Contact: Sandy Connolly, Director of Communications
Office of Higher Education
Students Who Anticipate Needing a Loan for Fall Urged to Explore Options Now
The student loan market has been in the spotlight lately as some lenders have stopped making certain types of loans due to turmoil in the financial markets. The greatest concern has been that students may not be able to find lenders to help them pay for college. Officials from the Minnesota Office of Higher Education say there are loans available, but finding them may take more time. If a student loan is needed for fall 2008, it is important to plan ahead, and shop now.
Since the beginning of 2008, dozens of lenders have announced they will stop making new federal Stafford and PLUS loans. Among them are major public lenders, such as the Michigan Higher Education Student Loan Authority, the Massachusetts Education Financing Authority as well as private and not-for-profit entities such as the College Board have suspended their federal student lending programs. Some lenders have also stopped offering private student loans, or have made eligibility requirements for these loans more stringent.
A list of state and for-profit lenders and what they currently offer is updated regularly at http://www.finaid.org/loans/educationlenders.phtml.
In Minnesota, TCF Education Financing and NorthStar Education Finance suspended issuing new federal student loans. The University of Minnesota, Minnesota State University Moorhead, Gustavus Adolphus College, Bemidji State and 15 other Minnesota colleges are direct lenders, meaning they issue federal Stafford and PLUS loans directly to their students. These Direct Loan programs use money from the federal government and are not affected by financial markets.
Tips for students and their families:
- Complete and submit the Free Application for Federal Student Aid (FAFSA) now.
- Talk with your college financial aid office.
- Find a lender now, for fall 2008, even though you loan may not be finalized until July.
- Ask questions about eligibility requirements and interest rates.
- Apply for your loan as early as possible.
- Plan extra time for loan applications to be processed this year, so that delays don't interfere with attending class in the fall.
A bill passed recently by the U.S. Congress and signed by President Bush will help. The legislation raises the amounts students can borrow through federal unsubsidized Stafford and PLUS Loans, making it less likely that private or alternative loans will be needed. It also loosens the rules so parents who are behind on mortgage payments can still qualify for federal parent loans. And it gives them more time before they must begin repaying parent loans. The annual loan limit for unsubsidized Stafford loans goes up by $2,000 for all undergraduates. The new limits for dependent students will be $5,500 for freshmen, $6,500 for sophomores, and $7,500 for juniors and seniors. Independent students or those whose parents don't qualify for a government PLUS loan will be able to borrow up to an additional $6,000 (on top of the previous $5,500) in each of the first and second years, and $7,000 in the third and fourth years. Besides easing borrowing pressures for families, the law also attempts to get more money into the hands of lenders so they can continue making education loans. To do this, the federal government will be allowed to temporarily purchase loans from private lenders.
For more information and guidance, contact the financial aid office at the institution you attend or plan to attend. A list of Minnesota colleges and universities is available here.