Student Loans Bypass Community Colleges
Some of the nation’s biggest banks plan to stop providing student loans for college applicants and students. Less-selective four-year colleges, like Eastern Oregon University and William Jessup University in Rocklin, California, have already been dropped by other student lenders.
The New York Times reports that some loan companies have exited the student loan business entirely, viewing it as unprofitable in the current environment. By splitting out community colleges and less-selective four-year institutions, some remaining lenders seem to be breaking the market place into tiers.
Lenders will not say how many colleges they have dropped, making it hard to determine just how many institutions have been affected. Although financial aid administrators say the trend is widespread, they are often reluctant to identify which lenders have stopped serving their colleges, for fear that it will complicate matters for current students who have taken out loans from those lenders and still need to deal with them.
Democratic Underground states that the practice suggests that if the credit crisis and the ensuing turmoil in the student loan business persist, some of the nation’s neediest students will be hurt the most.
The difficulty borrowing may deter them from attending school or prompt them to take a semester off. When they get student loans, they will wind up with less attractive terms and may run a greater risk of default if they have to switch lenders in the middle of their college years. Tuition and loan amounts can be quite small at community colleges. But these institutions, which are a stepping stone to other educational programs or to better jobs, often draw students from the lower rungs of the economic ladder.
According to the most recent data provided by the College Board, about a third of their graduates took out loans, a majority of them federally guaranteed.
Photo: © yuankuei
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