By Tami Luhby, CNNMoney.com senior writer
February 15 2008: 12:12 PM EST
NEW YORK (CNNMoney.com) -- The credit crunch is hitting the college classroom.
When parents and students try to line up college funding this spring, they will likely be in for a nasty shock. They may still get a loan, but it will come at a price. Borrowers will have a more limited choice of lenders and find discounts for on-time payments or direct debit scarce. On top of that, they'll see higher rates and fees.
The credit crisis, which started last year with mortgages and has bled into many other areas, is now affecting student loans. Many lenders, particularly smaller companies not affiliated with banks, are finding their main source of funding for private student loans cut off as investors balk at buying securities backed by these loans. This will force some to boost interest rates on private loans by up to 1 percentage point, raise minimum credit scores to 650 and require parents to co-sign the loans, experts said.
"If lenders are not able to securitize, they are not getting the capital to make new loans," said Mark Kantrowitz, who runs FinAid.org, a college funding Website based in Cranberry Township, Pa. "It's an issue of liquidity and cost of capital."
On top of this, legislative changes enacted by Congress last year have sent some lenders fleeing from the federal student loan program. Lawmakers reduced the subsidy lenders receive for making government-backed loans.
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more:
http://money.cnn.com/2008/02/14/news/companies/privatestudentloans/index.htm?cnn=yesWell, SHIT. I could never have gotten through grad school without student loans -- and really couldn't do without them even as an undergraduate. This is going to affect a lot of people who were just barely managing to afford college already.
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