NEW YORK, May 8, 2008
Student Loan Landscape Changing
For The Better In Some Ways, But Not Others, Says Ray Martin, Who Offers Guidance
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Play CBS Video Video The Soaring Costs Of College College costs have soared in recent years, leaving many students up to their ears in debt. Financial adviser Ray Martin offers tips for how to afford a college education in our tenuous economy.
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Ray Martin (CBS/The Early Show)
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E-MAIL US Write To Ray Martin Benefit from Ray's financial wisdom! Seek his help. Ask him questions. E-mail him!
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Special Report Ray Martin's Money Tips The Early Show money maven offers advice to keep your financial house in order.
Students Struggle to Get Loans for College
Homeowners aren’t the only ones caught in the crosshairs of the credit crunch. More students heading to college this fall may have a difficult time pulling together the money they will need to pay for their college costs, since fewer lenders are willing to make student loans. And with more unemployed workers looking to go back to school, the competition for loans is likely to intensify.
Last month, the student loan crisis hit full-tilt, as student loan giant Sallie Mae, Citigroup, Bank of America and about 50 other lenders had stopped offering some forms of private student loans. The global credit crisis also increased the lenders' financial costs above the rates the federal government allows them to charge on federally guaranteed loans, so such loans could only be made at a loss. Also, once-burned-twice-shy investors are no longer offering money to buy loans from lenders, causing some to cease doing business altogether.
In a hurried attempt to avert a looming shortage in available student loans, Congress passed a student loan bill last week designed to ensure that students will continue to be able to get federally-backed student loans. President Bush has since signed it into law. According to the Education Department, about 7 million students will need more than $68 billion in federal loans for education this coming school year. Under the plan, the Education Department would direct federal funds to state-level guaranty agencies, and the funds would then be disbursed directly to colleges and students. With summer typically being the peak season for student borrowing, the hope is that these funds will be available beginning June 1.
So, there will be a few new twists for students and parents to be aware of when applying for federally-backed loans. Also, there will be new, higher limits on amounts students can borrow under federal education loan programs. Typically these limits are $3,500 for freshman year, $4,500 for sophomore year and $5,500 a year after that. According to just-reported details, under the new student loan bill, these annual limits would be increased by $2,000.
But, as college costs have increased at a faster rate, more students have turned to private loans to fund their education and, this year, getting these private loans will be more challenging and costly.
Tips for Getting College Loans and Financial Aid
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Add a Comment See all 13 Comments
- Well, let''s try to get some facts in play here:
Yes, a lot of lenders have left the loan programs or are unable to offer the same kinds of loans as they could before the financial markets got so bad. Yet, a student who would have qualified for a federal student loan before the credit crunch will still be able to get one afterward. So, to the lady who is worried about her child being able to get funds to attend school, your child should still apply for financial aid.
Second, to the person who is unable to find full-time employment after taking out $60,000 in loans: Under an income-contingent loan repayment program, you may be able to make very low monthly payments--maybe even less than the interest accruing each month--based upon your income and family size. If your present economic situation continues, & persists for 25 years, the remainder of the loan principal and interest will be forgiven. - Reply to this comment
- It is a viscous cycle. The U.S. is paying hundreds of billions of dollars to fight a war and kill people. Whether you like or dislike the war, the spending of the money is the real issue. Schools need more money to pay their bills. The war spending is drying up cash for education. Students with large debts are passive and not willing to rock the political boat for change. The rich are getting very rich, and the rest of use are becoming the peasants that we are trying to avoid. It is a viscous cycle with no way out.
- Reply to this comment
- I graduated as a working adult in 2005 with a student loan debt of nearly 60K (now nearly 70k as I''ve had to place the loans in forebearance) and now I can''t find a job that pays me enough income to support my family, live and pay the nearly $500 per month back to the student loans.
Repayment on student loans should be based on what kind of income you are making, not just a flat rate. I will have no alternative but to let the loans go into default as I don''t have the cash to repay them.
So was college worth my investment - NOT EVEN CLOSE! If I could go back and do it over there is NO WAY I would go to college, it''s one of the BIGGEST scams out there! - Reply to this comment
- "Get a Co-Signer: If you need to turn to private lenders for loans, then try to get a co-signer on the loan"
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Any idiot that cosigns a student loan will need a bailout down the road.
Student loans teach debt financing. Maybe this is the class of the current American Dream so everyone comes out of college programmed that debt is the way to do everything.
A lot of good education comes out of community colleges. And I don''t remember any being labeled as a party school... - Reply to this comment
- Our priority should not be for all Americans of the future generation but to the profits of the current Republican generation. Let''s screw the students and their parents too, that is the American way!
- Reply to this comment
- The government should not continue to subsidize every single sector of our economy that gets into financial trouble. By doing so, they artificially keep the price of goods and services too high. If everyone had to begin to live within their means, to pay for college through part time jobs and "as they go" (if they can''t afford tuition), then the cost of tuition, books, and board at colleges would come down to reasonable and affordable levels. Tuition is one area where the inflation rate has definitely out-paced other areas of inflation by large margins.
- Reply to this comment
- this whole process is a scam just like anything the banks figure is a money making venture. they have no scruples of morals. everyone is just another customer.
and colleges are treating students the same way.
why does everything--education, health care,etc--have to be treated like a commodity? no wonder europe is on the rise and america is in decline.
we''ve gone in one generation from being the greatest creditor nation to the greatest debtor nation. - Reply to this comment
- my parrents paid for college, it was no big deal to them.
- Reply to this comment
- My husbands and my credit has gone in the drain over the last year, because we both worked in residential construction, I have changed careers and am currently working at a $4.00 per hour pay cut, and he is still working just part time and not very regular. Our son is trying to enroll in a 9 month tech school and we have had problems finding a student loan. Will this help us, or do you have any advise for me?
- Reply to this comment
- WELL, MAYBE THE TUITION IS UNREALSTIC AND TOO HIGH! DUH! A DEGREE SHOULD NOT COST MORE THAN $10K ANYWAY! THESE GREEDY INSTITUTIONS NEED TO LOWER THEIR RATES, IF THEY WANT BUSINESS!
- Reply to this comment
- Currently, PLUS loans will go into repayment 60 days after disbursement. However, new regulations will change that. According to the National Association of Student Financial Aid Advisors, the new rule changes include:
Grace Period and Deferment For Parent PLUS Borrowers
Beginning July 1, 2008, the bill would allow parents to choose to defer payments on a PLUS loan until six months after the date the student ceases to be enrolled at least half time. Accruing interest could either be paid by the parent borrower monthly or quarterly, or be capitalized quarterly.
Special Provision for Parents Delinquent on Mortgage Payments
The bill would allow lenders to consider parents eligible for PLUS loans even if, during the period January 1, 2007, through December 31, 2009, the parents are or were:
* No more than 180 days delinquent on a mortgage payment on their primary residence
* No more than 180 days delinquent on any medical bill payments
* No more than 89 days delinquency on the repayment of "any other debt"
For more information, visit:
http://www.parentplusloan.com/plus-loans/ - Reply to this comment
- Currently, PLUS loans will go into repayment 60 days after disbursement. However, new regulations will change that. According to the National Association of Student Financial Aid Advisors, the new rule changes include:
Grace Period and Deferment For Parent PLUS Borrowers
Beginning July 1, 2008, the bill would allow parents to choose to defer payments on a PLUS loan until six months after the date the student ceases to be enrolled at least half time. Accruing interest could either be paid by the parent borrower monthly or quarterly, or be capitalized quarterly.
Special Provision for Parents Delinquent on Mortgage Payments
The bill would allow lenders to consider parents eligible for PLUS loans even if, during the period January 1, 2007, through December 31, 2009, the parents are or were:
* No more than 180 days delinquent on a mortgage payment on their primary residence
* No more than 180 days delinquent on any medical bill payments
* No more than 89 days delinquency on the repayment of "any other debt"
For more information, visit:
http://www.parentplusloan.com/plus-loans/ - Reply to this comment
- Hi Ray!
I was listening to the show this morning while getting ready for work, when I heard you start talking about the PLUS Loan. I work in the admissions department of a small private University, and I am very interested in making sure that I heard you correctly. So, as I understand it, the PLUS Loan can now be deferred until 6 months after the student graduates (like the Stafford). Is this correct?
Thank you! - Reply to this comment
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