I’m going to college…maybe

My excellent adventure to college

$tudent loan$ are getting more expen$ive

The same credit crunch that’s squeezing the mortgage market is crimping student loans as well, so parents and students seeking loans to pay for college this fall will find fewer companies offering loans and may find interest rates and fees higher than expected.
The college-loan market essentially has three parts: The federal government doles out loans directly to schools; there are federal loans with set interest rates and fees, but often handled by for-profit companies; and there’s the private loan market, where companies work directly with borrowers.
   
Just as mortgage lenders do, some lenders turn student loans into securities to sell on a secondary market, with the money from that sale helping to fund new loans. But thanks to widespread worries in the credit markets, investors are leery of buying those securities right now.
   
The end result is that private loans, for which interest rates already run as high as 13%, are going to get more expensive and borrowers with low credit scores may have more trouble securing a loan, said Mark Kantrowitz, publisher of FinAid.org, in Pittsburgh, a site offering financial-aid information.

   

While federal loan interest rates are set by the government — between 6% and 8.5%, depending on the loan — students will see fewer of the discounts that lenders routinely offered until now, such as a break on the origination fees or an interest-rate break for paying on-time for a set period.

credit crunch

February 21, 2008 Posted by | Student loan | | 1 Comment