Student Loan Worries

Although some lenders are getting out of the student loan business, experts say there are still thousands left, and government safeguards exist in case the lending pool dries up. Financial aid officers said they have received assurances that money will be available in federal loan programs.Connecticut students also have backup from the state's own loan agency, the Connecticut Higher Education Supplemental Loan Authority, with $31 million to lend and the possibility of adding money to the pool if more students than usual seek loans this year.

Still, some students who have poor credit and need more money than federal loans provide - often students with the most barriers to attending college - could have a harder time finding money for school through private loans, experts said. "Probably most colleges are going to be OK," said Haley Chitty, a spokesman for the National Association of Student Financial Aid Administrators.

"But in this worst-case scenario, unfortunately it's going to have the biggest impact on the low-income students who have the most to overcome to get to higher education and the students that the federal aid system is designed to help."Mark Kantrowitz, publisher of the website finaid.org, said that he is primarily concerned about students who rely on private loans or federal PLUS loans for parents, which both have credit requirements for eligibility.

Because much of the credit crisis was precipitated by foreclosures, meaning that more people might have weaker credit than they did in the past, Kantrowitz said, more people might be denied these types of loans. The credit requirements to get private loans also are increasing.Elaine Solinga, director of financial aid services at Connecticut College, said that she is not anticipating problems for her students. She advised that any students concerned about paying for education speak with their school's financial aid office and consider all their options before rushing out to apply for a loan.

The University of Connecticut is reaching out to students who borrowed through private lenders last year to let them know that money is becoming tighter, and it has created a website with information about loans, said M. Dolan Evanovich, the vice provost of enrollment management."We are concerned and we want to make sure that we're ahead of this," he said.

"Kids should just get families to try and get things lined up as quickly as they possibly can," he said.Financial aid advisers typically urge students to consider federal loans before turning to private loans.Federal loans, with the exception of PLUS loans, don't require credit checks. But most federal loans have borrowing limits that can fall short of what students need to cover their costs. The federal Stafford loans, for example, are capped at between $3,500 and $5,500 a year for dependent college students.

The PLUS loan program allows parents of dependent college students to borrow more than that amount. But those loans require credit histories, making them potentially out of reach for families that have been through a foreclosure or other credit problems in the past year.Connecticut residents and out-of-state students attending school here may also apply for loans through the Connecticut Higher Education Supplemental Loan Authority, or CHESLA, a quasi-state loan agency.

Like PLUS loans, CHESLA loans carry credit requirements. Although similar lending authorities in some states have run into trouble, CHESLA is not expecting problems because it raises money by selling fixed-rate bonds, rather than the auction-rate securities that have caused problems, executive director Gloria Ragosta said.CHESLA has received authority to sell another $30 million in bonds when its current lending pool runs out, and Ragosta said that officials are now discussing authorizing more money in case more students than usual seek loans this year.

Source:

http://www.courant.com