Worried about being able to get loans for next year? Get the Facts

Loan Shortage Next Year?
2008 has been a turbulent year not only for Wall Street, but for the student loan industry as well.  According to Mark Kantrowitz, publisher of Finaid.org, “More than 130 federal loan lenders and 30 private loan lenders have pulled out of the federal student aid program”.

As a result, there have been many misleading statements like, “If this crisis continues, students and parents won’t be able to get loans for the next school year”.     

Setting the Record Straight:
The idea of an overall loan shortage is very misleading.  The most common type of student loans are Federal Loans (Stafford, PLUS and Graduate PLUS).  There is currently no shortage in the availability of Federal Loans for the remaining academic year or even for next year.  In order to guarantee funding of those loans for college students, a law was passed and went into effect this past July 1, 2008 entitled “Ensuring Continued Access to Student Loan Act of 2008”. The Act has enabled lenders to continue to make Federal Loans for the remaining academic year.  Moreover, that act has been extended for the 2009-2010 academic year so you can rest assured there will be Federal loans available to you. 

Are there any loans that I may not be able to get next year?
Loans referred to as “Alternative” or “Private” are often used by students to cover the gap between educational expenses and what they received in financial aid, including Federal loans.  Alternative loans are significantly harder to come by in recent months because lenders have tightened their lending criteria as a result of the credit crisis affecting the overall economy.  In plain English, if you don’t have a good credit score or a co-signer with a good credit score, you’re not going to be able to receive an alternative loan. This may be the “loan shortage” that you’ve been hearing about. However, if you have good credit and/or a co-signer with good credit Alternative loans should still be available to you in the current and next academic year.

For more great tips sign up for our FREE quarterly newsletter.