Oct 14, 2008
Economy impacts present, future loans
by Natalie Lozano
Students following national economic news will not be surprised to learn that the bankruptcy of major financial institutions is having a trickle-down effect on the college loan market.
“For example, last spring, student lender Nellie Mae eliminated its Excel private loan program affecting more than 1,000 Liberty students,” Financial Aid Director Dr. Robert Ritz said.
More recently, students using EdAmerica had their loans delayed because the institution wanted to stay in business, which required federal assistance. During the last week of September, Wachovia told Liberty that they were no longer lending to the post-graduate sector, which potentially affects Liberty graduate students.
Sallie Mae, one of the most familiar names in student lending, recently addressed shareholders in a letter, confident that their company is stable, according to an article in the Sacramento Business Journal.
Ritz agrees with Sallie Mae’s confidence. “Even though it’s been a pain, students have been able to get the loans they need. Right now it’s at an inconvenient stage,” Ritz said.
Student reaction to the economic rollercoaster is, for the most part, optimistic.
Brittani Campanella, a senior from Pa., is not worried and does not feel her parents are either.
“(They) didn’t seem concerned about it — in general, my parents pay for me. I’m really lucky,” Campanella said.
“I worked at a camp this summer,” freshman Claire Jones said. “It came with an internship, and I’m working for the rest.”
Ritz recommends federal lending, like Stafford loans, over private institutions, because “usually the terms are better — interest rates, benefits, that type of thing.”
To increase your likelihood of receiving a loan, if you have a credit score, keep it clean. Also, “having a cosigner will dramatically increase your chances of getting approved,” Ritz said.
Graduates who are having trouble paying back the loan, or students concerned about the job market, should remember that federal lending allows for a six-month grace period before they are required to begin repayment.
Economics professor Robert Rencher believes that graduating seniors may face “more of a challenge to be able to get a job or as high-paying a job as they otherwise might have.”
Rencher suggests that students consider applying to graduate school, which will likely require more loans but also defers the repayment of undergraduate loans. The tradeoff is greater debt for a potentially higher rate of pay accompanying a master’s degree.
“The economy is not going to bounce right back,” Rencher said.
Rencher heard about another option for students to consider on the Clark Howard show: working in public service, which could lead to loan forgiveness.
In 2007, the College Cost Reduction and Access Act created a loan forgiveness program for those working for the federal government. The act stipulates that 120 repayments have to be made before loan forgiveness can be considered. For more information about the program, check out federalstudentaid.ed.gov.
Ritz expects more lenders to pull out or change what they are doing, including a decrease in the percentage of applicants who receive loans.
To stay updated on the status of loan institutions, check out liberty.edu/financialaid. The site also offers a comparison feature, which allows students to quickly see the differences between loan programs.
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