutions will help out with Direct Lending customer service. After the FAFSA stage of the loan process, there will probably still be a few private student-loan companies involved in handling the loan agreement and maintenance on behalf of the Department of Education. These companies will be paid a fee for providing this customer service to students, and will be selected by the Department through a competitive bidding process.

5) Don’t worry about the FFELP student loans you have now. If you have any current FFELP Stafford, Perkins, or PLUS loans, just keep making your interest payments or loan repayments as you have been all along. If the new student loan proposal becomes official, the transfer of existing loans from the FFEL program to the Direct Lending program will be handled by the Department of Education and your school(s). If your school’s financial aid office needs you to do anything, it will let you know. (And if you’re about to apply for a federal student loan, check with your school to see if it has signed up for the Direct Lending program. Probably no point in getting a loan through the FFEL program now.)

As expected, the U.S. House passed legislation yesterday that takes a giant first step towards major federal student loan reform. The Student Aid and Fiscal Responsibility Act (”SAFRA”) includes ending the Federal Family Education Loan Program (FFELP), in which the government paid subsidies to private lenders to provide education loans to college students, and moves all federal student loans into the Education Department’s own Direct Lending program.

This shift (if SAFRA or something similar also gets passed in the U.S. Senate) would be the biggest federal student loan reform in more than 30 years. If you’re watching all the developments in the news, it sounds like a very big deal. And it is — to the FFELP private-sector lenders who have been profiting from federally-guaranteed student loans for many years. Except for maybe the opportunity to be a selected loan servicer, commercial lenders will be cut out of the federal student loan picture after July 2010.

But what would this student loan reform mean for you? Will it change the way you get federal student loans, or make them harder to get?

Actually, the system overhaul approved yesterday doesn’t change the federal student loan eligibility rules, application process, or repayment process as far as the college student borrower is concerned — it only changes the source of the money that gets loaned out. If you’re a college student in need of a student loan, you would still apply for federal loans — the best deal you’re going to get — by filing a Free Application for Federal Student Aid, or FAFSA, every January.

It will be up to your school and the U.S. Department of Education to be ready to efficiently process your January 2010 FAFSA through the Direct Lending program. Fortunately, if the SAFRA overhaul is made law, it will include providing you with a simplified FAFSA next January.

Read more about these changes would mean for you: SAFRA: What’s In It For You?

Why undertake such massive student loan reform at all?

SAFRA’s supporters, which include President Obama and education officials in his administration, believe that cutting out the middle-man (the commercial student-loan lenders) will save the government about $87 billion over 10 years. Education officials plan to put $40 billion of that savings directly into the Pell Grant program, boosting both the maximum amount of each Pell Grant and the number of grants available.

Other portions of the savings are targeted towards higher education programs designed to simplify the FAFSA, maintain low student loan interest rates, provide support for colleges that serve minorities, and increase college degree completion, Perkins Loan availability, and student loan forgiveness.

The case for closing down the FFEL Program and changing to all Direct Lending

Commercial student-loan companies, private-sector banks, and student loan trade organizations worked with sympathetic legislators to offer an alternative to the SAFRA, but as yesterday’s vote demonstrated, they were not successful. Their concerns about how much money SAFRA will actually save may not be unreasonable, but the FFEL Program has had more than a couple of strikes against it in recent years.

• CBO Savings Estimates. The Congressional Budget Office estimated that the FFELP supporters’ counterproposal would save the federal government much less money than the SAFRA Direct Lending proposal. It could be that it’s a question of “Whose math is the right math?” but for now, the SAFRA advocates have come out ahead.
• Student Loan Default Rates. In 2007, the rate at which students defaulted on FFELP student loans was actually higher than that of students who got loans through the Direct Lending program. This is a real blow to commercial banking institutions, who have often claimed that the premiere customer service private-sector lenders provide to students results in a lower FFELP default rate. The higher default rate is probably due to the increase in the number of students from for-profit schools getting FFELP loans, but it’s too late now.
• Student Loan Scandal. In 2006-2007, an investigation into the student loan business uncovered extensive and dramatic corruption involving many large and small lenders from the FFEL program. The widespread conflict-of-interest violations and kick-backs between schools and financial institutions forced a federal crack-down on both the private and federal student loan industries.
• Credit Market Collapse. Many Republican legislators and banking industry advocates characterize the elimination of the FFEL program as another example of “government takeover,” but the truth is, the federal government has been the primary funder of federal students loans for over a year anyway. When the credit market collapsed and financial institutions stopped making loans of any kind, students trying to line up money to go back to school panicked. The federal government stepped in and both took on the debt of existing FFEL student loans provided by lenders who fell apart, and increased federal funding in order to increase federal Stafford loans.

The 2009 student loan reform is not official yet. The U.S. Senate has to approve the plan, too, and the two houses of Congress often do a little negotiating to come up with a final plan that will make the majority and the president happy. Education legislators in the Senate are already at work on a plan that looks likely to pass.

Stay tuned to EducationGrant for further developments, and in the comments section, drop in your questions about what this student loan reform would mean for you.

Well, the federal student loan program’s big moment is at hand. On Thursday, September 17th, the U.S. House of Representatives will vote on a proposed major overhaul of the student loan system. If the new legislation is passed, it will shut down the bank-based Federal Family Education Loan Program (FFELP) and issue all future federal student loans from the alternative Direct Lending program, which is funded by the U.S. Treasury.

Schools that currently participate in the FFELP will have until July 1, 2010, to shift all their existing student loans over to the Direct Loan system.

The Obama Administration proposed the FFELP shutdown based on estimated cost savings that would come from not having to pay government subsidies to banks and commercial lending institutions in the student loan business. The plan is to funnel the saved money into the federal Pell Grant program.

Although getting 4,000-plus schools ready to handle billions of dollars of federal student loans through the Direct Lending program in a year’s time would obviously be a gigantic tactical undertaking, it offers the appeal of a greatly simplified federal student loan system, in addition to the boosted Pell.

You may have already had to get your financial aid ducks in a row for this semester, but for those students who are still scrambling to find tuition money, or have maxed out their federal loans, consider this new trend in financial aid options: peer to peer lending.

Peer to peer lending is a type of loan that individuals seek from ordinary people looking to lend money, without the formalities of going through a bank, credit union, or other financial institution. But, this isn’t just free money for school offered up by people out of the goodness of their hearts; there is some structure to these transactions.

If you were looking to borrow money through peer to peer lending, you’d go about it via an “online marketplace” or through your own social network (friends, family, and business colleagues).

The online marketplace connects you with lenders through an auction-like process. You would benefit because, in this case, you would secure the lowest rate for the loan since the lenders compete with each other to “win” the ability to lend you the money. But, these lenders usually factor in your credit score & debt when they make their decision to offer you a certain rate. So, even if they are competing, your lowest rate may not be very low if you have significant debt, a low credit score, or limited income.

The social network method is where you approach your network of friends & family to ask for small student loans in the hopes that one or more of them will lend you a portion or the entire amount that you need. You’d be wise to use one of the sites below to do this because, while your request is personal and you know everyone you’re reaching out to, the sites formalize the process, including the repayment terms and other fine print that you might not be familiar with or you just might feel uncomfortable discussing.

The main peer-to-peer lending sites are:

• Lending Club
• People Capital
• Green Note
• Virgin Money

Though the rates and terms are often much more favorable for lenders and borrowers, there are some drawbacks to this type of financial aid for students that are interested. David K. Randall at Forbes mentions one in particular:

Under current IRS rules, the interest paid on conventional student loans is deductible from income taxes, as long as the borrower had an adjusted gross income of less than $70,000 (or $145,000 for married couples filing jointly.) Peer to peer loans from friends or family generally won’t qualify as educational loans under the government’s definition, which bars loans between family members.

So, have you looked into peer-to-peer lending? Any recommendations or horror stories? Share in the comments!

The William D. Ford Federal Direct Loan program is a federal student loan program that allows students to borrow money for college from the U.S. Department of Education rather than from a private bank or commercial lender. If you’re eligible for a federal direct loan:

• Your school will administer your loan
• Your loan money will come from the U.S. Treasury via the Department of Education
• You’ll handle your loan repayment through one point of contact, the Direct Loan Servicing Center

Supporters of the direct loan program firmly believe that it offers students a more reliable, less complicated, and less expensive loan option. Reliability and the availability of loans became an issue in 2008 when the credit crisis caused many private banks and financial institutions to stop offering student loans. And the subsidies that would otherwise go to financial institutions in the bank-based Federal Family Education Loan Program (FFELP) could be used instead to pay for more and larger Pell Grants. The Direct Loan program also helps to cut down on corruption in the student loan industry, proponents say.

FFELP supporters are not convinced that the subsidy savings outweighs the customer service that private banks and commercial lenders provide. Still, the U.S. Treasury had money for student loans when many private banks didn’t, and that’s a tough point for supporters of the bank-based FFELP to get around.

Not all schools participate in the Direct Loan program. In general, all qualifying schools that participate in the federal financial aid program sign up for either the Direct Loan program or the FFELP, and until recently, a large majority chose the FFELP.

But between the 2006-2007 student loan scandal, the 2008 credit collapse, and the proposal by the Obama administration to shut down the FFEL program and finance all federal student loans through the Direct Loan program, dozens of schools have been switching over in the last year. Ask your school which program it belongs to (and maybe recommend the Direct Loan Program, if they’re not already on the ball on that).

Direct Loan Program Advantages

• Reliable source of funding
• No middleman
• Lower interest rates and fees
• Choice of repayment plans
• Website, www.dl.gov, where you check on your loan account 24 hours a day, 7 days a week

You must be in school at least half-time to get a federal Direct Loan.

Federal Direct Loan Amounts

The loan amount you can apply for depends on several factors, including:

• whether you’re an undergrad or graduate student
• what year of school you’re in
• whether you are still claimed as a dependent on your parents’ taxes
• whether your parents tried to get a Parent PLUS loan

Based on these factors and financial need, the amount of your Direct Loan can range from $5,500 (undergraduate freshman) to $20,500 (graduate or professional student per year), in a combination of subsidized and subsidized loans.

Federal Direct Loan Interest Rates

Interest rates for new Direct Loans (first paid out between July 1, 2009 and June 30, 2010):

• Subsidized Stafford Loans for Undergraduates: fixed at 5.6%
• Subsidized Stafford Loans for Graduate students: fixed at 6.8%
• Unsubsidized Stafford Loans for ALL students: fixed at 6.8%
• PLUS loans for Grads and parents: 7.9%

How to Apply for a Federal Direct Loan

1. File a FAFSA, the Free Application for Federal Student Aid
2. Complete a Master Promissory Note

Don’t assume you won’t qualify for a direct loan program student loan. It turns out that nearly half the number of college students who would have qualified for federal student loans didn’t even apply, losing out on thousands of dollars in financial aid.

The school year is approaching and thousands more college students are enrolled this fall than last year. In one more ripple effect of the recession, traditional and nontraditional students alike are coming up short on tuition money and wondering how to appeal for more financial aid.

Wall Street Journal: Families Appeal to Colleges for Extra Aid

A quick look at college financial aid pages around the web turned up some consistent recommendations, particularly if your financial circumstances have gotten worse since you filed your FAFSA. Financial aid administrators have the flexibility to adjust aid awards based on special circumstances such as a job loss in your family. If you can prove a loss of income or other specific hardships, you should file an appeal with your school for more financial aid. Even if school itself has no funds remaining, your circumstances may make you more eligible, or your parents more eligible, for low-cost federal loans.

What is a financial aid appeal?

A financial aid appeal is a formal request to have your financial aid package reviewed and increased due to changes beyond your family’s control that have occurred since your FAFSA was processed or that were not reflected in your FAFSA.

Hardships and changes in circumstances eligible for an appeal will vary from school to school, but most schools will include:

• Significant or catastrophic loss of family income or benefits for either you or your parents (if you’re still a dependent they can claim on their taxes) due to loss of job, disability, retirement, or homelessness. Most financial aid offices are restricting appeals to families in which unemployment or underemployment has lasted 8 weeks or longer.
• You or your parent becomes widowed, separated, or divorced after the FAFSA was filed
• You or your parent have necessary medical and/or dental expenses that were paid but not covered by insurance and not likely to be covered by insurance in the future
• Personal bankruptcy
• Significant and unexpected disability or medical cost
• Childcare expenses required in order for you to attend classes
• Additional costs for required research, internship, or field study
• Unexpected transportation costs
• Increase in on-campus boarding costs when increase is not the result of a choice on student’s part
• Other special circumstances outside of your control (for example, unusual expenses related to special education needs of a brother or sister)

There are also some common appeal circumstances that schools will not consider:

• Personal choice decisions: you’ve run out of money due to credit card expenses, property purchased for income, high mortgage payments, or a family vacation, wedding, or new car
• Your income or your parents’ income level is already too high to have any effect on the appeal outcome

How to file a financial aid appeal:

• Confirm that your FAFSA for the current year is filed and processed
• Call your financial aid office and tell them why you want to appeal for more financial aid. Ask for any special forms required for filing an appeal and any details you should know about the process (does your financial aid office have a web-page listing all the appeal instructions?)
• Write a letter explaining your circumstances. Be detailed, not vague.
• Submit the letter with the appeal form and financial documentation your financial aid administrator requires. This could include the state confirmation of unemployment and/or termination of benefits, copies of medical bills that weren’t covered by insurance, a federal tax return, or the change in income you’re anticipating for the year ahead based on the change in your financial circumstances
• Ask when you should expect to hear back from them so you don’t bug them with phone calls before the time you could expect an answer

Federal Aid First. . . and Last

It may be that your appeal for more financial aid will be accepted only if your school can get more federal funding for you. Unfortunately, if your FAFSA determined that your Expected Family Contribution (EFC) was zero (0), then you’re already eligible for the maximum amount for federal student aid you can get. If the school or state cannot fill the gap, your appeal for more financial aid may be denied.

By the way, if you haven’t yet filed a FAFSA (Free Application for Federal Student Aid) for the coming school year, you still have plenty of time. Apply online, it’s fastest and most efficient.

One thing that has never been said about the federal financial aid system is that understanding it is a piece of cake. If you have ever had to fill out a FAFSA, you already know that your first college challenge is figuring out how to get money for your tuition from the feds. If this is you, you’ll be glad to hear that it may be possible to change big bureaucracy after all.

On July 21st, the U.S. House of Representatives will discuss the new Student Aid and Fiscal Responsibility Act, which the Hon. George Miller (D-CA), Chairman of the House Committee on Education & Labor, introduced last week. The SAFRA, as it’s already being referred to, contains sweeping changes to the ways federal money for education is allocated and managed. Theoretically, some of the changes would free up funds to pay for all the others, which means that the reorganization would cost us taxpayers nothing.

The new legislation also reemphasizes the Education Department’s plan to more closely align work and higher education.

How does the SAFRA help you find money for your college tuition? There are several changes to the student aid system that will make things easier for students at both the start and the end of the financial aid timeline. SAFRA:

• Boosts the Pell Grant maximum to $5,550 in 2010 and $6,900 by 2019. (About 6 million students received a Pell Grant in 2007-2008.) Starting in 2010, the scholarship will be linked to match rising costs-of-living by indexing it to the Consumer Price Index + 1%.

• Lowers the interest rates on need-based (subsidized) Stafford loans, the primary federal student loan, and changes the interest rate from fixed to variable in 2012, to keep the rate low. (Nationwide, about 5.5 million students take out Stafford loans each year.)

• Increases access to the Perkins Loan program by expanding it to every U.S. college campus. (Last year approximately 495,000 students received a Perkins Loan.)

• Follows through on simplifying the FAFSA, cutting down the number of questions on the form by allowing students and families to use their tax return information. (In 2003-2004, over 1.5 million college students who likely were eligible to receive Pell Grants didn’t apply for financial aid because they found the FAFSA form too confusing.)

• Converts all new federal student loans to the Direct Loan program. Beginning July 1, 2010, all new federal student loans will be originated through the Direct Loan program, instead of through lenders subsidized by taxpayers in the federally-guaranteed FFEL student loan program. Unlike the lender-based program, the Direct Loan program is entirely insulated from market swings and can therefore guarantee students access to low-cost federal college loans, in any economy. Having the feds provide the money for and set interest rates on federal student loans also removes any potential for conflicts of interest between lenders and colleges.

• Uses a competitive bidding process to select private loan servicers based on how well they serve borrowers, educate them financially, and prevent loan defaults. The Education Department wants to acknowledge private lenders for their customer service effort and create a new public-private partnership that would sustain it.

• Invests $1.2 billion in Historically Black Colleges and Universities and Minority-Serving Institutions to provide students with the support they need to stay in school and graduate, and invests $3 billion to increase college access and completion support programs for students. There’s also more funding for the College Access Challenge Grant program, and for state and college programs to increase financial literacy and student retention.

In short, SAFRA makes much more federal money for tuition available, makes it easier to apply for, insulates it a little better from roller-coastery financial markets, and makes repaying it a little less painful (if the legislation survives the House and Senate mostly intact, that is). What’s not to like?

The United States Student Association, a longstanding advocate for college students, gave Mr. Miller’s bill an A+: Students Thrilled with Student Aid Reform Bill. In a previous statement about the substantial budget investments targeted for higher education, USSA President Carmen Berkley commented, “Funding for these programs is important not only for the financial health of the country, but because everyone has the right to an affordable college education.” (Don’t miss USSA’s press release today, which summarizes data from a new report on the Direct Loan program.)

Stay tuned to EducationGrant.com as we follow the coming House and Senate debates about the SAFRA. Sometimes criticism and debate uncover genuine problems with a plan; other times, they are just a lot of posturing and hot air. There is good intent in Mr. Miller’s bill, and so far, the Congressional Budget Office says it will pay for itself. If it becomes law, the process of getting money for tuition from the feds may become a little more user-friendly.

Does the cloud of the current recession have a silver lining? Well, maybe it’s — at last! — a hard look at need-based financial aid for working adults and a new spotlight on the importance of making higher education accessible to nontraditional students.

The flood of job losses has brought career-oriented higher education into the public arena, where the need for effective job training programs and need-based financial aid for working adults have come together in a highly visible way. When it comes to higher education, job training, and financial aid, the U.S. is at a 3-way crossroad.

Fortunately, the Department of Education seems to be on it. The Chronicle of Higher Education reported today that the new undersecretary of education, Martha Kanter, met with state higher education leaders and agreed with them that now is the time to coordinate education and career efforts more effectively.

There are actually two parts to this discussion. One part is education philosophy: looking at the alignment of higher education with job training and preparation for being in the workforce. In the old days, people were apprenticed in a trade, gaining both skill expertise and knowledge of the subject. At some point, a college education for its own sake, whether or not it included training for a specific job, diverged from apprenticeship education. A college education is indeed a valuable and worthy experience, but the current economy is highlighting a re-emergence of career-focused education as a postsecondary alternative.

The second part is public policy: the need for a financial system that can adequately support working adults who go back to school. From the Chronicle article:

“The question of how state and federal governments should help working students came up at a conference session about rethinking student aid. Sandy Baum, senior policy analyst for the College Board, said that one needed public-policy conversation was how to best allocate financial aid to adult students. The central question for many students is not how they are going to be able to pay tuition itself—the focus of much current student-aid policy—but how they can afford to pay basic living expenses while classes and study are preventing them from working as many hours as they could, Ms. Baum said.”

This is the real issue in providing need-based financial aid for adults returning to school: Are the financial needs of working adults, also referred to as nontraditional students, different from those of the traditional 18-year-old dependent going to a 4-year university directly from high school? And if so, how do we enhance the need-based financial aid system to accommodate older, nontraditional students already in the workforce?

There are primarily two kinds of financial aid: “need-based” and “merit-based.” A merit-based scholarship or education grant is typically tied to a particular accomplishment or set of accomplishments, such as a high grade point average, community service, and other measures of academic and personal success the sponsor has established as eligible criteria for its financial aid reward.

Need-based financial aid is assessed according to the student’s expected income and ability to pay for education. Most federal education grants for students are need-based, most federal student loans are limited to those under a certain income level, and many private scholarships are adding a need-based qualification to their merit-based awards.

Nevertheless, for working adults, attaining need-based financial aid is not as straightforward as it sounds. For one thing, working a lot of hours even while in school can raise a nontraditional student’s income level to the point where he disqualifies for a federal Pell Grant. The same problem may rule out the possibility of federal Perkins loans and subsidized Stafford loans (although even unsubsidized Stafford loans are still a better bet than private loans). So the current federal financial aid system penalizes hard-working adult students rather than supporting them.

For another, the process of applying for federal financial aid is so complicated, confusing, and redundant that many potential students don’t even try, forfeiting what need-based financial aid they may actually qualify for or taking out expensive private student loans instead. And maybe there’s a need for different categories of independent student where the FAFSA is concerned: a 24-year-old with a cat but no family has different financial aid needs from a single mom with custody of 2 small kids.

The recession, the credit collapse, and the job losses we’ve endured have been a real blow to countless American families. But take hope: one small silver lining has been President Obama’s earnest desire to make college accessible to anyone who wants higher education, and a renewed look at both federal financial aid and the value of community colleges in achieving a worthwhile degree. Just in the last 6 months, we’ve already seen much more progress made toward simplifying the FAFSA, with strong requests to align it with IRS tax processing, and millions of dollars have gone to the states for fast-turnaround career training programs. In the months ahead, keep a lookout for more new initiatives to overhaul need-based financial aid for working adults.