CHICAGO – Finding financial aid for college this year promises to be tougher than any final exam.
The quest for money that begins for students and parents every January has taken on new urgency in 2009 amid fears that loans and grants will be scarcer than in the past because of the recession.
“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.”
Federal student loans remain readily available with some funding even increased recently by Congress. But the prospect that grants and scholarships may be cut at many schools, combined with the shrinking availability of private loans, has fueled widespread angst at a time when more people than ever are seeking help. Applications for federal aid for the current academic year already are running 10 percent above last year’s record pace, according to the Department of Education.
Savings held in Section 529 plans the state-sponsored investment funds for college that are popular for their tax breaks have been depleted by the worst bear market in decades and home equity values have plummeted. That has sapped two sources most tapped by parents to fund their children’s higher education. Colleges’ endowments have been similarly walloped.
Private student loans are especially hard hit. Last year, 60 private lenders provided $19 billion to students. Now, 39 of those have stopped lending to students and the remaining firms have made it harder to borrow, according to Finaid.org, a Web site that tracks the industry.
“The stress level is high,” said Rod Bugarin, financial aid adviser for the New York-based college consulting firm IvyWise.
