October 27, 2008
What’s The Scoop On Student Loans And The Credit Crisis?
There was much play in the mainstream media about the harsh impact of financing an education with loans during the present economic crisis. However, some surveys suggest that even though private lenders are dropping out of funding student loans at a higher rate, that most people were able to find some other source of funding to replace it, yet more students were impacted by the sour turn of events in the student loan market.
What the Survey Says
A survey done by the National Association of Independent Colleges and Universities surveyed 500 colleges and found that 56% of them noted that they had at 10 or more students who had failed to obtain private financing for their student loan needs. On top of that 49 colleges noted that within each college they had at least 50 students who couldn’t get a loan of any kind, not just private lending, because they needed a co-signer with good credit for the loan.
What Does It Mean?
So, while the majority of students did manage to obtain some financing, more and more students are being affected by the drop in private lending. In addition, more families are trying to find any source of financial aide due to their own financial hardships. To make up the gap, they have turned to various other forms of financing:
- Federal Guaranteed Loan Programs – More families may actually qualify now if they are having financial hardships. So, many more applying in the hopes of getting funding that is still available for student loans in this tight market.
- Tuition Repayment Plans – Many colleges and universities offer tuition repayment plans that can help middle income families to stagger their payments. While it doesn’t provide a deferral of the entire amount, like student loans, it can be more affordable than having to pay your tuition all at once.
- Federal PLUS loans – These loans are typically co-signed by the parents who are the ones that take out the loan for the student. So, if your parents are willing to take out debt on your behalf and pay it back, in case you default, that is still an option for many families.
Aside from these loan programs, many students are choosing to take a leave of absence or reducing the number of hours they take in a semester to be able to continue to finance their education with their own private resources.
