Tuition rates are continuing to increase, but the use of private loans has decreased by nearly 50 percent at some universities. Around the country, private loans had been a rapidly growing payment source for college until the recession hit.
At the University of Nebraska-Lincoln, however, the decrease in private loans appears to be less substantial because UNL hasn’t projected solid lending numbers as far in advance as other institutions.
“Because of the collapse of the credit market, far fewer dollars are available to lend and fewer lenders making loans,” said Craig Munier, director of scholarships and financial aid at UNL. “Lending practices became far more conservative.”
At the same time, the federal government increased the amount of money students could borrow, Munier said.
“Now that loan limits are higher, federal borrowing is expected to increase,” he said.
This also accounts for the decrease in private lending.
“With that increase, students may not have needed to borrow as much in the private loan programs,” said Ritchie Morrow, financial aid coordinator for the Nebraska Coordinating Commission for Postsecondary Education.
Congress is currently debating whether greater amounts of money should be borrowed through the Perkins Loan program, which is also expected to decrease the amount of private loans.
Munier said it’s an advantage for students that federal loan limits have increased.
“The terms and conditions of federal loans are better; interest rates are better,” he said.
Federal loans have fixed or low interest rates that can be subsidized, while private loans have higher interest rates and don’t necessarily pay for college in the most cost-effective manner.
Scholarships and federal loans still allow students to attend college despite the decrease in private loans. And with the recession, it’s likely that more students will consider attending college.
“When students are unable to find employment, they go to college. We know that’s true of graduate students,” Munier said.
Morrow agreed.
“I don’t think there is any significant change in the numbers of students deciding to attend college versus the number that are waiting a year,” he said. “Usually when the economy is in a recession, jobs are hard to find, so more students decide to attend or return to college.”
Scholarships, although helpful in paying for college, don’t affect the amount of private loans.
“They go up every year, but that’s because of inflation,” Munier said.
Morrow offers some advice to those trying to pay for college: “Complete the FAFSA. Apply for scholarships. Borrow a private loan only if absolutely necessary.”
nicolestaton@dailynebraskan.com
Use of private loans plummets during recession
Published: Sunday, November 1, 2009
Updated: Sunday, November 1, 2009
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