Eyes Wide Open-The Student Loan Squeeze Part 1 of 3
FACT – In 2004, nearly two-thirds (62.4%) of graduates from public universities had student loans. (Source) Given this level of borrowing, there is no doubt that the current mortgage and student loan crisis has the immediate attention of parents and students. The student loan squeeze is a three part series that will answer a few of the most important questions on the minds of students and parents around the country.
Question: Many student loan companies are no longer offering federally guaranteed loans, how will this affect a student trying to find federal student loans?
Answer: This is a great question, but it is very unlikely that students will even notice that these lenders have dropped out of the federal program. Sallie Mae and Citigroup, which are reported to account for 75% of federally backed student loans, are meeting daily to discuss the how they can continue offering the loans. There is speculation of government intervention, but nothing in writing at this point.
Even though these two companies account for the majority of loans, there are still more than 2,500 lenders in the system, so it shouldn’t affect any students that are eligible for federal student loans. The remaining institutions will absorb the gap left by these companies, and students will just choose from a smaller pool of companies.
The federal loan system is extremely attractive for banks, especially in times such as now, because the federal government guarantees the loan. This means that there is absolutely no risk to the bank if the borrower decides not to repay for whatever reason.
Short Answer: The system is still going strong, and all students who qualify for a federal student loan will get one.
COMING SOON Part 2 of 3: What is the affect of Sallie Mae’s decision to stop making loans to students with low credit scores?
May 8th, 2008 at 9:40 am
I would advice a young parent to think about FEDERAL STUDENT LOAN as early as a child is preparing to go for high school. This is important because you will avoid any enormous strain on rush loans that most especially are unavoidable. The federal student loans information is available online, in your local library, high schools and even in the colleges and universities. You need to be advised on why you should try the alternative of federal student loans or why you should not leave it out as an extra way of funding your child’s education.
March 11th, 2009 at 8:51 am
Is it a good time to be doing this now?
May 16th, 2009 at 2:54 pm
I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.