Student loans bring concern to campus as U.S. crisis continues making an impact on future plans
By Terrance McGee
As Congress scrambles to stop the flow of red ink from America’s financial institutions, the economy continues to suffer, and students, parents and financial aid officers keep a close eye on the student loan industry.
The recession, largely attributed to an unprecedented number of sub-prime loans, has made money tight at banks and lending institutions across the country. As a result, standards to approve loans have become stricter as interest rates applied to those approved loans have seen major increases.
Kay Pearson, the loan administrator for financial aid, said there have been many changes in the student loan industry and market within the last several years. One good thing happened as far as the interest rate is concerned for subsidized Stafford loan.
Previously, a fixed rate of 6.8% was applied to loans disbursed July 1, 2006 – June 30, 2008; however, since July 1, 2008, the interest rate for subsidized Stafford loan has decreased to 6%. The interest rate for all subsidized Stafford loans will continue to decrease gradually over the next four years. By July 1, 2011, subsidized Stafford loans will have a fixed interest rate of 3.4%.
“This is good news for the class that came in as freshmen this year,” Pearson said. “While you are in school, within your grace period and during your repayment, your interest rate will be a little bit lower than what it was.”
One thing that causes concern for most students is the availability of funds for loans.
“Even though we have fewer lenders on our list now than in the past, the funds are still there,” Pearson said. “Because we are a private school, our students have a good repayment history, and our school as a whole has a good default rate. Our students should not have to worry about being able to obtain a Stafford loan.”
With that said, there have been some problems if the student tries to borrow an alternative or private loan. On a regular Stafford student loan, there is no credit check done on the student.
“Any student can get a Stafford loan, but when it comes to the private loans, a credit check is performed on the student’s credit history,” Pearson said.
Most students are not yet credit worthy, meaning they have not had enough credit history to obtain a loan in their own name, she said. In that case, they need a co-signer.
Due to the financial plunge, most lenders have increased their credit score requirements. This can make it difficult for students to obtain a co-signer, and can also make it difficult for parents who are attempting to obtain a parent loan.
The financial aid loan administrator said students can borrow from any lender and are not limited to the lenders that the school normally conducts business with.
“As our students continue to borrow responsibly and consistently pay back their loans, I don’t think that the university will have any problems in the future. We have a really good record,” Pearson said.
Michael Welch, a freshman mathematics major said, “I feel fortunate to have received a student loan for college, but at the same time, I can’t be certain whether or not that was a good thing during times like this.”
Welch remembers that hard work in college can result in an increase in the amount of debt owed.
“I feel like the interest rate will soon be off the Richter Scale. After all, just when you think you are doing something good, something or someone always seems to remind you that nothing in life is for free or easy.”
Andrew Benjamin, a junior majoring in chemistry, said that times are becoming extremely difficult. He is a single parent with two sons, ages 12 and 14 and said he can only imagine what is soon to come because he thinks about their education more than his own as a student.
Benjamin said that at no time soon does he foresee students being able to easily find a loan provider.
“In fact, it is going to become much more difficult to receive a loan and might even affect schools’ retention and recruitment goal.”
The amount of student funds that can be borrowed is set by the federal government.
“If obtaining a loan is necessary,” Pearson said, “I suggest students borrow only the amount that they need to pay their direct expenses. After all, students need to realize how much money they are taking out and what their obligations are to repay it.”