Lenders Cut Back On Student Loans
Many Private Financial Institutions Are Choosing Not To Finance Educational Expenses
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Play CBS Video Video Student Loans Hard To Come By A rising number of banks and public lending authorities are cutting off loans to college students. With school approaching, students and families are scrambling for alternatives. Bianca Solorzano reports.
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Richard Evans is a freshman at Boston College. When his private loans for his first semester fell through, Evans and his parents had to scramble to make up the difference. (CBS)
Incoming freshman Rich Evans says the sky-high tuition for his next four years at Boston College will be worth it.
"I'm not paying $200,000 for an education," said Evans. "I'm paying $200,000 for an experience."
But his excitement turned to anxiety when Massachusetts Educational Financing Authority - or MEFA - announced it could no longer offer private student loans.
Just four weeks before the start of school the not-for-profit lender, which offers lower interest rates, put the word out to 40,000 families, many of which had to scramble to find cash.
"With those bills and the tuition coming due and hanging over your head, it does put you in a bit of a panic," said Betsy Evans.
Hundreds of thousands of students are feeling the credit crunch this month, as lenders struggle to capitalize loans. On top of that, congress cut subsidies for federal loans, making that business less profitable for banks.
More than 120 lenders have dropped out of the federal loan program. And this week, Wachovia bank, the sixth largest student lender, suspended its private student loan program for undergrads, Solorzano reports.
"Many families thought they had their financing all arranged," said Kalman Chany, author of "Paying For College Without Going Broke". "Only to find out the lenders they've chosen are no longer going to be offering loans this fall."
Betsy Evans is finding that federal loans are available, but at a higher interest rate. The best private rate she found was 2 percent higher than MEFA, but at a variable rate - an option that experts discourage for students
"Some of these rates have no caps which means if interest rates rise, you could be up to paying 15 to 18 percent on these loans," Chany said.
The Evans are likely to settle on a home equity line of credit - which comes with a low fixed rate -and tax deductible interest, but now their house is on the line, and with two more kids going to college, Richard will be expected to pay back the loans
"Richard is going to be burdened with a mortgage," said Peter Evans. "You know, when he comes out, so it's very scary."
But for Rich the freshman, that's four years and a college lifetime away.
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See all 56 CommentsSigned,
A student on loan, living responsibly so that others will also be able to benefit from the programs.
(Oops, my efforts are for nothing, thanks to the brats who want fancy degrees and don''t want to work to help pay their way)
[Posted by Element51 at 02:28 PM : Aug 11, 2008]
it''s not an image.
[Posted by jamesm12341 at 12:41 PM : Aug 11, 2008]
looks like you missed out as well ... you''re missing the apostrophe in the word don''t above. no biggie ... but seeing you''re so focused on everbody''s grammar, spelling, and what education level they may have ... it seemed only appropriate.
The truth is, they are loans, bearing interest, that must be paid back over time. In fact, student loans are much more difficult to discharge in bankruptcy than are usual loans, such as credit cards.
The students who take out these loans will be burdened with them for years.
But maybe the Republicans prefer that everyone be ignorant and easily led.
Let''s not forget all those "third world" countries where the talented are educated at state expense, because of their value for the future.
But the sad truth is, Republicans don''t seem to care much about the next generation, whether it''s "pump all the oil now" or "let the poor kids have careers at Walmart".
Sad.
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