Credit Crisis: What to Expect
It’s been almost two months since the passing of the Emergency Economic Stabilization Act of 2008, more popularly known as the Bailout Bill. Certainly, the stock market has felt a majority of the pressure as it picks itself up only to fall back down a few times every day. But how has this all impacted higher education?
In our conversations with financial aid experts, we’ve uncovered the effects of the economy on eligibility, availability, and cost of student loans.
“The bottom line,” say financial aid experts, “is most students and families should still be able to obtain federal education loans.” Experts are quick to add that families with bad credit will encounter trouble in getting a loan. Some families will also have to find new lenders.
As a result of cost, students will opt for less expensive colleges in order to avoid having to vie for a private student loan. Additionally, customer service in the lending sector will deteriorate, meaning that families can expect longer hold periods on their loans.
Though the Bailout Bill shouldn’t affect the federal budget in the long run, financial aid experts warn that it could be used as an excuse to cut spending. A likely target is the Pell Grant, especially since recent funding has exceeded appropriations. Last year, in fact, Congress cut $69 off the maximum Pell Grant and cuts are likely to occur again this year.
College budgets will also be affected. Lenders have been cutting off loans to fund building projects and payroll. Financial aid experts state that “increases in the cost of financing will ultimately lead to increases in tuition rates.”
Although the Bailout Bill hasn’t directly affected the student loan and higher education markets, the overall effects and scare of the economy have begun to take their toll indirectly. Families going through the college search process will have to examine their financing options more stringently with the increasing costs of college and student loans.
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