Credit Crunch Ups Price of College Loans

Federal, private lenders will raise rates, increase rejections
By Caroline Zimmerman,  Newser Staff
Posted Mar 3, 2008 2:40 PM CST
Credit Crunch Ups Price of College Loans
"The federally guaranteed loan program is always going to be available . . . but the good deals are harder to find. On the private side, loans are getting more and more expensive," said one director of student financial services.   (

Even as college costs soar, the credit crunch is about to make student loans more expensive—and tougher to come by. Fees for federally guaranteed loans, which offer below-market rates, are expected to rise, and some states have dropped out of the program. At least a dozen private firms have already abandoned the student market, and those rates will rise even faster, the Washington Post reports.

Students at community colleges and for-profit schools, which have the highest default rates, will get hit hardest. "Right now the securitization market for private loans is not there," said a spokesman for Sallie Mae. It doesn't help that Congress cut subsidies to the federal loan program last year: They were "clearly not designed for times like these," said a loan provider spokeswoman. (More college stories.)

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