Article Views:
139
Ezine ready page
Ezine ready page
Posted on June 15, 2008 by Jeff Mictabor | Posted under Loans
Profit-Conscious Banks Cut Student Loan Programs to Community Colleges
|
Getting money for school could get more challenging this fall for the more than 6.2 million students who attend community colleges, as some of the nation's major banks become more selective about which schools they do business with. Citibank, JPMorgan Chase, PNC, and SunTrust recently announced they will no longer offer federal student loans (http://www.nextstudent.com/student-loans/student-loans.asp) to undergraduates enrolled at certain community colleges and other less competitive two- and four-year institutions — schools that the banks have determined tend toward higher default rates, fewer borrowers, and small college loan amounts that make business less profitable. Students enrolled at community colleges — who make up more than 40 percent of the undergraduates in the United States — take out an average of $3,200 a year in college loans (http://www.nextstudent.com/private-loans/private-loans.asp), according to the College Board. While it is not known whether more banks will follow suit or just how many two-year schools will be affected by the banks' decision, the absence of these lenders could compound the availability problem with federal student loans at community colleges. Banks' Lending Selectivity Presents New Challenges for Two-Year Students Undergraduates at 25 percent of the nation's community colleges already lack any kind of access to federal student loans (http://www.nextstudent.com/), simply because their schools don't participate in the federal student loan program, according to a report released in April by the Project on Student Debt. This basic availability problem, combined with the banks' recent shift away from two-year schools, may make it more difficult for community college students to pay for school. Susan Mead, director of financial aid at Dutchess Community College in New York, told The New York Times that her institution has been dropped by at least six lenders so far — Chase, Citibank, Citizens Bank, HSBC, M&T Bank, and Student Loan Xpress. These lender departures from entire categories of schools are unprecedented, added Samuel Collie, director of financial aid at Eastern Oregon University in La Grande, Ore. “There's been a certain amount of market segmentation going on, but this is the first time we've seen a lender, especially as large as Citibank, saying 'We don't want to do business with you,' " Collie said. Low-Income Students May be Most Affected by Limited Access to Federal Student Loans Community colleges, with their low tuition and flexible hours, tend to serve a large number of low-income and working students, and it is these disadvantaged students who may find it the most difficult to afford a college education as the current credit crisis and the turmoil in the student loan credit markets continue to affect the availability of federal student loans at community colleges. Although community colleges generally offer undergraduates one of the most affordable options for higher education, without access to the full range of low-cost, low-interest federal college loans available to the undergraduates enrolled at four-year institutions, low-income students at two-year schools may be forced to rely on costlier ways to pay for college. These students may end up turning to high-interest credit cards or more costly variable-rate private student loans (http://www.nextstudent.com/private-loans/private-loans.asp), which can carry high fees and may not offer the same income-sensitive repayment options available with fixed-rate federal student loans. “If we put too many hurdles in their way to get a loan, they'll take a third job or use a credit card," said Jacqueline Bradley, assistant dean for financial aid at Mendocino College in California. “That almost guarantees that they won't be as successful in their college career." Learn more about Student Loans and Private Student Loans (http://www.nextstudent.com/). About The Author: |
Tags: STUDENT LOAN CONSOLIDATION, STUDENT LOANS, STUDENT DEBT CONSOLIDATION, FEDERAL STUDENT LOANS, FEDERAL DIRECT LOANS, FEDERAL STUDENT LOAN, FEDERAL LOAN
