Wednesday, August 13, 2008

Many Student Lenders are Out, But…

Doug Lederman of Inside Higher Ed wrote an article yesterday entitled Credit Crunch or Echo Chamber? questioning whether or not there will be any difficulty for students paying for college this fall. Time and time again, he points out, we have heard that there is a major problem and we had better brace ourselves for the inevitable calamity. But does a crisis actually exist?

Dozens and dozens of student lenders have stopped issuing federal and/or private loans. The media has been constantly reporting on the latest companies who leave the industry. Some college financial aid officers and directors have voiced their apprehension based on experiences with their own students. Lederman (and many supposed Financial Aid Directors and other school administrators who commented on the article) asserts that just because the signs are there, doesn’t mean the “credit crunch” is the norm for the majority of students and their parents.

There are, however, many students who have been struggling – calling company after company trying to get financing for their education. Robert Massa of Dickinson College claims the “sensational media” may be trying to invent a story. As he points out, “there is no story in ‘same old, same old.’” However, stories identifying the credit crisis as real state there may be a bleak outlook for students who are now applying for student loans. Students that are more vulnerable, such as those whose schools do not participate in FFELP, attend for-profit universities and others, may not get all of the money they need.

The truth is that no one knows whether the crisis is real or not until after students apply for their loans. Despite all of articles reporting on the “credit crisis,” if students get rejected, the question might then be, “Why wasn’t I told that I wouldn’t be able to get my loan?”

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