Student Loan Lenders Dropping This Fall

I’m glad I subscribed to Money Under 30, had I not I would have missed this post highlighting an article from ABC news discussing student loans and how students are scambling to secure new loans as the financial crisis moves on to effect the student loan industry.

Financial Crisis Effecting Student Loans

The ABC article highlights something many people in their late teens but possibly early twenties may be dealing with last minute; Student Loans. According to the ABC Article, “Student loan companies traditionally raise capital by selling bonds, but as a fallout from the sub prime housing meltdown continues to shake the country’s financial sector, investors have become wary about putting their money into student loans.” As a result of the current financial mess in the United States, “Lenders have been having a hard time raising enough capital to continue making loans.” Without the ability to raise the capital the lenders have been contacting universities to tell them they can no longer provide federally guaranteed loans.

Types Of Student Loans
[src 1]

• Federal student loans made to students directly: No payments while enrolled in at least half time status. If a student drops below half time status, the account will go into its 6 month grace period. If the student re-enrolls in at least half time status, the loans will be deferred, but when they drop below half time again they will no longer have their grace period. Amounts are quite limited as well.
• Federal student loans made to parents: Much higher limit, but payments start immediately
• Private student loans made to students or parents: Higher limits and no payments until after graduation, although interest will start to accrue immediately. Private loans may be used for any education related expenses such as tuition, room and board, books, computers, and past due balances. Private loans can also be used to supplement federal student loans, when federal loans, grants and other forms of financial aid are not sufficient to cover the full cost of higher education.

The Student Loan Meltdown

“Since March, roughly 100 U.S Lenders have suspended their government backed loan programs while nearly 30 have also stopped their private student loan programs.” This was quoted in the ABC article, but obtained from NASFAA statistics. The Government has been stepping in on many fronts to help out the economic situations, personally I have to wonder when our taxes will suffer because of this. The Federal Government has created the Ensuring Continued Access To Student Loans Act or ECATSLA which among other things, allows the U.S Department of education to buy government backed loans from student lenders.

Further Information

I won’t reiterate anymore of what was said over at Moneyunder30, I suggest going to read his article. Which includes information on obtaining further information for student loans. As one commentor pointed out, this should be read by anyone looking at student loans right now, or in the near future.

[1] http://en.wikipedia.org/wiki/Student_loans_in_the_United_States

Subscribe in a reader

Similar Posts

• Mortgage Rate Gap
• Weekly Round Up: Quadruple Traffic Edition
• TMM Top 20 Series: Build a Better Budget
• Credit Modeling 101
• Dumb Credit Card Rumors