Big changes have come to the higher education loan market as a result of the Wall Street melt down. Long before the pyrotechnics of failing lending institutions and government bailouts, many students have felt the credit crunch as they returned to school to find that they had to scramble to find new lenders willing to service their student loans.
CampusDoor, a student lender that was backed by the failed Lehman Brothers, had to inform students that the private loans they had been approved for would not be funded. According to Sallie Mae, 70 private lenders have left the student loan market in 2008. Some of these lenders have suspended business in the higher education loan market and others have suspended loan programs with colleges that they consider to be a high risk, however, many lenders have gone out of business all together.
Here’s what you need to know to get the money you need to complete your educational goals:
Help is on the way
* The U.S. Senate passed the Ensuring Continued Access to Student Loans Act that will allow the Secretary of Education to buy loans from private institutions. This move should increase the liquidity of these lenders, allowing them to loan more money to students.
* The Ensuring Continued Access to Student Loans Act also changes the terms of repayment for PLUS loans. Under the current terms, parents must begin repayment 60 days after the disbursement of funds. Going forward, parents will have the option of deferring repayment for up to 6 months after students leave school.
* The new act also increases the loan limits on fixed rate, no credit check Stafford Loans. This move was aimed at helping students save money by foregoing more expensive private student loans.
Creditworthiness is very important
* Guard your credit! As lenders work to shore up their bottom lines, credit worthiness is paramount. Alternative loans, which are credit based, may be an option you need to consider with the rising cost of tuition. If you don’t have good credit, you may have to find a co-signer.
Complete the FAFSA to qualify for the all the financial aid available to you
* Higher education loan eligibility is determined based upon the information contained in the FAFSA or Free Application for Federal Student Aid.
* Completing the FAFSA will help to determine your eligibility for grants scholarships and work-study as well as student loans. Broadening your financial options will make more funds available for education expenses.
* Make sure to contact a financial aid adviser at the college or career school that you plan to attend. Schools are required to inform you of their financial aid procedures and deadlines. They can also inform you of other forms of financial aid, such as state programs of school based scholarships.
Remember that the unprecedented financial crisis affecting the higher education loan market is constantly fluctuating. The best way to make sure that you have the funds that you need is to be informed of the changes and how they affect your financial goals.
Student Loans 