New York Enters as Mass. Flounders

Just as New York’s Governor Paterson is planning to ask the state legislature to create a new low-interest student loan program, Massachusetts is turning students away from its own.

Governor Paterson announced last week that he would begin working with Albany to meet the needs of college students in his state that have been struggling to pay for college. New York is one of a handful of states that currently does not offer a low-cost program that alleviates financial burdens caused by the increasing cost of higher education. As highlighted in a recent New York Times article, Patterson has decided to pursue Eliot Spitzer’s agenda to allocate funding for a state government loan program; yet, opponents say that there is just not enough money in the budget that is already stretched thin.

No specific details have been provided for how Paterson will afford sending thousands of students to school, but he stated that his administration “is deeply committed to ensuring that we provide the best education services to our citizens.”

A low-cost program is already in place in Massachusetts, but financial strains are affecting the ability to meet demand. Prior to the credit crunch and the economic downturn, the Massachusetts Educational Financing Authority (MEFA), had a low 6.5% fixed rate for college students looking to borrow money. MEFA’s Executive Director, Thomas Graf, stated, “As a result of our problems and the continued dislocation of the capital markets, we have been unable to raise funds for the coming academic year.” Last year, MEFA provided over $500 million in loans to its residents, according to the Boston Herald.

Students who have taken advantage of the MEFA program must now turn to private student loans if federal loans do not cover the overall cost of their college expenses. The good news is that there are deals out there if students take the time to research the different institutions that offer borrower benefits. Putting in a little effort can save borrowers and their families hundreds or thousands of dollars over the life of the loan if they recognize that they should only take out what the need.