Aug. 10, 2008
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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- 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.
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- 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.
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- 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.
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- Rich, thank you for clarifying and explaining the situation. Much success to you.
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- sorry about the multi-post, my computer messed up
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- 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.
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- 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.
- Reply to this comment
- 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.
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- 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.
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- 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) - Reply to this comment
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