2008 Woodie Awards
Student loans hurt by national economic recession
By Leanne Sturt
Issue date: 3/17/08 Section: News
The rising interest rates and the rise of credit expectations could dismay many college students and soon to be graduates as the country heads even closer to a recession due to the defaults on mortgage and loan payments that have rocked America in the past year.
What this means to students is that federal and private loans, as well as grants, will continue to tighten and get harder to attain heading into the fast-approaching Fall 2008 semester. Credit scores will have to be better to attain even mediocre interest rates, and even looking for federal loans and grants will become a scavenger hunt.
Education loans have been getting harder and harder to get as credit qualifications have increasingly been raised due to the major issues that face many creditors today. However, big companies such as Sallie Mae and many other large banking corporations have in the past few months done their share to keep the market going by using their largely financed companies to keep lending prosperous.
"The potential for crisis occurs when the well-capitalized lenders and banks cannot absorb all that (loan) volume," Ben Kiser, a spokesman for Nebraska based Nelnet, said in an AP article from Feb. 20.
The major defaults and issues such as Montana's student-loan agency having recently tried unsuccessfully to sell $300 million in bonds has caused even the largest of student loan lenders to have issues supplying students the loans needed for their education expenses.
Major and especially smaller banks have cut supplies of loans substantially in the past few months as the deficit continues to thrive in the United States. Even after the Federal Reserve cut a key interest rate five times in the past months, the poor conditions of the student-loan industry will make it more expensive for students across the board to borrow money.
This has all started due to the rising delinquencies that occurred last year and the global credit tightening triggered by the major fall-outs of high-risk Alt-A and Sub-prime mortgages. Also, student-loan legislation that occurred last October cut an estimated $20 billion in federal subsidies to lenders.
What this means to students is that federal and private loans, as well as grants, will continue to tighten and get harder to attain heading into the fast-approaching Fall 2008 semester. Credit scores will have to be better to attain even mediocre interest rates, and even looking for federal loans and grants will become a scavenger hunt.
Education loans have been getting harder and harder to get as credit qualifications have increasingly been raised due to the major issues that face many creditors today. However, big companies such as Sallie Mae and many other large banking corporations have in the past few months done their share to keep the market going by using their largely financed companies to keep lending prosperous.
"The potential for crisis occurs when the well-capitalized lenders and banks cannot absorb all that (loan) volume," Ben Kiser, a spokesman for Nebraska based Nelnet, said in an AP article from Feb. 20.
The major defaults and issues such as Montana's student-loan agency having recently tried unsuccessfully to sell $300 million in bonds has caused even the largest of student loan lenders to have issues supplying students the loans needed for their education expenses.
Major and especially smaller banks have cut supplies of loans substantially in the past few months as the deficit continues to thrive in the United States. Even after the Federal Reserve cut a key interest rate five times in the past months, the poor conditions of the student-loan industry will make it more expensive for students across the board to borrow money.
This has all started due to the rising delinquencies that occurred last year and the global credit tightening triggered by the major fall-outs of high-risk Alt-A and Sub-prime mortgages. Also, student-loan legislation that occurred last October cut an estimated $20 billion in federal subsidies to lenders.
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