College Admission Help

College Students Scramble as Bank Loans become Harder to Land for College Admission Help

By Cassie Foss
The Grand Rapids Press

As her name might suggest, Hope Start isn't giving up when it comes to finding a way to pay for college.
A sophomore at Calvin College, the 19-year-old from Hudsonville has become a pro at rustling up school money wherever she can find it.
Like many students, she has her hands in a number of lending pots, collecting loans, grants and scholarships to offset expenses that will exceed $32,000 next fall.
However, this year's recession forced Start to abandon hopes of a traditional bank loan like the one she had during her freshman year.
"I didn't even try because I assumed it was going to be really hard to get one," she said.
She is paying only the interest on last year's $2,000 loan because that's all she can afford. Her father, Doug Start, said he cannot help this year with expenses because his concrete business is so slow.
"Some people have to leave school because of the money," said Start, who is majoring in Spanish. "But I would never want to leave for that reason."
As today's deadline passed to file the Free Application for Federal Student Aid in Michigan, students and families can expect a tougher time in landing loans because of the credit crisis.
"It's definitely been difficult for students to get private student loans," said Mark Kantrowitz, creator of the student financial aid Web site finaid.com and author of "FastWeb College Gold," a guide to paying for college.
Last May, one of Michigan's largest banks, Comerica, suspended its student loan originations because the bank was unable to sell those loans on the secondary market, a bank official said.
The state also pulled back its lending. About 8,500 students lost access to low-interest loans when the state closed down the MI Loan program because the credit market was so tight.
At the same time, however, loan demand is rising from students hard pressed by the poor economy.
Applications for federal aid at Grand Valley State University -- usually the first stop in the funding process -- are up 20 percent over the same time last year, said Ed Kerestly, GVSU director of financial aid.
Kerestly said it's too soon to know whether the rise is due to more students filing or students just filing earlier.
"The biggest unknown continues to be families who look beyond federal loans to private lenders because that's tied up in the market," Kerestly said.
Phyllis Hooyman, director of financial aid at Hope College, also reports a slight rise in aid applications this year.
Dave Steffee, director of financial aid at Aquinas College, said the school received about 1,000 federal-aid applications by mid-February, which is on track with last year.
Kantrowitz estimates almost 30 percent of students getting private loans in 2007 are no longer eligible.
While banks do not disclose much information about the number of loans they make, Kantrowitz said the higher rate of co-signers is evidence lending standards are higher.
In 2007, 50 percent of popular lender Sallie Mae's student loans had co-signers. In 2008, that number grew to two-thirds, he said.
"A number of students are having trouble finding someone to consolidate their loans as well," he said.
Another large bank in the Grand Rapids market, National City, now part of PNC Financial Services Group Inc., has halted its participation in federal consolidation loans, an official said.
The bank does offer students with loans of more than $30,000 extended repayment terms.
But the Pittsburgh-based bank said it still is lending to students. In fact, PNC increased lending to students and their families by more than 20 percent compared with a year ago.
Patricia Scott, director of the Michigan Bureau of Student Financial Services, said getting a handle on how many private lenders suspended student lending is easy to see.
The state once published a list of private lenders running more than 20 pages. That list is under five pages now, she said.
"With all of the credit market upheaval, all of the market has been impacted, including student loans," Scott said.
Most federal student loans still are available, although Michigan a year ago cut its MI Loan program, an alternative loan source for students attending Michigan colleges and universities.
The program helped students bridge the gap between college costs and traditional federal financial aid resources.
"There are ongoing efforts to monitor the credit markets, with the intent of bringing the program back," Scott said.



College Students Scramble as Bank Loans become Harder to Land for College Admission Help