Student Loan Snapshot: Who Wins, Who Loses?

College administrators, students, and parents have expressed concern over the last few months that students may not be able to readily get the funds they need for college this fall in light of the $21 billion cut in government subsidies to federal lenders and the effects of the sub-prime mortgage crisis causing over 103 lenders to leave the Federal Family Education Loan Program.

In response to these concerns, Congress passed the Ensuring Continued Access to Student Loans Act last month to help stem the exit of lenders from the FFEL program and increase access to student loans.

While the extent of the act’s effectiveness in increasing the availability of student loans remains to be seen, many students may have a more difficult time getting the money they need for school this fall according to an article in The Washington Post (“Loan Programs Will Leave Some Students Behind,” May 25, 2008).

• Community college students and those students attending other two-year institutions, may face the most challenges getting student loans now that some of the largest student loan lenders like JPMorgan Chase and Citibank no longer offer loans to these types of schools.



• Independent students with low or moderate credit scores and no co-signer will have a harder time securing private student loans, as lenders now enforce more stringent credit requirements and demand credit scores of 650 or higher to qualify.



• Dependent students, especially those returning to school, that have decent credit will likely be able to find enough federal financial aid. Chances are, though, they’ll pay higher fees than the previous year and may have to find new lenders to replace those that have withdrawn from the FFEL program.



• Parent borrowers with minor financial delinquencies will still be able to qualify for credit- based PLUS loans. However, those with "adverse credit histories," or those who have a foreclosure or bankruptcy on their credit history, may have to wait up to five years before they can borrow again.

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