September 15, 2008 by Mara Strom
The news has been doom and gloom all year for would-be student borrowers. From private
loan companies folding to their insurers going under, it seemed that finding an affordable student loan for the ’08-09 school year was going to be impossible.
Well, lo and behold, according to recent articles in the Wall Street Journal, Chicago’s Daily Herald and a survey conducted by the New England Board of Higher Education, it turns out the bark of the financial aid crisis may have been worse than its bite.
So what gives?
Well, here are a few factors that may have eased the crisis:
* Congress raised the cap on its unsubsidized Stafford loans by around $2,000 a year. Unsubsidized loans don’t require applicants to demonstrate financial need. In the past, many families have complained that Stafford loan amounts were failing to keep pace with increases in tuition. Now, freshmen can borrow $5,500 a year, sophomores can take out $6,500 per year and juniors and seniors can receive $7,500 each year.
* In Illinois, the state government has paired up with eight state credit unions to offer $100 million in student loans to families affected by lenders that have ceased their financial aid lending. About 25,000 Illinois students are expected to benefit from this program, which will be allocating the money through unsubsidized Stafford loans.
* Congress passed provisions to the College Cost Reduction and Access Act of 2007, which forgive federal student loans for qualified individuals who have worked for at least ten years in public service.
* A growing number of private programs are also offering student loan forgiveness, including this one at Tufts University and this one, which we covered last week, through the AmeriCorps program.
* For nearly a decade, Congress has pressured private colleges about their dramatic annual tuition hikes, which have far outpaced the rate of inflation. As a result, schools like Harvard, Yale, Brown and Columbia have now started offering full rides to admitted students from middle-income families.
* As the Ivy League schools kick their financial aid rewards into high gear, a number of state colleges and universities, including the University of Washington, are following suit.
Tell us: What has been your experience? Was securing students loans more difficult this year? Did the credit crunch encourage you to look more closely at Stafford loans than you might have otherwise?