FAP696: Understanding What an Investment Is
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Student Financial Aid News
+ Inside Higher Ed: Haverford College announced Wednesday that it is moving to replace all loans in students’ aid packages with grants. At the same time, the college is creating a new endowment fund and asking (but not requiring) students who benefit from the change to pledge gifts to assure that future generations of students have the same opportunity to avoid loans. Tufts University on Wednesday announced that it would replace loans with grants for students from families with incomes up to $40,000.
+ Chronicle: The U.S. House of Representatives approved this afternoon a $555-billion budget package for 2008 that includes less-generous amounts for academic research and student aid than previous bills favored by Democratic leaders in Congress had contained. The sprawling measure, which the Senate passed on Tuesday, now heads to President Bush, who is expected to sign it.
+ Passage of the bill follows a month of tense negotiations between Congress and the president, who refused to sign any bill that exceeded his budget request. Ultimately, lawmakers were forced to shave millions of dollars from their proposed appropriations for domestic programs. Among the cuts: nearly $1-billion from the budget for the National Institutes of Health, which is the largest single source of funds for university research.
+ Under the bill, HR 2764, the maximum Pell grant, which is now $4,310, would be trimmed to $4,241, although the actual award would rise to $4,731 once funds from a student-aid bill enacted in September are included. The earlier measure provided enough money for a $490 increase above the maximum in the bill approved today. The new omnibus appropriations bill would finance every federal agency except the Pentagon for the 2008 fiscal year, which began October 1.
+ Funds for the TRIO and Gear Up programs, which prepare low-income students for college, would be frozen at 2007 levels, while spending would drop on several other student-aid programs, including Supplemental Educational Opportunity Grants, Perkins Loans, and the Leveraging Education Assistance Program, or LEAP.
+ IndyStar: Last Friday — the day he was renamed chief executive of Sallie Mae — Lord had to sell a whopping $34.6 million worth of his personal stock in the student loan giant to cover an unspecified loan. Then on Wednesday, shares plummeted 21 percent in value after Lord told analysts on a conference call the beleaguered company would consider reducing its dividend payment. To top it off, Lord wrapped up his rambling and, at times, tense conference call by dropping a four-letter bomb.
+ When an analyst asked how much equity it would take to improve Sallie Mae’s credit rating, Lord said, “You’re talking to the wrong guy. I don’t know that answer.” Lord told analysts he would answer questions in full at a company meeting in January. The call ended with Lord saying, “There’s no more questions, let’s get the (expletive) out of here.”
Scholarship Update
+ In an effort to help further the advancement of the geospatial tradecraft, the United States Geospatial Intelligence Foundation (USGIF) is dedicated to assist promising students interested in the geospatial sciences with scholarship awards. USGIF hopes to inspire students who are interested in all that GEOINT has to offer to invest their futures in this incredibly exciting and relevant field of study.
+ Last year, the Foundation awarded a total of 12 scholarships to recipients: two Ph.D. candidates, four master’s candidates, three undergraduates and three high school seniors. High school winners received $2,000 scholarships and the other winners received $5,000 scholarships.
+ June 15 deadline
+ Details at our free college scholarship search site
Economics 101
+ What is an investment?
+ Stock definition: laying out money or capital in an enterprise with the expectation of profit
+ Short version: it’s a bet
+ Different than savings
+ Savings has the intent of keeping your money safe, hence the name
+ An investment is a bet, just like Vegas, in which you want to make more money than you put in
+ The likelihood that you’ll do so is called risk
+ Risk is not the same as uncertainty - uncertainty means you don’t know what the odds are, whereas risk you do
+ Investing has levels of risk from small to outrageous
+ Important: with insured savings, FDIC/NCUA, up to a certain dollar amount, your initial money is guaranteed
+ Investments are NEVER guaranteed and you CAN lose it ALL
+ Why would you invest? To make money. Investing is one of the most powerful forms of passive income, where your money earns money
+ The likelihood of your money making money is the rate of return, or return on investment, and the more risk you take, the higher the potential return, because you’re in effect giving a loan to someone else
+ When you give a loan to someone in the form of an investment, you are paid based on the risk you take
+ There are lots of different kinds of investments - stocks, bonds, trusts, you name it. See a qualified financial planner to determine what blend of these tools is appropriate for you.
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Reminders
+ Financial Aid Podcast Show Notes at FinancialAidPodcast.com.
+ Discuss this episode at the Financial Aid Forum!
+ FAFSA form tutorials and free help at FAFSAonline.com
+ Stafford federal student loans at StaffordLoan.com
+ Student loan consolidation at StudentLoanConsolidator.com
+ Private student loans available at any time - visit AlternativeStudentLoan.com
+ The Financial Aid Podcast is a publication of the Student Loan Network.
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