News Briefs
Credit crisis hits student loans
Mar 13, 2008 12:18 PM
Many college students will see higher costs for loans this spring, while others at community and for-profit colleges will be turned away as risky investments, university finance directors and lenders say.
Lenders are scaling back their activities because of turmoil in the credit markets, initially caused by the subprime-mortgage meltdown last year, and cuts in federal subsidies, firms said. Others have moved out of the business. Already, the Pennsylvania Higher Education Assistance Agency announced that it has temporarily stopped making federally guaranteed loans. The College Loan Corp., the nation’s eighth-largest student lender, also is leaving the federal loan program.
Sallie Mae is tightening credit requirements for borrowers and pulling out of offering loans to students attending some for-profit career schools and community colleges.
Colleges are responding by themselves becoming direct lenders, and some Congress members asked the Department of Education to gear up its “lender of last resort” program, which provides a safety net should many student loan firms fail.
Student loan troubles are being felt unevenly. Those attending institutions with high graduation rates and low default rates among their alumni may still be able to get low-cost private loans. Students at lower-ranked schools with higher defaults among graduates are likely to get hit with stiffer fees and rates, especially those who will be paying off private loans that came with variable rates.
School debt also determines what fields graduates choose. “People who want to go into humanitarian work will have to wait until 10 to 15 years down the road until after you have paid off your loans. ... I might have to sell my soul to an oil company,” one student said.
Washington Post, March 3
