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
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)
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(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.