Downsizing in the sluggish economy has driven many people to college for new careers or updated skills, but they may find it harder to get the money they need to pay their way, local financial aid officials say.
Escalating panic among lenders and on Wall Street could throw up roadblocks on some financial avenues, said Rexann Bumpus, director of financial aid at the University of Tennessee at Chattanooga.
“There (are) definitely not going to be as many choices for students,” she said.
Since 2007, 137 education lenders have exited or suspended their participation in all or part of the Federal Family Education Loan Program, the federally guaranteed student loan program. There have been more than 6,106 layoffs in the student loan industry since last year, according to FinAid.org, a Web site that tracks financial aid.
Many lenders have been affected by the frozen credit markets and no longer view the student loan business as profitable, experts say.
No students were denied loans through the Family Federal Education Loan Program this fall, but funding was delayed at many Tennessee colleges, said Levis Hughes, associate executive director for loans at the Tennessee Student Assistance Corp.
Mr. Hughes said delays have been caused because lenders were challenged to find the cash they needed during the fall peak lending session and turned to the U.S. Department of Education for funding, which never has been an alternative until this year.
At UTC, one lender, Edamerica, delayed funding for a week, causing college officials to offer book loans of up to $500 so students could begin their semester of classes, Ms. Bumpus said.
“It was an inconvenience,” she said. “There (are) a lot of unknowns.”
Schools such at Bryan College in Dayton, Tenn., and Cleveland State Community College in Cleveland, Tenn., also faced delays receiving loans, officials said.
In fact, at Cleveland State, which began its fall semester more than a month ago, there are still about 75 students waiting for their federal loans, said Michael Stokes, vice president for student services at the school.
The same problem may arise next year, as well, Mr. Hughes said.
While federal loans still are available, although the wait may be longer, students needing private student loans are finding a much stricter market, experts say.
“Private loans are experiencing a continuing meltdown,” said Mark Kantrowitz, publisher of FinAid.org.
Ms. Bumpus said the number of students at UTC denied alternative or private loans has tripled since last fall. At Bryan College, about 30 students applied for private loans but did not have a problem, said Rick Taphorn, director of financial aid at Bryan.
Borrowers with marginal credit ratings will not have the access they have had in the past to private student loans, Mr. Kantrowitz said. More banking and lender institutions are requiring either excellent credit — a problem for students without a credit history — or that a student have a loan co-signer with excellent credit, he said.
The scarcity of private loans soon will be compounded by increased fees, he said. Next month, interest rates will rise 2 to 3 percent on many private loans.
“Private student loans are going to be less available,” said Mr. Kantrowitz. “I do think that things are going to get more difficult.”
Yet there is a silver lining, he said.
A federal bill passed this year, the Ensuring Continued Access to Student Loans Act, increased yearly limits on federal loan programs by $2,000, he noted, making it easier for students to avoid high-interest private loans.
“It means families are going to have to start focusing more on the cost of education,” he said. “It gets families to focus on costs ahead of time. It may encourage families to minimize debt.”
Joan Garrett McClane has been a staff writer for the Times Free Press since August 2007. Before becoming a general assignment writer for the paper, she wrote about business, higher education and the court systems. She grew up the oldest of five sisters near Birmingham, Ala., and graduated with a master's and bachelor's degrees in journalism from the University of Alabama. Before landing her first full-time job as a reporter at the Times Free Press, ...