Reader Michael has some questions about how the credit crunch is affecting private student loans. Is anyone still lending?
In the wake of the Credit Freeze, I’m a student who needs some private loans for my schooling starting in the Spring. I’m an older student with established credit. I’ve seen a lot of student loan organizations close their doors lately and now that I’m in a position to apply, I need to know where to turn…Is there a list of who’s still lending privately and who is “frozen”? Any suggestions?
According to a recent AP article, there is some cause for concern. A survey by the National Association of Independent Colleges shows that students are being forced to drop out — and one in five colleges reported a smaller incoming class than expected, despite the largest crop of 18-year-olds since the Baby Boom.
According to the website FinAid.org, 36 lenders have stopped providing private student loans, says the AP, and the rest have upped their standards. This is actually good news for you — because the article says that the number one barrier to obtaining a loan in this environment is a lack of a credit history or a poor credit history.
John E. Dean, special counsel to the Consumer Bankers Association, which represents for-profit student lenders, told the AP:
“The easiest step… is to bring in a creditworthy co-signer,” he said. “That will make a difference on the availability of loans and the price.”
If your credit history is established, it’s time to shop around for the best deal. FinAid.org provides a list of lenders (in alphabetical order) that you may want to start with.
Before you even consider a private loan, however, you should make sure you read up on how they are different from federal loans. Here’s some information from the Student Borrowers Assistance Project, which is program of the National Consumer Law Center.
Anyone else looking for student loans in this market? Do you have advice for Michael?
(Photo: rmgustaf )