Given the current annual cost of four-year public and private colleges, it’s no surprise that students sought more than $148 billion in financial aid during the 2006–2007 academic school year. However, funding for college may not be as readily available from college lenders for the upcoming school year, as some low-cost federal student loan programs dry up and even high-cost private student loans become harder to get. How do you get funding from college lenders?
Several lending companies that offer federal loans have recently backed out of the student lending market because of the fallout from the sub-prime mortgage crisis. Some lenders are backing out of the federal loan market as a result of the 2007 College Cost Reduction and Access Act, which lowers the profit that lenders can make on federal loans and raises the fees that lenders must pay.
As a result of the credit crunch and tight lending standards, some private college lenders are setting tougher standards for their private loans, such as asking for better credit scores from families and demanding that the student be enrolled at institutions that have higher graduation rates. This shifting lending landscape means that some college students may not qualify for private loans, or their cost to borrow these loans will be much higher.
If you absolutely must use private education loans to pay for college, please do your research and shop around before choosing a lender. Be sure to keep written records of all forms, applications and correspondence with your lender, especially regarding discounts and special deals. Furthermore, be sure to ask the following questions from college lenders before you borrow:
- What is your lowest interest rate and how do I qualify for it?
- Is the rate only for a limited period, or is it for the life of the loan?
- Is it a variable or fixed rate loan?
- If variable, is there a limit on how high the variable rate can go?
- How often is the interest rate adjusted?
- How long will I be repaying the loan?
- Is there any penalty for paying it off early?
- When do I have to start making payments?
- Can I defer payments while I’m in school?
- Do you offer a discount with your loan?
- Are your discounts guaranteed, or are they subject to change later?
- Can I reduce my payments temporarily because of economic hardship?
Paying for college gets more expensive every year. If you plan to send your child to college in the next few years, don’t try to navigate the financing by yourself. We’ve had many clients come in to see us after their children have started college, only to discover that they lost a lot of money by not seeking qualified advice. Whether you borrow for college or not, we can help you to potentially reduce and even recapture your costs. Call us for for your free consultation.