Feds still making loans to students

Uncle Sam might have a rescue package for you, too, if you’re a parent with a student who needs to pay for college.

Despite rumors that college loans will be hard to find from now on, federal money is out there for students. According to college loan specialists, students who want federal loans can get them, even though sources for private loans may be getting more difficult.

The basics of college lending amount to this: Anyone wanting to go to college can borrow from the feds or from a private lender, in their own name or their parent’s. Federal government loans for students and for their parents are still available. And these loans, while more tedious to apply for, usually come with lower interest rates, fixed rates and better terms than private loans.

Private loans are the ones that are now difficult to get, since private lenders began backing out of the student loan business about a year ago, said Sue Nelson, associate director of financial aid at Midwestern State University in Wichita Falls, Texas.

The government-based school loans system has had its own recent bailout.

“We had our own bailout, if you will, before this (current credit crisis) happened,” said Melissa Elliott, director of financial aid at Vernon College in Vernon, Texas. “The (U.S.) Department of Education said they would buy student loans from lenders versus them getting out of the program. There were some lenders that went with that program for this school year, and they would be selling their loans to the Department of Education. It’s all very complicated. We stay out of that fray. That is negotiated from the lender with the Department of Ed. Bottom line: I feel like they are making student borrowing a priority.”

A student should always be able to get a loan because the government requires its state guaranty agency to serve as a lender of last resort. “Our students will still be able to get loans through that agency,” Elliott said.

Nelson and Elliott agreed it could actually be a positive thing that private loans are more difficult for students to get now. Both said they see a trend among today’s students to borrow the maximum amount of money that they’re allowed — instead of the minimum they need to get by. Students increasingly prefer not to work while they’re going to school.

“We counsel them about over-borrowing,” Nelson said.