Lenders Cut Back On Student Loans

Many Private Financial Institutions Are Choosing Not To Finance Educational Expenses

(CBS)  The economic credit crunch isn't just about home mortgages any more. Just a few weeks before the fall term begins - college students across the country suddenly find themselves scrambling to get their student loans, reports CBS News correspondent Bianca Solorzano.

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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.

[nofaxpaydayloan-david]

The first time I read this article I thought of the possibility that I if a graduating college student needs an emergency cash advance for their tuition fees there is one that is willing to take a risk in lending money, you can get it immediately the day you want it like what they did to me. No Fax Payday Loan is the online cash advance that is worth for your trust, visit http://personalmoneystore.com/moneyblog/ for further explanation and received a professional consultation about no fax payday loan.

[nofaxpaydayloan-david]

The first time I read this article I thought of the possibility that I if a graduating college student needs an emergency cash advance for their tuition fees there is one that is willing to take a risk in lending money, you can get it immediately the day you want it like what they did to me. No Fax Payday Loan is the online cash advance that is worth for your trust, visit http://personalmoneystore.com/moneyblog/ for further explanation and received a professional consultation about no fax payday loan.

[squeakof2006]

As a college student, I''d like to find an easier time getting loans. I don''t have a parent that is able or even willing to help finance my education. I''m going to be doing federal work-study plus try to find a job in the community in addition to work-study. All this while trying to pass 18 credits. It would be nice to see the government help us, but maybe have a cut off for number of credits paid for. I plan to get my degree and get a real job. I want to pay my way in life, I just need help paying for my education to do that.

[chanag-2009]

Rich, thank you for clarifying and explaining the situation. Much success to you.

[revans37-2009]

sorry about the multi-post, my computer messed up

[revans37-2009]

This is Rich Evans, I''m shocked at a number of the responses that there is to my family''s situation. We are looking for anything but a handout, and just because a number of people found what they were looking for in a less expensive state school does not mean that every other person should follow in that path. The article and news spot failed to mention the fact that I am working two jobs right now and am going to work in Boston in addition to my on-campus work study program. Myself and my family are just looking for a way to finance my education without putting myself so far in debt that I spend the rest of my life paying it off. With 7% variable as the best rate we can find it looks like I will be.

[revans37-2009]

This is Rich Evans, I''m shocked at a number of the responses that there is to my family''s situation. We are looking for anything but a handout, and just because a number of people found what they were looking for in a less expensive state school does not mean that every other person should follow in that path. The article and news spot failed to mention the fact that I am working two jobs right now and am going to work in Boston in addition to my on-campus work study program. Myself and my family are just looking for a way to finance my education without putting myself so far in debt that I spend the rest of my life paying it off. With 7% variable as the best rate we can find it looks like I will be.

[revans37-2009]

This is Rich Evans, I''m shocked at a number of the responses that there is to my family''s situation. We are looking for anything but a handout, and just because a number of people found what they were looking for in a less expensive state school does not mean that every other person should follow in that path. The article and news spot failed to mention the fact that I am working two jobs right now and am going to work in Boston in addition to my on-campus work study program. Myself and my family are just looking for a way to finance my education without putting myself so far in debt that I spend the rest of my life paying it off. With 7% variable as the best rate we can find it looks like I will be.

[chanag-2009]

By the way, these programs have in fact become give aways. I personally know quite a few people who literally live off of loans as professional students. No goals, other than to avoid being productive adults, going for one degree after another, and from what I understand with no intention of repaying. And, as another said, education cannot be taken away by the creditor, so no loss to the professional student taking us all for a ride.

[chanag-2009]

Advocating responsible loan use is not "anti-student loan."

Signed,
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)

[downtowner97]

Makes sense. This is the best idea I''ve heard to get smart people to enlist in the military, and you know we''re going to need a lot more troops to take on Iran.

[bobnjersey]

[Maybe you like looking like a fool because you sure do project that image.]
[Posted by Element51 at 02:28 PM : Aug 11, 2008]

it''s not an image.

[element51]

should read "your sensibilities". I''m having a problem with my "r" today/

[element51]

fifth line should read "your ignorance". Wouldn''t want to offend you sensibilities james.

[avigil2]

Getting a higher education is a sham! You''re not going to get that dream job anyway long after you''ve graduated college for which you''ve paid thousands of dollars into your future career. Companies want experienced workers, not fresh out of college newbies. Baristas for life!

[element51]

jamesm12341.....There you go again posting right out of your arse. I am a liberal democrat and I worked my way through college getting a degree in education and teaching for 26 years. Many of my fellow teachers over the years were also liberals and I can assure you that they all had earned degrees. Don''t you realize that when you come on here where the whole world can see what you post, you make a total arse of yourself and you ignorance shines like a beacon in the night. Maybe you like looking like a fool because you sure do project that image.

[bobnjersey]

[this is a nonstory for libs....they dont go to college anyway ]
[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.

[lochlan-2009]

Dumbing down America, again.

[jmurrieta1]

Strange how some of the anti-student loan folks seem to act like these are give-aways.

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.

[whatsup49]

another thought, in the texas city where i live, high school juniors and seniors, if they qualify, can earn college credits while finishing high school. the daughter of a friend of mine graduated from high school in 2007, and entered college as a junior. during her last two years in high school, she lived on the college campus and her parents only had to pay for room and board, at a reduced rate.