Examine Your Options for Student Loans

When deciding to attend a college or university, there are several financial factors that play a part in the amount of money it will take to attend. These include tuition, fees, room and board, books and incidental costs for personal items such as Internet access, dry cleaning and laundry, entertainment, and transportation. According to the College Board, the total cost of college for this past year (2005-2006) was an average of $11,000 for a two year college and $14,000 for a four year college. Private universities cost an average of $30,000 per year. There is also an expected 5-8% increase each year because of the inflation rate. Scholarships and loans are often the most important key to ensure a successful education. Indeed, there are several resources to find student loans that will help you to get the money you need to attend the college of your choice and to get on with your future.

One of the more common ways to get a college student loan is through government aid. These types of loans are available through the federal and state governments, as opposed to private lenders. Most government federal aid is awarded after determining the needs of the student. The US DEP (Department of Education) makes more than $67,000,000.00 (billion) available in loans, cash grants, and college based student loans each year to help millions of students and their families pay for postsecondary education.

Receiving a loan from the federal government often includes completion of several different forms in an application package, the number depending on the needs of the applicant. Once you complete the applications, you begin the process that will eventually approve your request for a loan or cash grant. This approval is only good for one year, beginning with the next year. In order to qualify for financial aid, you must have a high school diploma, be enrolled in college for a specified number of hours, show that you are maintaining an established GPA (grade point average) in your classes, and be an U.S citizen.

One type of loan offered through the federal student loan program is the Federal Stafford Loan. This will allow a given amount to the student, which will then begin to be paid back six months after the student graduates from his college or university. Another popular loan is the subsidized loan. These loans are available but are dependent upon the financial needs of the student. As long as the student continues to be enrolled at least half time in his college or university and can demonstrate that he has financial needs, he will continue to qualify for a subsidized loan. Another type of student loan is the unsubsidized loan. This student loan is not dependent on financial need and requires that the student’s parents pay a certain amount of the loan within a given amount of time.

You may also consider alternative student loans. Some alternate types of loans that students may qualify for are campus-based aid programs, also know as a Perkins loan. These types of college sponsored programs are either direct loans or cash grants, and are administered by the university or college. Federal funds are made available to the schools and the schools are then authorized to divide the money in loans or grants, according to the schools best judgment, based on the needs of their students. If you receive one of these types of student loans, you will be eligible for a work-study program which will allow you to have a job on campus, a cash grant, or a federal Perkins Loan. These types of loans are strictly dependent on a student’s needs as well as the amount of money that was allotted to the school.

All government loans can be applied for online through the Free Application For Student Aid (FAFSA) website at http://www.fafsa.ed.gov. Applications for student loans must always be filed at the beginning of March in order to be considered. Your application will begin the process to determine which type or types of government student loans you are eligible for. As soon as a determination is made as to your eligibility, you will be notified by mail stating what types of student loans are available for you, and in what amounts. You then have the option to accept or decline each of these offers which sets the amount which you can borrow for the year.

There are also other types of loans for which one can apply that are not government based or funded. These are private loans that are offered to students attending college or university. Most of the time, these loans will carry higher interest rates in the later years of the loan, but if there is not enough money coming from a federal loan for which you have applied, these loans may be a viable option and enable you to get through school. These types of loans will require some research and you will have to fill out additional application forms because they will be coming from a private lender. Note: Never submit an application to anyone without keeping a copy for your own files. This is not only a good business practice, it also gives you a ready reference for your personal information should you have to fill out more forms in the future.

The loans that are offered through the government and private sectors are an excellent way for you to get a college education without having to worry about the high costs of education or the limiting effects of inflation. For up to date information you contact your college’s financial aid office or the originator of your student loan.

Scholarships and loans are often the most important key to ensure a successful education.

Students Scramble to Find Student Loans As Fall Semester Draws Near

It’s crunch time for college students trying to secure the money they need for the fall semester. But with lenders continuing to suspend their student loan programs – the count now stands at 131 federal loan lenders and 30 private loan lenders – students may find themselves challenged to locate lenders that are still offering federal or private student loans.

In an attempt to help lenders be able to continue making new federal student loans, the government included a provision in the Ensuring Continued Access to Student Loans Act, signed into law in May, aimed at providing capital for cash-strapped lenders.

Under this legislation, the Department of Education can buy federal college loans from lenders, thereby providing these lenders with the liquidity they need to continue funding new parent and student loans. The law specifically targets lenders who, in the current credit crunch, are unable to find investors in the secondary market willing to purchase their student loan portfolios.

Even with this legislation in place, however, lenders continue to find themselves forced to suspend their student loan programs. As recently as July 28, the Brazos Higher Education Service Corp., the 26th-largest originator of federal student loans in 2007, and the Massachusetts Educational Financing Authority, the largest student loan issuer to Massachusetts residents, both announced that they would no longer be able to provide either new or current borrowers with student loans.

As the suspensions of both federal and private student loan programs keep spreading through all types of lenders – large and small; for-profit and nonprofit; banks, non-banks, and credit unions; state loan agencies and schools-as-lenders – students and their families are finding themselves with fewer borrowing options to get the parent and student loans they need to pay the fall tuition bills that are coming due over these next few weeks.

Two Major Lenders the Latest Casualties of Student Loan Crisis

The Brazos Group, a primarily nonprofit group of higher education lending, servicing, and other financial aid companies, first announced that it would stop offering federal
college loans back in March. In May, however, after the government passed the Ensuring Continued Access to Student Loans Act, Brazos once again began offering federal parent and student loans, saying that the government’s short-term liquidity plan had renewed the organization’s confidence in its ability to continue offering student loans.

But Brazos once again suspended its education lending program late last month, citing continued turmoil in the student loan industry.

Brazos Executive Vice President Ellis Tredway said his organization simply “ran out of time to get everything in place” to issue new student loans for the fall.

The Massachusetts Educational Financing Authority, which issued more than $500 million in college loans to 40,000 Massachusetts college students and their families last year, had already suspended its federal student loan program in April. Now, MEFA has also pulled the plug on its non-federal private loan program, which provided Massachusetts students with fixed-rate private student loans.

“While we continue to pursue every possible option, raising the necessary funds to offer fixed-interest rate private education loans is taking longer than originally projected and has become even more challenging,” said Tom Graf, MEFA’s executive director.

Students Face the Uncertainty of Switching Lenders

With over 8 million students and parents having turned to federal college loans in 2006-07, according to the College Board, the number or families that stand to be affected by the ongoing wave of lender departures this year is not unsubstantial.

Last week, financial aid officers at Texas A&M University – a school with over 54,000 students – heard from seven different lenders warning that they would no longer be able to offer federal student loans, a situation that has made more than a few borrowers uneasy.

Dyneche Duffield, an incoming college student headed to Houston Baptist University, is uncomfortable with the prospect of having to establish a relationship with a new lender other than her local bank, which used to offer student loans.

“I would have much rather taken out a loan there than somewhere where I didn’t know anyone,” Duffield said.

While students like Duffield may still be able to go directly to the Department of Education for their federal college loans or find those remaining lenders who are still offering private student loans (albeit with more stringent credit criteria that are making it harder for students to qualify), the magnitude of the problem within the student loan credit markets and how deeply it has permeated the college loan industry is alarming to many administrators and officials in higher education.

Kathryn Osmond, executive director of student financial services at Wellesley College in Massachusetts, finds the situation with MEFA to be particularly indicative of a long-lasting and serious problem.

“An economy that is in such a tailspin that it affects a critical agency like MEFA,” said Osmond, “is an economy that scares me.”