Problems in the Student Loan Industry
Recent reports in the media have caused significant concern about the availability of student loans. The reports you’ve seen may have discussed issues with both federal (Stafford) and private (alternative) loans.
Stafford Loans
Much of the reporting done on the federal Stafford loan program has been exaggerated. Though some lenders have left the program, such as the Michigan Higher Education Student Loan Authority (MHESLA), there are still many lenders available who have made firm commitments for the 2008-2009 academic year.
Stafford loans are guaranteed by the federal government so credit checks and co-signers are not necessary. The amount students can receive is limited and based on grade level. Dependent students at the freshman level are eligible for $3500 for the year.
Private/Alternative Loans
The concerns about the private loan industry are not without merit and warrant your attention. Private, or Alternative loans, are loans provided by bank lenders that are used to supplement the grants, scholarships and Stafford loans the student has received. They are credit based, and the vast majority of students require a credit-worthy co-signer. In the current economy, many private lenders have seen disruptions to their funding which is causing them to limit the kinds of programs they offer, and tighten the credit requirements for their applicants. As a result, some students may have more difficulty obtaining private loans for the 2008-2009 academic year, while still others may see increased interest rates and fees.
Because it is difficult to foresee exactly which students will be affected, our best advice is that you do not delay completing any part of the financial aid process. The process includes:
- Submitting your signed FAFSA at www.fafsa.ed.gov.
- Returning all additional documentation requested by our office, (verification paperwork, etc.) promptly.
- Reviewing the Financial Aid Notification letter in your financial aid package carefully and working out a reasonable budget to determine how much if any additional funding you will require.
- If additional funding is required, review the Loan Information book included with your Financial Aid Notification letter for information on private loans. Once you’ve selected a lender, contact them to start the application process. It’s important to bear in mind that a pre-approval is not binding, and your loan is not secured until you have signed the promissory note and returned all requested documents to the lender.
Your ultimate goal should be to have a clear picture of your financial situation before school starts in September, so you can make informed decisions on your enrollment before charges begin to apply. The additional time may also allow you to review and clear up any mistakes on your credit report or to find a credit-worthy co-signer. Adding a credit-worthy co-signer is always your best chance to get a loan approved.
Though the credit requirements for PLUS loans are not changing, parents who are planning to utilize them for 2008-2009 may also want to consider applying as soon as possible, as many families have seen their credit damaged over these past months.
Please do not hesitate to contact our office if you will have any delays in completing your FAFSA or verification requirements due to a late tax return or other documentation problems. We will do everything we can to work with you. You can reach us by phone (313.664.7495), email (finaid@collegeforcreativestudies.edu) or by stopping in our office on the second floor of the Yamasaki building (appointments aren’t necessary). We are open Monday – Friday, 8:30 a.m. – 4:30 p.m.
