Student loan crunch

27 March, 2008

THE tightening credit market due to the subprime lending mess is conspiring against financially strapped college students and their parents to throw up an even higher hurdle to pursuing higher education in America..

With college costs hitting the stratosphere, students are increasingly forced to mortgage their futures to finance a college degree. Moreover, their predicament is about to get worse.

Like other sectors of the economy reacting to the turmoil in the credit markets, student loan providers are scaling back their operations or increasing the cost of loans. It's a bit of a crunch, says Yvonne Hubbard, head of student financial services at the University of Virginia. "The money will be there," she predicts. "It's just going to be more expensive."

A lot more expensive.

Even students seeking federally guaranteed loans because they offer fixed, below-market rates might have to pay higher borrowing costs. And because college costs are rising faster than the maximum loan amount allowed under the federal program, many students have to search for other sources, like private loans, to finance their education. Unfortunately, many of the more costly private loans have variable rates, which are projected to jump this year.

According to the nonprofit College Board, the share of private education loans has quadrupled over the past decade, to 24 percent last year. And finding a good deal in student loans these days has become an education in itself.

It shouldn't be so financially difficult for one to go to college in the United States or to study for advanced training to better compete in the global market, but it is. The latest blow to students and families struggling to afford college is the effect the current credit crisis is having on the cost and availability of college loans.

Some lenders, increasingly unable to find investors to securitize their student loans, have stopped making them altogether. Others are tightening student and family requirements to qualify for a loan.

Should many student loan firms fail in the coming months, members of Congress want assurance from the Bush Administration that the federal program that provides loans directly to colleges will be able to handle increased demand.

This means a scary time for students and their parents, who mostly foot the bill. Too often, the choice is no college or taking on enormous debt that may well dictate a change in career plans after graduation just to meet the monthly loan payments.

The imposition of such towering financial burdens could prove ruinous for the nation in the long run if it discourages generations of young people from pursuing higher education. The next Congress and President must find realistic solutions.

Source:-http://toledoblade.com/apps/pbcs.dll/article?AID=/20080324/OPINION02/803240301