Recession raises concerns over availability of student loans
Melody Perry
Issue date: 5/1/08 Section: Campus News
State loan programs run by nonprofit lending groups or state agencies have been known for offering loans with better benefits than lenders for profit, but some have stopped offering federal loans. Federal loans are a major source of college money to thousands. In Massachusetts about 15,000 students that previously qualified for the low-interest Stafford Plus loans from Massachusetts Education Finance Authority (MEFA) will not be receiving money as of July 1 as a result of MEFA's forced suspension of the loan program.
"People should not be worried about their ability to get a loan to pay for college. They should be aware that the lender they used last year might not be making loans this coming year, so they may need to choose a new lender… but they are not going to see the rug pulled out from under them," Robert Shireman, executive director of the Project on Student Debt, a group that advocates affordable loans, said.
Lenders generally borrow money in order to lend it out; however, with the credit crunch lenders have not been borrowing as much money. Also, part of the problem has been mortgage payments. Homeowners have been missing payments causing lenders billions of dollars in losses. In return, lenders are fearful to lend much out.
"In this credit crunch, companies still aren't lending," said Stephen Cooke, director of credit research at SMH Capital Advisors, Inc. "It will take a while for credit to loosen up and for low rates to flow through and help the economy."
"Even if some lenders continue to drop out of the federal program, the impact on individual students is likely to be minimal," said Lauren Asher, Vice President of the Project on Student Debt.
"A large majority of loans are made through a small proportion of private lenders," Asher said "Movement further down the list is not going to affect a large number of borrowers.
"Students should not be panicked about being able to get their federal student loans. That's the bottom line," she added.
"People should not be worried about their ability to get a loan to pay for college. They should be aware that the lender they used last year might not be making loans this coming year, so they may need to choose a new lender… but they are not going to see the rug pulled out from under them," Robert Shireman, executive director of the Project on Student Debt, a group that advocates affordable loans, said.
Lenders generally borrow money in order to lend it out; however, with the credit crunch lenders have not been borrowing as much money. Also, part of the problem has been mortgage payments. Homeowners have been missing payments causing lenders billions of dollars in losses. In return, lenders are fearful to lend much out.
"In this credit crunch, companies still aren't lending," said Stephen Cooke, director of credit research at SMH Capital Advisors, Inc. "It will take a while for credit to loosen up and for low rates to flow through and help the economy."
"Even if some lenders continue to drop out of the federal program, the impact on individual students is likely to be minimal," said Lauren Asher, Vice President of the Project on Student Debt.
"A large majority of loans are made through a small proportion of private lenders," Asher said "Movement further down the list is not going to affect a large number of borrowers.
"Students should not be panicked about being able to get their federal student loans. That's the bottom line," she added.
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