Student Loans Drying Up

[cashlenders]

Every year, students apply for financial aid to help pay for college. Loans usually make up a good chunk of the package. For those of you who are waiting for your packages for the 2008-2009 school year: expect the unexpected.

According to an article in the Los Angeles Times, the federal government is planning to purchase loans from student lenders to help them stay afloat in the market. What does this mean for college students? Less aid money.

Some of the largest lenders have been suffering due to the economic recession and a cut in federal subsidies. Over 80 lenders have already pulled out of the market in the last few months. Sallie Mae, the nation’s largest educational lender, according to U.S. News and World Report, will make it tougher for students to borrow money. The company has already announced that it will no longer do business with students at trade schools with low graduation rates.

Students at Quinnipiac University may have to pick a different lender if their current one is pulling out of the market. An email from the Senior Director of Financial Aid states: “Recent legislative changes and difficult market conditions have made it difficult for many lenders. Some have suspended participation in student loan programs, some have had to sell their loans which will likely result in a split-servicing arrangement and most others have had to cut borrower benefits, adjust interest rates/fees or realign their processes…” It goes on to say: “If you are being asked to select another lender, it is because we have received notice from your bank that they no longer participate in the federal loan programs or will no longer honor the master promissory note that you have signed in previous years.”

That’s great. As if applying for financial wasn’t frustrating enough, we are now being threatened with little to no aid and to pick another lender that may or may not be reliable.

Public schools like Rutgers, UNC – Chapel Hill, UC Davis, Santa Barbara and Berkeley, and UGA may suffer the most since their pool of money is even more limited than private school’s.

This clearly sucks. This is all going to determine how much aid we will get, if we get any at all. All the more reason to look for a job this summer.