I have never hid my opinion from our readers that, if given a choice, federal student loans are far superior to private student loans. Federal student loans have lower interest rates, more favorable terms (such as income-based loan repayment), don’t require a co-signer, and freeze your repayments and interest while you’re in school. All these factors, coupled with the instability of the private loan market starting last fall, make federal student loans a much better option than private student loans for students. Congress concurs, which is why a House committee recently took up a bill to more closely regulate private student loans within its overhaul of banking regulations. If approved, the Consumer Financial Protection Agency Act of 2009 would create a new centralized fed...

Yesterday, we talked about whether or not paying for college should be the parents’ responsibility. At the end of the post, I asked what you thought about cosigning a student loan. Is cosigning a great way for parents to help out their kids with the rising cost of college? Or is co-signing a slippery slope that does nothing but hinder both parties? Lots of financial experts out there have an opinion on this matter, and most of them say: Don’t do it! For example, here’s: MSN Money on why you should never cosign a loan Finance author Francine Huff on thinking long and hard before cosigning on a personal loan Talk show host Dave Ramsey on how cosigning can hurt your family Financial expert Suze Orman on why love means never having to say you’ll cosign Why do the expe...

The credit crisis has everyone on edge. If you are planning to take out student loans to help pay for your college education, you, too, may be worrying about how this financial crisis is going to affect you. If your credit rating isn’t all that good, your worry is probably pretty intense. But before you hit the panic button, take a deep breath and read this post… it’s got everything you wanted to know about getting a student loan in spite of your credit score! Apply for federal student loans first Remember that there are two kinds of student loans: those that are guaranteed by the federal government and those that come directly from private lenders without government guarantees. Government guaranteed loans take the form of one of three types: the Stafford Loan, the Perkin...

According to this recent article on MSNBC, college students are scrambling for financial aid for next year: “The financing system for college is in real crisis,” said Barmak Nassirian, associate executive director of the American Association of College Registrars and Admissions Officers. “Every one of the participants in the system is experiencing hardship – higher education institutions, states, aid donors and families all are cash-strapped.” According to the article, college grants are down as schools struggle with their depleted endowments. Private loans are also way down. Last year, there were 60 private lenders loaning $19 billion. Today there are just 21 private lenders, and they are making it increasingly difficult to qualify for a private student loa...

Credit is retracting in nearly every sector – home mortgages are dwindling, business loans are down, car loans are non-existent.  But there is one area in which credit has actually expanded: Government-backed, higher education loans. The total number of student loans made in 2008 is up 18.6% from 2007, according to an article in today’s Wall Street Journal.  Home mortgages, on the other hand, were down 38%. At the same time that federal lending has increased, private education loans have shrunk.  Thirty-nine private lenders stopped making private loans, according to the WSJ.  The private loan sector, which accounts for one-fifth of total education lending, fell by as much as 25% in 2008. The Federal Reserve Bank is trying to kick-start private lending with a $200 billio...

October 6, 2008 by Mara Strom You can’t turn on the TV these days without being bombarded by financial doom and gloom.  If you are a college student (or planning to be one in the near future), there is no doubt that current economic climate is going to have some kind of an impact on your student financial aid package.  Over the next few weeks, we’ll be looking at the cost of attending college during an economic downturn, with stories on how to recession-proof your college savings and how the market cash will impact your 529 Plan. This week, I’m putting the spotlight on how the recession may impact your student loans. The University Chronicle recently reported on how that the current credit market crunch is affecting education lenders. According to this October 2nd a...

September 22, 2008 by Mara Strom A panel of financial aid experts thinks that America’s federal financial aid system needs a major overhaul.  According to the Rethinking Student Aid study group, these changes include simplifying the application process (aka FAFSA, or the Free Application for Federal Student Aid) and increasing Pell grant maximums. The most sweeping change recommended by the Fulfilling the Commitment report is the creation of federally-funded college savings accounts for children from low-income families. Each year, the government would add money to a fund for each eligible child, until that child turned 18. To draw on the fund, the money would have to be used to cover approved college expenses.  The group recommends starting the program from the age of 5. The G...

July 15, 2008 by Mara Strom Some of you may be wondering whether qualifying for a federal loan is really that big of a deal. You figure money is money, and debt is debt. Plus, you’ve heard that applying for and getting accepted for a private loan is easier and faster. While it’s true that any green will pay the bills, not all loans are equally emerald. Here’s a look at the major differences between federal and private student loans. Federal Student Loans Backed by the U.S. government, federal student loans are available through your school (Perkins loans) or through lenders and banks (Stafford and PLUS loans). To qualify for a Federal Student Loan, you must complete a FAFSA, the Free Application for Federal Student Aid. Benefits of federal loans include: • Lower, ...