Student loans and the credit crunch

May 1, 2008 8:37:44 PM PDT
Many college students across the country are finding themselves in a financial quandary.Students with school loans are now finding themselves the victims of the recent credit crunch.

It's a crunch that has left some in the lurch and wondering whether they will be able to finish school.

Eyewitness News reporter Stacey Sager has the story.

Nicole Milazzo is a junior at Fairleigh Dickinson University who just wants to get her degree. But like many, she has a student loan that doesn't come from the federal government, so interest rates aren't fixed and the loan isn't guaranteed.

"I'm really concerned that tuition prices are going up, and interest rates are going up," she said. "And it's just going to become really hard to even finish a degree that I started."

The problems stem from the recent credit crunch. Banks are tightening their terms for private loans, leaving students like Giovanny Infante also in the lurch. He has to come up with $17,000 more this semester.

"Especially from my standings, how may parents are, it's kinda tough to have them co-sign," he said. "So I'm gonna have to do it on my own."

At the same time, Congress is slashing subsidies to many private lenders. At Fairleigh Dickinson, for example, at least two banks have now told the financial aid director that they're through.

"I think the latest bank that just notified me was Bank of America," financial aid director Vince Tunstall said. "They will no longer participate in the private student loan funding market."

At this school, the admissions department is trying harder than ever to counsel incoming students about financial matters. And the turnout at these sessions has been greater than ever.

It's a sign of the times. Some students' families, who once took out home equity loans to pay for school, are now feeling the pain of the housing bust as well.

Vince says the number of calls about home equity loans is non-existent.

Admissions staff are just advising students to examine all their options and to apply for loans early and thoroughly. Some of them are just hoping the economy allows them to finish what they've started.