Weakening economy affects student loans

As the economy weakens and credit tightens, the number of education loans available to college students is declining.

Last week, Michigan News reported the state is suspending its Michigan Alternative Student Loan Program due to credit problems that are making it hard for borrowers to get money.

MI-LOAN is one of the few private fixed-rate loans available to Michigan students. The loans are primarily used by students who do not qualify for traditional federal aid programs or who need more money than is available through the traditional programs.

The suspension could cause students currently receiving the MI-LOAN to take out multiple loans or turn to other private lenders.

Nationwide, other private, or alternative loans, could be effected as well.

Donna O'Quinn, assistant director of financial aid at USM, said she does not know at this point if USM students will be affected by folding loan lenders.

"Here at USM, the only thing we have seen happen is that some lenders have gotten out of the program because it was too expensive for them," she said. "Other alternative loan lenders could leave the program as well."

O'Quinn said it all depends on what version of the reauthorization act of the Higher Education Reconciliation Act passes in Congress.

On Feb. 7, the House of Representatives voted to reauthorize HERA by passing the College Opportunity and Affordability Act, according to information found on edlabor.house.gov. Next, the bill will go to Conference Committee for negotiation. If Congress passes the bill, it will be sent to President George W. Bush to be signed.

The new act would put new restrictions on relationships between student loans and colleges. It would also make the process of applying for financial aid easier, increase visibility of private student loans and combat rising costs of tuition. If passed, O'Quinn said the act would make alternative loans more restrictive. "The credit requirement will be more strict, meaning parent and student cosigners will need higher credit ratings to be qualified," she said.

O'Quinn said lenders are leaving the market because more people are borrowing money than paying it back. "Due to the market, it is difficult to find money, and many companies are not making money. They are doing this to protect themselves," she said. O'Quinn wants to assure students that the federal loans programs are not in danger but could see some changes.

"We (at USM) have not felt the effects of this so far, but we anticipate it to be more difficult to get private loans," she said. "We are in limbo, just as students are."

Laurie Benvenutti, a junior business administration major from Bay St. Louis, said she does not have any private loans but knows people who do.

"This is going to hurt a lot of students because most students haven't built up their credit yet, so they will not be able to get student loans," she said. "This is going to make it much harder for people to pay for college - especially since the cost of tuition keeps rising."