Federal loans are the most important form of aid to students and form 41% of the total aid offered to undergraduate students in colleges. Private loans are then used to top up the difference after obtaining a federal student loan. Tuition fees vary widely with the kind of college public or private, and the status of the student in-state or out-of-state. For further detail regarding financial aid please visit How to Research Your Financial Aid Options.
How difficult is it to obtain loans?
The economy has given all sectors a big jolt and higher education is no exception. According to an article published by USAToday.com, even Harvard, the wealthiest university in the USA, faces financial cuts and California State University plans to limit enrollments in the coming year.
Sallie Mae, the nations foremost provider of student loans, has decided to constrict the underwriting on all private student loan products. This means that applicants will have to satisfy higher credit standards and will meet with lower approval rates for these loans. Sallie Mae also proposes to raise its loan pricing. At a time when students aid requests are up 16% as compared to the previous year, Sallie Maes decision will be hard on parents and students alike. [Source: McClatchydc.com]
However, according to a 2008 report, total grant aid and total federal loans calculated per each undergraduate increased by 5.5% for the academic year 2007-2008. The same year, over 143 billion USD was distributed to undergraduate and graduate students in the form of grants (including Pell grants), federal loans, tax credits and deductions. Students also borrowed more than 19 billion USD from state and private sources.
According to a November 2008 press release, the U.S. Department of Education is trying to make sure that students do not suffer and can have uninterrupted access to federal loans. Lenders have committed loan volume to schools for the upcoming 2009-2010 academic year, and the Department of Education, in synchronization with the Treasury Department and the Office of Management and Budget, is implementing the extended Ensuring Continued Access to Student Loans Act to ensure more liquidity in this market. The Department of Education has indicated that it will repeat the PPI and loan purchase programs for loans in the academic year 2009-10.
Aid for Online Degrees - How does the loan process work?
Aid for online degrees is available and as a student applicant, one of your first tasks would be to check with the financial aid advisor whether the school you intend to enroll in qualifies for federal student loans. Online degrees cost considerably less than regular college education as they do not include costs such as transportation, boarding and food.
Broadly speaking, loans can be categorized as need-based or non need-based. For loans based on financial need, the federal government is the largest provider via subsidized Stafford Loans, the Perkins Loan and subsidized Direct Loans. These loans are characterized by low interest rates, delayed repayment with the government paying interest while you are in school.
When the costs are shared by the family and loans are needed to help make up the deficit, a non need-based loan is the best option. These loans are characterized by higher interest rates than federal loans, have no subsidy on the interest and may require immediate repayment of the principal. The four types of loans in this category are: unsubsidized Direct Loans or unsubsidized Stafford Loans for students, Grad PLUS loans for graduate students, private loans for students and PLUS Loans for parents [Source: CollegeBoard.com]. To qualify for federal loans, the student must be enrolled at least part-time at a college/university.
Are scholarships being cut?
HSBC has pulled out from the US student loans market and the Consumer Bankers Association has stated that many more might follow suit as they are not able to secure the debt. Iowa Student Loan, a private lender, has announced that it will stop giving students loans due to the current economic crisis. Congress is known to have urged the Bush Administration that the situation warrants attention after the National Association of Independent Colleges and Universities issued a caution that student loans have become more difficult to get since the economic slowdown. [Source: Business.TimesOnline.co.uk]