The ongoing credit crisis may make it more difficult for students to secure college loans, but they should ultimately be able to find lenders, according to Virginia Hazen, Dartmouth's director of financial aid
Approximately 50 percent of Dartmouth students borrowed money to help pay for tuition in the 2007-2008 school year, Hazen said. Students often secure these loans through the Federal Family Education Loan Program, a partnership between the federal government and private, non-profit and state-based lenders. The program facilitates the offering of federally guaranteed loans to parents and students. These students may now face difficulties because many lenders have dropped out of the program, Hazen said. Students who previously secured loans through these lenders will have to find a new source of financing.
"We do not anticipate that either current students or new students will be unable to find lenders," Hazen said in an e-mail. "There are many lenders still making loans."
Many lenders still participating in the program may reinstate extra charges, such as insurance and guarantee fees, that they recently have not been enforcing, according to Hazen. These fees can be up to four percent of the total loan cost.
"Students will need to shop to get the best deal," Hazen said.
Despite the current financial climate, Hazen said she does not expect the interest rates of FFELP lenders to increase because these rates are set by Congress, not individual lenders. The rates are scheduled to decrease on July 1, Hazen said.
While students should be able to secure federal loans, Hazen said, finding alternative private loans from companies who do not participate in the FFELP may be more difficult. The College recommends that students use private lenders only after exhausting all federal options, according to Dartmouth's 2007-2008 financial aid handbook.
Many lenders, such as the New Hampshire Higher Assistance Foundation, have discontinued several private loan plans because these loans are not guaranteed by the federal government, according to Hazen. Others have begun to require students to pass a credit check or have a credit-worthy co-signer for their loans, Hazen said. The private lenders establish the interest rates for these loans.
The challenge of securing private loans and decreasing participation in FFELP should not affect student enrollment, Hazen said, because students and parents can still use PLUS loans and Stafford loans, which are both offered by the federal government.
The College is currently finalizing a new plan to help families secure loans that comply with regulatory changes that limited how universities recommend lenders. The Financial Aid Office will likely create a potential list of the top lenders chosen by students and parents in the 2007-2008 academic year, Hazen said. The College will process student loans through any lender, regardless of whether that organization is on the list. The College will also offer advice about choosing a lender and applying for a loan.
The U.S. House of Representatives passed the Ensuring Continued Access to Student Loans Act of 2008 on April 17 to protect families' ability to secure uninterrupted federal college loans if the credit crisis causes a "significant number" of lenders in FFELP to reduce their lending activity. The bill increases the limits on the amount that a student can borrow in federal loans to $31,000 from $23,000 and gives the Department of Education additional authority to buy federal loans so that lending institutions can have enough money to make new loans, according to the House Committee on Education and Labor web site.
Federally guaranteed college loans totaled approximately $60 billion last year, according to The New York Times, and a New York Times/CBS News poll found that 70 percent of surveyed parents were "very concerned" about paying for college, while only six percent of parents said they were unconcerned.
