As you may already know, students who have to borrow more than the maximum amount for the federally subsidized loans, turn to private loans to pay for school. These almost always have higher interest rates. As a student I had to do this just a few years ago when I paid a heftier price to attend an out-of-state school. While I don't regret attending my alma mater, I do wish I had tried harder to establish residency in the state of my chosen school. That's because my private loan rates now make me cringe each month. With our country in what is currently called a "credit crunch" by the media, private education loans are becoming more costly and difficult to access, according to this report on NPR. It's getting harder for companies and nonprofit organizations to find investors who are willing to "buy debt" which in turn means these institutions have less money to lend.
This translates to more stringent restrictions on credit scores for interested borrowers and in some cases, less available private loan options altogether. As the NPR story points out, this has been affecting private schools that provide specific professional training like culinary or technical schools first.
So what does this mean? No college (or no more college) for you? Not necessarily. It will definitely force you to more closely examine which colleges or universities you can afford to attend as well as which might get you off on the best foot (read: finding options that won't leave you with loans that have outrageous interest rates). For example, you might not discard community colleges so quickly knowing they have the potential to save you big bucks down the road. The situation could encourage you to ask yourself if you really looked at all the programs offered by public universities in your state? Coming from someone who wishes she had thought a little bit more about this herself, I think having to reexamine your options when it comes to college could be a significant bright side to an otherwise discouraging piece of news.
- Sarah
I just did a presentation about this subject and this information was very helpful!
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