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.   (Shutterstock.com)

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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