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Credit Crisis Squeezes Student Loans

Families struggle to pay college tuition as loan market dries up

By Rob Quinn, Newser Staff

Posted Oct 17, 2008 2:46 AM CDT

(Newser) – The economic downturn is hitting college students hard, the New York Times reports. Job losses and the disappearing loan market are strangling formerly robust family plans to foot college tuition fees. Private lenders, used by many students to fill the gap between federal aid and the total cost of college, are hiking interest rates and tightening standards.

Applications for federal aid have soared, and learning institutions are beginning to fret that a prolonged downturn will mean there just isn't enough money to go around. Funding for this fall is safe, but it was secured before the scale of the financial crisis became apparent. "If we start seeing massive layoffs, we may be in for a real bumpy ride,” said USC's dean of financial aid.

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Andrew Favreau, a part-time MBA student at DePaul University, poses with a pile of text books in downtown Chicago. (AP Photo/Charles Rex Arbogast)

A student talks with an adviser at Michigan State University. The sluggish economy and a tougher time getting loansare making it harder for college students to study or travel abroad. (AP Photo/Al Goldis)

A volunteer places onions in the produce section at the University District Food Bank in Seattle. (AP Photo/Elaine Thompson)

Madelaine O'Neal, a freshman from St. Louis, studies outside of the main book store at the University of Colorado in Boulder. (AP Photo/Ed Andrieski)

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I have two kids in college and I want to say ‘come home,’ but at the same time I want to provide them with a good education. - Diana Jacobs of Salem, Indiana, whose husband has just lost his job

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Credit Crisis Squeezes Student Loans