Trouble with student loans?

Across the country, college students are seeing more direct results from the faltering economy besides high gas prices. Students at two-year schools and technical schools are no longer eligible for college loans from a number of big banks and lenders, like Citibank and Chase.

With students seeing more problems finding a way to pay for college, there may eventually be higher dropout rates than normal. Other students might have to stretch pennies even farther than before, including incoming freshmen.

"I'm an incoming freshman and I need to pay for the things I need," said Michell Roberson, a new Weber State University student. "But prices are rising because of the economy."

Some national lending companies have completely dropped support for Federal Family Education Loan Program (FFELP), a federal-private program available to students, and this is leaving the federal government with no private lender support. The Stafford Loan is the largest component for the FFELP, and relies on private lenders to front the money, and then the government will cover the interest rate accrued while the student is in school.

"I think education in our country is important," said Beau Burgess, a WSU sophomore, "so by banks dropping that option, people that would have had the opportunity to go to college won't have it, which may have more drastic effects in the future."

Other banks opted to cut specific schools rather than eliminating whole groups of schools from loan eligibility. Four-year colleges like Eastern Oregon University and William Jessup University are no longer receiving private lending support.

A growing concern over the denied loans to certain schools is that many loans students had access to, like the Stafford Loan Program, are federally funded as well as privately funded. Now banks are being accused of cherry picking with taxpayers' money, meaning that while some students can continue to receive loans through the federal-private programs, others will not have the same access to these programs.

"A large proportion of student loans are made through a small number of private lenders," said Nanzeen Ahmad, a WSU professor in the economics department. "Lenders generally borrow money to lend it out. However, with the credit crunch it is now harder for lenders to raise money, so some of these institutions are not lending as much as before. Students, however, can still find new lenders, but they may have to pay higher interest rates."

Students throughout Utah have not quite seen the effects of the nation-wide financial aid issue. Utah is strongly supported by the Utah Higher Education Assistance Authority, a state program in place to help students pay for college.

"As far as money being available, that's affecting all the schools," said Claude Payne, manager of loans at WSU. "Congress has been cutting back on the amount of money going out to schools. I know that with the Perkins Loan, congress has not, for the last six years, funded any new money for it, so everything that is collected by Weber State goes right back out to another student and the money is dwindling down."

Banks and big lenders may have previously supported smaller school loans, but because of the state of the economy, lenders have reevaluated the value of these loans. Very little money, if any, is made from creating the shorter term loans that two-year schools depend on. Default rates on shorter term loans were also part of the decision to drop loan options in two-year and tech schools.

"The default rates on the two-year loans have always been much higher than the four-year loans," said Clifford Nowell, professor of the WSU Goddard School of Business, "and so they are a little more of a risky investment for lenders."

The economic issues affecting students go beyond loan availability, and students recently graduated or about to may see some of the effects.

"Unfortunately, students who are graduating right now are entering at a very difficult time and some of them are likely to default," Ahmad said. "The reason is job prospects are limited for them; if they are lucky to find a job, they might not be lucky to get their expected salary. This will make it hard for them to pay off their student loan."