Source: NY Times articleSome of the nation’s biggest banks have closed their doors to students at community colleges, for-profit universities and other less competitive institutions, even as they continue to extend federally backed loans to students at the nation’s top universities.
Citibank has been among the most aggressive in paring the list of colleges it serves. JPMorgan Chase, PNC and SunTrust say they have not dropped whole categories, but are cutting colleges as well. Some less-selective four-year colleges, like Eastern Oregon University and William Jessup University in Rocklin, Calif., say they have been summarily dropped by some lenders.
Citibank has been among the most aggressive in paring the list of colleges it serves. JPMorgan Chase, PNC and SunTrust say they have not dropped whole categories, but are cutting colleges as well. Some less-selective four-year colleges, like Eastern Oregon University and William Jessup University in Rocklin, Calif., say they have been summarily dropped by some lenders.
The practice suggests that if the credit crisis and the ensuing turmoil in the student loan business persist, some of the nation’s neediest students will be hurt the most. The difficulty borrowing may deter them from attending school or prompt them to take a semester off. When they get student loans, they will wind up with less attractive terms and may run a greater risk of default if they have to switch lenders in the middle of their college years.
Tuition and loan amounts can be quite small at community colleges. But these institutions, which are a stepping stone to other educational programs or to better jobs, often draw students from the lower rungs of the economic ladder. More than 6.2 million of the nation’s 14.8 million undergraduates — over 40 percent — attend community colleges. According to the most recent data from the College Board, about a third of their graduates took out loans, a majority of them federally guaranteed.
Tuition and loan amounts can be quite small at community colleges. But these institutions, which are a stepping stone to other educational programs or to better jobs, often draw students from the lower rungs of the economic ladder. More than 6.2 million of the nation’s 14.8 million undergraduates — over 40 percent — attend community colleges. According to the most recent data from the College Board, about a third of their graduates took out loans, a majority of them federally guaranteed.
“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 K. 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.”
So far, financial aid administrators say they have been able to find fallback lenders that students can switch to, but the hurdles are costly to students — in money and time. The maximum interest rate on federal loans, now at 6.8 percent on the most commonly used loans, is set by Congress, but lenders are scrapping benefits, like rate cuts for borrowers who make their payments on time or allow direct withdrawals from bank accounts.
So far, financial aid administrators say they have been able to find fallback lenders that students can switch to, but the hurdles are costly to students — in money and time. The maximum interest rate on federal loans, now at 6.8 percent on the most commonly used loans, is set by Congress, but lenders are scrapping benefits, like rate cuts for borrowers who make their payments on time or allow direct withdrawals from bank accounts.
Some loan companies have exited the student loan business entirely, viewing it as unprofitable in the current environment. By splitting out community colleges and less-selective four-year institutions, some remaining lenders seem to be breaking the marketplace into tiers. Students attending elite, expensive, public and private four-year universities can expect loans to remain plentiful. The banks generally say these loans are bigger, more profitable and less risky, in part perhaps because the banks expect the universities’ graduates to earn more.
1 comment:
some economy!
Post a Comment