Students in need of a loan needn’t be intimidated by the looming credit crisis.
Although more students are taking out loans this year, university officials urge them not to worry – the credit crisis will not dramatically hinder their ability to pay tuition.
“We [financial aid] are not affected in terms of our ability to assist students,” said Katy Maloney, interim director of financial aid. “The only problem is that people read the news and think that they won‘t be able to afford schools. It’s more a psychological fear than anything.“
The two types of loans students typically take out are federal loans and private loans. Financial aid encourages those struggling to pay tuition to use private loans as a last resort, given their rising rates and required credit scores.
Approximately 300 – 1 percent of – students at UCD have chosen to take out private loans in order to fill the gap that federal loans, scholarships and other kinds of financial aid cannot fill.
The percentage of students going to private lenders is low because UCD receives money for loans from the federal government, not a bank or money lending institution, unlike many other schools. Even the largest private student loan provider, Sallie Mae Group, has decreased their loan aid by $1.2 billion in preparation for what they expect to be a difficult financial year.
“California has been able to keep the cost of education at lower levels than other states, but it competes with prison, health care, welfare and other state funded programs,” said Tom Timar, professor of education and expert in education finance and governance. “In the long run there are some very structural problems in the California state financing mechanisms.“
The only circumstance that would cause the university to worry about providing adequate loans is if the government cuts funding for higher education.
“If the federal government isn’t able to give us that money, then I would be worried,” Maloney said. “But I don’t see that happening right now.“
A national study revealed that the number of parents who take out loans for their child’s tuition has increased from 53 percent last year to 62 percent this year. Students like Ulysses Morazan, a second year biochemistry and molecular biology major, are deciding whether the loans he currently has will be sufficient for the coming academic year.
“It’s nerve-racking because I’m already going into debt,” he said. “If tuition keeps rising, I’ll either take out another loan or make some sacrifices, like commuting to school from Elk Grove every day. I wouldn’t want to do that, but I’d probably have to if I wanted to stay at UCD.“
The financial aid office at UCD has seen approximately 14 percent more applications for loans compared to last year. For the 2007-2008 school year, they have given nearly $79 million in federal direct loans to undergraduates, graduates and professional students.
“We don’t have a crystal ball and we can’t yet tell what the impact will be because most students turned in their applications by last spring,” Maloney said. “However, we do expect [the need for loans] to increase.“
LAUREN STEUSSY can be reached at firstname.lastname@example.org.