Wall Street’s credit crunch is making it harder for students to receive private loans, leaving some pressed for ways to fund a university education.
More than 168 private loan lenders have stopped participating in a federally guaranteed student loan program, according to finaid.org, and the University’s list of preferred loan lenders has dropped from 13 to seven this year, meaning students have fewer places to find money for classes. One USF program, though, organized before Wall Street’s collapse, is helping students respond to financial hardships.
Paul Simino, president and CEO of onesimpleloan.com, said he thinks the loans business is driving students to start their careers in a financial hole.
“The average college student graduates $20,000 in debt,” he said.
Couple this debt with a tightening job market and fewer available loans, and many
students feel stuck in a cycle of needing money for tuition and other expenses to better themselves but are struggling to acquire the necessary funds to do so.
Thirty to 40 percent of college students need private loans to complement their federal loans, but few qualify for such loans, Simino said.
“You need a credit score of between 680 to 700 points to be approved for a private loan, and over 95 percent of college students need a co-signer,” he said. “Many students around the country haven’t been able to get a private loan this year.”
Stephanie Polash, a senior majoring in chemistry, experienced the lagging economy’s effect on money lending. She needed to apply for a federal Stafford loan once in 2001, when she was at the University of Minnesota, she said.
But things changed for her this year, as she found herself unemployed and unable to gather enough money to pay for the last seven credits of her degree. Polash said she was upset when she realized she didn’t qualify for the private loan she needed.
“I was asking myself, ‘Are you kidding me?’ I only wanted to take four credits this semester and three the next one, and I thought I wouldn’t be able to do it. I was really upset, but I kept fighting and eventually found a way to pay for everything,” she said.
Polash found an ad for the USF program Don’t Stop, Don’t Drop, presided by Director of Community Relations Lesley Miller Jr., which helps students find ways to pay for college. She said the program helped her navigate the loan application process.
“I was so happy to find that program,” Polash said. “I needed a middleman to help me with my loans, because people in financial aid are so busy sometimes that they aren’t able to help you as personally as Don’t Stop could.”
Miller said the program is meant to go beyond the help given by financial aid. “What we do is help students who are thinking about dropping out find ways to come up with ways to get the money they need,” he said.
Polash was accepted for a Stafford Loan last August. She will be able to graduate next spring.
The program helped 65 students in September. Of those, 52 went to Don’t Stop, Don’t Drop because they couldn’t afford tuition, Miller said.
The federal student loan business is an $80 million a year industry, while private loans take in about $20 million annually, Simino said.
The students’ struggle is being reflected at banks across the nation, as 22 banks have laid off more than 6,206 employees since August 2007, according to finaid.org, an independent financial aid advising Web site.
The federal government is working, however, to make private student loans more readily available, said Brett Lief, director of the National Council of Higher Education Loan Programs in Washington, D.C.
“Secretary of the Treasury Henry M. Paulson Jr. and Secretary of Education Margaret Spellings will ensure that students will have loans for the next two academic years,” he said.
On Oct. 7, President Bush signed a one-year extension of the Ensuring Continued Access to Student Loans Act of 2008.
The act amends the Higher Education Act of 1965 to increase, by $2,000, the maximum annual unsubsidized Stafford loan amounts that may be provided to undergraduate students under the Federal Family Education Loan (FFEL) program, according to opencongress.org. Stafford loan amounts vary according to years in school and tax dependence.
On Oct. 10, both the US Department of Education and the US Department of the Treasury released a statement thanking President Bush for the extension and stating that they would be “moving aggressively to support the continued availability of funding for federal student loans in the next school year with the goal of restoring the government guaranteed student loan market to normal operations,” according to the Web site.
This is important because the University has no control over private loans.
“(USF) is not the lender — we just process the applications,” said Billie Jo Hamilton, director of Financial Aid.
Amid this turmoil, Simono said there’s still a bottom line to borrowing. He breaks it down to three simple rules: Borrow wisely, don’t forget about loan payments while in college — even if you don’t have to pay for them yet — and ask prospective employers if they’ll pay for part of them.
“I heard many success stories of students that were almost $60,000 in debt and told their employers that they would offer their services for five years if, in exchange, their employer would pay 20 percent of their loan costs every year,” Simino said.