By JENNY DERRINGER
derringer@crescent-news.com
With the U.S. economy slowing in several segments including increasing mortgage foreclosures, skyrocketing gas prices and declining stock prices, it would follow suit that the student loan market might be a bit shaky as well.
In fact, some lenders are getting out of the student loan industry because of the high cost of doing business.
But loans are still readily available from such entities like College Loan, Student Loan Corp., Great Lakes and NextStudent Inc., though students are going deeper into debt to earn that coveted diploma due, in part, to rising tuition and fees.
USA Today reported recently that the average student loan in 2006 was $14,379 -- up from $12,393 in 2001.
So, for those looking to earn a college degree and increase their odds of finding a good-paying job, options are available to students, especially at a time when tuition and fees at four-year public colleges have increased by an average of 31 percent in the last five years, according to the College Board.
In an effort to help the situation, the U.S. House of Representatives passed the College Opportunity and Affordability Act (HR 4137) on Feb. 7. According to the House Committee of Education and Labor, the bill "would address rising college costs and remove other barriers that keep qualified students from pursuing a college education."
It is up to Congress to pass the bill before being sent to President George W. Bush for his signature. If passed, according to the Committee of Education and Labor, HR4137 would provide students with information about college tuition, ensure that states maintain higher education funding commitments, encourage colleges to control price increases through innovative strategies and hold colleges accountable for price increases.
Congressman George Miller, D-Calif., chairman of the House Education and Labor Committee, said, "Last year, by enacting a $20 billion increase in federal student aid -- the largest increase since the GI Bill of 1944 -- this Congress took an historic step to help American families pay for college. Now we are redoubling our commitment to college students and parents by reining in skyrocketing tuition prices and making our whole system of higher education far more consumer-friendly."
But those seeking student loans shouldn't be too concerned about availability.
"There are some lenders that have chosen to get out of federal Stafford loans," explained Mary Cannon, director of financial aid at Defiance College. "There are still plenty of lenders that are doing federal Stafford loans but even in a worst-case scenario, the law states that even if there were no lenders, which there are still thousands of them, that the federal government must step in and make those loans available to the student. So there will never be an issue about federal Stafford loans, subsidized or unsubsidized."
She noted that interest rates are currently going back to a variable rate on July 1.
"It's currently for all federal Stafford loans, subsidized and unsubsidized, at 6.8 percent," explained Cannon. "The new law goes into effect July 1 and subsidized loans will be at a fixed rate of 6 percent for one year; unsubsidized will remain at 6.8 percent. After that, the subsidized loans are scheduled to go down to 5.6 percent beginning July 1, 2009; 4.5 percent beginning July 1, 2010; and 3.4 percent beginning July 1, 2011. Then the interest rate will return to 6.8 percent for subsequent years."
Mike Suzo, DC's vice president for enrollment management, noted that 82 percent of DC's students receive federal loans, most taking advantage of Perkins or Stafford loans. The average for all DC undergraduate students with federal loans is $4,500 a year.
Cannon added that the average repayment term is 10 years, but the federal government has included in legislation up to 30 years for repayment. "So it has a lot to do with how much a student borrows and their specific situation. A lot of times hardship cases could extend that term to up to 30 years."
Suzo added that the default rate for DC students is .5 percent. "I remind students not to take these loans too lightly," stressed Suzo. "They do have to be repaid and you never want to borrow more than you need to borrow."
"It's been proven that students who invest in their education are more likely to succeed," added Cannon. "They just need to be educated and well-informed so they don't overborrow. But there's nothing wrong with borrowing. It's going to invest in their education, going to give them a start."
Amy Francis, director of financial aid at Northwest State Community College, said she has not "seen any impact as of today for our students applying for student loans."
Of the student population at NCSS, she pointed out that approximately 35-40 percent have taken out Stafford loans to attend college.
Francis also shared a recent letter signed by U.S. Secretary of Education Margaret Spellings that was sent to college presidents concerning the "volatility in credit markets" and how it may relate to student loans.
"I want to reassure you," stated Spellings, "that federal financial aid -- grants, loans through both the Federal Family Education Loan (FFEL) and direct loan programs and work-study -- will continue to be available to your students and their families. There are more than 2,000 lenders that originate loans in the FFEL Program.
"Thus far, we have not encountered any situation in which eligible students have been unable to obtain federal student loans," she added.