In Declining Economy, Student Loans May Be More Difficult to Secure

Student Loan Girl — Tue, 04 Nov 2008 22:27:00 GMT

Students are finding it increasingly challenging to find the money they need to pay for college as the credit crisis continues to hamper student loan providers’ ability to fund new loans, reports MustangDaily.net, the college newspaper of California Polytechnic State University (“Student Loans Harder to Come By in Uncertain Economy,” Oct. 30, 2008).

In 2007 alone, Cal Poly lost almost 25 percent of its student lenders, leaving many families scrambling to find a new student loan provider.

“Last year (Cal Poly students) borrowed through 76 different lenders,” said Lois Kelly, the school’s director of financial aid. “Nineteen of those lenders are now declining to make any student loans. That is a substantial number of lenders no longer in the market.”

With fewer lenders serving the school, Kelly says students will have a harder time finding a student loan provider that will “be there for them” until they graduate.

To date, more than 100 lenders have stopped issuing federal student loans and 37 lenders have stopped offering private student loans due to a reduction in federal subsidies and a lack of funding to make new loans.

Lending Problem Affecting Students Nationwide

A recent study conducted by the National Association of Independent Colleges and Universities revealed that out of the 500 institutions surveyed, nearly 50 percent reported that some of their students were dropping out of school or switching to part-time status because students couldn’t get college loans and couldn’t afford tuition costs without them.

“We lost a large portion of our freshman class who were unable to secure a private loan and whose parents were either denied a PLUS loan or could not take one,” said an unidentified NAICU survey respondent.

Of the students who were denied a student loan and chose to remain in school, many turned to credit cards, which are generally more costly, to help pay their tuition expenses.

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Student Loan Crunch Affected Some Private Schools, But Crisis Largely Avoided

Student Loan Girl — Tue, 28 Oct 2008 20:59:00 GMT

The student loan crunch that began this past spring failed to become the widespread crisis that experts predicted, according to the results of a survey by the National Association of Independent Colleges and Universities. Still, the NAICU reports, some of the private colleges surveyed have had to scramble to help their students get the loans they need to pay for school (“Student-Loan Crunch Sets Back Some Private Colleges, but Most Manage,” The Chronicle of Higher Education, Oct. 22, 2008).

More than 500 NAICU member institutions responded to the survey, including 450 private colleges and universities that participate in the Federal Family Education Loan Program, the federal student loan program that relies on private, third-party lenders to provide the majority of federally backed loans to students. Of those schools, 85 percent found that their students were dropped by at least one private lender, and 27 percent of the schools said that their students had struggled to find a replacement lender.

Schools reported that their students who weren’t able to get a private student loan often had to take time off from school, drop down to part-time status, work additional hours, or use a credit card to make up the difference in their college expenses.

Three-quarters of the colleges surveyed saw an increase in demand for student aid, but 67 percent reported no negative impact on their enrollment. This is “a good sign,” said David Warren, president of NAICU, even though he speculates that many families may had not yet felt the full impact of the downturn when they were surveyed on Sept. 10., only days prior to the Lehman Brothers bankruptcy filing.

“On the one hand, we avoided anything we’d call a crisis,” Warren said. On the other, we see some clear signals of what may be in store for families right on the edge.”

Only 18 percent of respondents said they had fewer returning students than anticipated, while 19 percent reported having a smaller freshmen class than expected, which came as a surprise to Sarah Flanagan, NAICU’s vice president for government relations and policy. “I thought our sector was going to be OK.”

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Student Loan Blog : NAICU

In Declining Economy, Student Loans May Be More Difficult to Secure

Student Loan Crunch Affected Some Private Schools, But Crisis Largely Avoided