In the midst of a national credit crisis, a number of private colleges and universities have reported reductions in student loan availability and borrower benefits, according to data collected by the National Association of Independent Colleges and Universities.
NAICU’s most recent survey revealed that private lenders are tightening up credit requirements for loans by requiring higher credit scores and cosigners. Nearly 43 percent of survey participants reported that one or more of their lenders were no longer providing private loans. Another 30 percent of respondents said that one or more of their lenders were reducing borrower benefits. A slightly smaller percentage of institutions said that lenders were increasing their interest rates.
More alarming is the fact few institutions are prepared to deal with a credit market meltdown. When asked what actions would be available to students should private loans cease to be available, 48 percent of participating schools reported that they had no plan. Twenty percent of the institutions said that they would offer budget counseling and 15 percent reported that they would increase institutional funding. Only six percent of institutions offered tuition payment plans.
Dr. David Warren, president of NAICU, insists that institutions are looking for national guidance and safeguards from the government to avert a pending crisis. The federal government has taken no action, although congressional leaders have petitioned the Federal Reserve for assistance.
NAICU fears that minority and low-income students will bear the brunt of the sluggish economic climate. These students are less likely to meet the income and cosigner requirements of the increasingly exclusive private student loan industry. Combined with a decrease in federal student loans, there will be few financial options available for high-risk students. Earlier this quarter, Sallie Mae, the nation’s largest student lender, announced that it would no longer provide unsubsidized loans to borrowers at colleges with low graduation rates.
