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.

[iphyt4u]

It''s part of republican strategy. Keep the common man down, that way, the republicans can use them as slaves. The wealthy who received the tax breaks will keep sending their kids. But as for John Q. Public''s kids, they''ll have a place in Bush''s America flipping burgers.

[d33pthroat1]

Bush has pi55ed away 500 billion dollars in Iraq (costofwar.com)

Just imagine. That money could have put millions of young Americans through college.

Food for thought for all the Bush and McSame supporters.

[news_sceptic]

I was appalled by this story. People can''t afford whatever-it-is-they-want, so they put their houses up for it. What are these people going to do when their other two kids need to go to college and the first one can only find a job in a call center? If he''s lucky. Why not send the kid to a college they can afford? Isn''t this how so many people have gotten to the point of foreclosure? Apparently people are not learning from the news they hear.

[rockpeterson]

Eventually, I believe the whole system will come crashing down. Young students can''t work their way through school anymore. Approximately 90 students at San Diego State University were recently arrested for selling drugs in order to finance their education. Doesn''t that tell you something, professors?

[omega39-2009]

Wait.....isn''t education the panacea for all that ills our economy thanks to free trade? Our politicians don''t offer solutions to the jobs flying offshore, they just tell us we''re going to get educated and get those green jobs (they haven''t explained why those won''t go to India and China either). It doesn''t appear that is going to happen for the former middle class.

[barbaraf4]

"Food for thought for all the Bush and McSame supporters." Posted by d33pthroat1
~~~~~~~~~~~~~~~~~
And provided medical care for senior citizens and uninsured or under-insured Americans.

[barbaraf4]

Richard should skip the Boston University "experience" and find a good local Community College. Live at home and work at McDonalds. Get all your core credits and then transfer to a four year college - maybe not Boston U., but there are many other colleges offering a good education.

[chanag-2009]

Folks, we are responsible for ourselves. No one is even entitled to loans, or to go the most ridiculously expensive college of their choice.

Contrary to the quote of the student above, student life is not meant to be a lavish social "experience", but the purpose is to learn something.

People are making themselves slaves. If families obtain loans to ease the burden, great. But we should plan ahead and be prepared to take care of OUR OWN business.

For instance, choosing an affordable community college, and working to build up financing to pay off the completion of their degrees at the fancier places, if one insists.

I know people who, like myself, live in small apartments, find colleges at low tuition, or at least installment payments while we work. Oh, it doesn''t hurt to cutback on Starbucks, restaurants, or those add-it-up costly daily meet-ups with friends.

Good planning, common sense, and choosing a simple lifestyle will accomodate college, and it literally pays off in the beginning as well as the end.

[spadeisspade]

BarbaraF is right; college is the greatest American scam of all time! It doesn''t matter where you start, it matters where you finish. It''s far wiser to dabble and get your prereqs in a small college, and then if you must, transfer to a more prestigious school.

You can''t blame banks for backing away from student loans. I swear that 90% of people I know blatantly defaulted on their student loans because it''s not like they can repo your college education. Plus, you can defer them like crazy, especially if you stay in school (thereby racking up even more student loan debt). It''s just not a "business smart" move.

I hope that when it becomes less easy to borrow money for college, colleges will in turn take a look at their absolutely unnecessary tuition rates and make a change.

[Hybdiesel]

Good grief 200,000 for a experience. What ever happened to COMMON SENSE? The family sounds like they will be in great shape for the next kids. I feel sorry for the stupidy in some people.

[babooph]

No problem -rich need no loans & the children of the middle class need no education to compete with Mexican cutting grass in gated communities.

[puritan9]

Bush and McCain still want to give tax credits to the rich and put more money in the pockets of their rich friends while 90% of the country is suffering. Making it impossible for students to afford college is a great way to become competitive in the world. The Bush-McCain rich clans want to put ordinary Americans in perpetual debt so they can sit back and rake in the high interest rates, fees and penalties. What a great way to screw the American people in every which way, mortgages, credit cards, student loans... and all this while the banks are raking in the money like never before! We dont need terrorists we have the republicans already!

[shippg]

My son got his AA (Associates Degree) at an inexpensive community college. We paid as he went part-time. Then at the end of the two years he decided that he really wanted to learn Spanish (as his major). So we sent him to Panama for 6 months.

There is no education like a real-world one.

College is sometimes a joke. Whatever you do, pay as you go. No loans.

[shippg]

And another thing...when son was in college he had a job at Starbucks. There were people working right next to him WITH BACHELORS DEGREES, and making the same amount per hour as he was.

[stn_sage]

We''ve got TWO wars going: one in Afghanistan, and the other in Iraq, which hundreds of billions of dollars have been spent on. We''ve got gross negligence by credit lenders at mortgage companies, who''ve been bailed out at tens of billions of dollars. We''ve had around seven banks go under SO FAR, which will be bailed out, but---
we don''t have the money for people to get educations!

In other words, there''s money available for destruction and murder! There''s money for corporate welfare in the form of bailouts! But, there''s no money for people to learn job skills and knowledge that is then applied to make things and improve society?!

Now, what the h3ll is wrong with this picture?! Does anybody else see it? Or, have you all gone ''daft?

We are ON THE WRONG HIGHWAY, MOVING IN THE WRONG DIRECTION! I suggest to you all that''s time to turn onto another highway, BEFORE it leads us over a cliff!

[oneworldusa]

I started working at age 15 and paid for my own college education, starting at age 17. It can be done.

[marshall_nee]

This is just the start of a massive credit contraction, not seen since the Great Depression, and it is going to lead to an even Greater Depression probably.

[stn_sage]

Posted by OneWorldUSA at 05:28 AM : Aug 11, 2008
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Yeah, maybe! But prices are sky-rocketing now compared to a percentage of wages! It''s a lot harder now to keep up! You got more for your dollar when you did it!

With all the debt Bush and the GOP has run up, the dollar is becoming worthless!

[stn_sage]

We''''re dumming down America to increase the GOP voter base.

Posted by onemoretim at 06:18 AM : Aug 11, 2008
--------------------
They''re SURE trying! :)

[acarponzo]

has the cost of higher education with no specific goal in mind become too high? No, just the cost at "Brand" schools maybe? Maybe we could cut some of the education budget for Public education and plow it into Adult education instead.

http://www.BOP-O-RAMA.com

"Bop early and Bop often." --Alphonso Carponzo

[acarponzo]

On second thought, let Obama and McCain put this on the debate list.

htt://www.BOP-O-METER.com

Let them know how you Bopping feel!!!

"Bop early and Bop often." --Alphonso Carponzo

[jmurrieta1]

About time! These lower-class peasants who think they have the right to attend a college along with the upper-crust sons and daughters of privilege need to be taught a lesson.

America is run for the benefit of rich Republicans. They don''t need some dirty, unwashed masses of vassals contaminating their little darlings at college.

The children of the permanent slave class needs to understand their purpose in life--to work long hours at minimum wages, in competition with imported coolie labor, so the wealthy can maintain their lifestyles.

Then the fascist state the Bushites have worked so hard for will be a reality.

[mytoosense]

"Many Private Financial Institutions Are Choosing Not To Finance Educational Expenses"

The Bush Plan is complete, ensure that employment in America is impossible without a college degree and then ensure that the military is the only way for most to pay for it.

[mytoosense]

A college education should only be available to those who can save up and afford it. Those who need money should work and save for it.
Posted by GOP_forever

How many 18 year olds do you know of who have just graduated from high school AND have saved enough money for college?

The GOP, Home of simple answers from simple minds.

[element51]

What GPO_Forever really means is that education should only be available to rich republican families since everyone else is below them. I believe that one of the goals of the neocons is to move things back to the way they were before WW2 when only the wealthy had access to quality education. There were "teachers colleges" because the ruling class needed the workers to be able to read and write and do math. So there were people trained to teach these skills. It was only after WW2 with the GI bill that colleges were opened up to anyone who could go. Realizing that they had made a big mistake the goal has been to again make good schools affordable only to the wealthy. Just recently there was a battle in congress about increasing GI education benefits and it failed.

[element51]

GPO_forever...Yeah..pretty much everyone I know has a "trust fund" for their kids.

[barbaraf4]

The problem with making higher education available to everyone is that it devalues the effort and the achievement.

When I lived in California, because of the Community College network, higher education was practically free (for the price of your books - this was years ago). When everyone has their degree, you have college graduates working all the entry level jobs that used to be held by high school grads or dropouts. I had a Phd working for me as a data entry clerk.

If you are going to school so you won''t have to grow up and take responsibility for your own life, then school isn''t going to help what is wrong with you.

[jtdev1]

And how do they expect us to compete in a global market when college in India is essentially free???

It''s bad enough to have to pay the most for an education let alone not being able to borrow the money to get it.

[element51]

barbara4f....While I do agree with you that everyone should take responsibility for their own lives I think you are being a little un-realistic. My niece is a teacher, this is her third year, but most of her friends from college aren''t so lucky. They have degrees in a variety of areas and are unable to find jobs in their career fields. Her boyfriend has a degree in marketing and the best he has been able to do is work in a call center. Now we are talking about good kids here who worked hard to receive their degrees. What about those who, for whatever reason, could not go to college? While having a degree is no guarantee of success, not having one virtually dooms you to failure. My point is that it is hard enough with a degree and almost impossible without one. I also went through the California system and became a teacher and did quite well. I knew I had to prepare for my retirement and my wife and I saved and did without and even with that are having to really watch what we spend. It''s tough out there for these kids and it''s going to get tougher. My heart goes out to them.

[jtdev1]

The problem with making higher education available to everyone is that it devalues the effort and the achievement.... Posted by barbaraf4


True, but this is happening from the graduates in India and such. College is basically free (or at least very cheap) and a master''s degree is a dime a dozen.

Now we have US Companies requiring at least a masters before they ever consider your resume and the pay is just over minimum wage...

How can we compete? Have to pay a fortune for college and not get enough to live on...

[jmurrieta1]

Strange how the billionaires like Gates and Ellison complain about a lack of educated Americans, but the party of billionaires does everything it can to stand in the way of education.

It''s almost like the Republicans, party of Traitors, wants to sell America''s soul for money.

[navyjimfl]

"I''m not paying $200,000 for an education," said Evans. "I''m paying $200,000 for an experience."

I agree......students should go to class and not take these internet diploma mill programs from Troy, Phoenix and Webster.....

[hypnotoad72]

Logical. Student tuition costs have skyrocketed, the pay on (any available jobs) is pathetic*

I recently looked at higher education. Even at other fields. To get an Associates Degree would cost $40,000. In graphic design, the available jobs fetch $30,000/yr. Those jobs are going overseas anyway, and common sense says not to get education in a dying field. (Duh!) Seveeral months ago, CBS News also had a nice article on the future of such jobs -- I printed the article and sent it to the schools I looked at. They were dumbfounded and had no clue -- proof what they were training could easily be accomplished by downloading the trial software and buying a $40 book.

Most jobs don''t need college education, and if everybody had Masters degrees, anyone who thinks poverty would disappear is a *** fool. Techrepublic.com has a great article entitled "The Education Scam". Look it up.


* "70% more than what high school grads" is what''s claimed for those with college degrees -- yet it''s still 70% more than the minimum wage, which still isn''t even a living wage; never mind being able to pay any of the loan back. So why give money to greedy administrators, who wouldn''t give a carp about the quality of the education?

[hypnotoad72]

I haven''t even gone into detail on offshoring; the wages paid are lower - don''t know much about the quality except for the conjecture I''ve read that it''s poorer and their turnover is high, BUT those countries'' lower cost of living make the wages these corporations pay manna from heaven to them (while the same wages can''t even allow us to live).

And that''s my own conjecture.

[hypnotoad72]

jmurrietal, I totally agree.

Posted by GOP_forever


A college education should only be available to those who can save up and afford it. Those who need money should work and save for it.

Posted by GOP_forever


Given what jmurrietal said, you are for a fascist state where only the wealthy are allowed to live?

I agree with what he said too, and maybe I''m missing some context or even sarcasm from your posts.

But what I think makes a society is a person willing to work in it, to put their God-given talents into use and to live a decent quality of life, personal time, and if they wish, family time to raise a family in return. That is freedom.

[whatsup49]

too bad students aren''t turning to state universities and colleges, where tuition, books and housing costs are much cheaper. state universities and colleges, in many cases, offer the same level of education that private universities and colleges offer. for example, the texas university where i live has one of the best deaf education programs in the country, as well as one of the best engineering departments. it''s also too bad that there are not a lot of programs that help college students pay for their expenses in return for community service when they graduate.

[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.

[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.

[lochlan-2009]

Dumbing down America, again.

[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.

[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.

[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]

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

[element51]

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

[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.

[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.

[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)

[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.

[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.