Oct 6, 2008 7:50 pm US/Eastern
It's Tough Times For Prospective College Kids, Too
NEW YORK (CBS) ―
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Many parents and students turn to privately funded school loans when the traditional government loans don't cover all the costs, but the money available may be shrinking and more expensive. (File)
CBS
The slumping economy is taking its toll on families seeking college loans for incoming students. Many parents and students turn to privately funded school loans when the traditional government loans don't cover all the costs, but the money available may be shrinking and more expensive.
Robert Loftus doesn't know where he's going to college next year, but he does know what he wants to avoid: "Struggling to pay loans when I'm trying to buy a house and start a family and things like that," he tells CBS 2.
The bulk of the payment pain will fall on Loftus' parents, who wonder what effect the credit crunch will have.
"It's beginning to be a worry, whether you'd get a loan and if so, at what rate," sayd Eileen Loftus, Robert's mother. "Are they going to lend you the money to send your kids to college?"
Currently, $148 billion is loaned every year for college. Most of it is federally funded but a portion, $18 billion, comes from private companies. The concern is that the credit crunch will shrink the piece of the pie, making it tougher for families to take a bite out of it.
"Then what's available – the interest rates are going to be much higher," says Sen. Charles Schumer (D-NY). "They're now as high as 19 percent. That's highway robbery."
And that's why Schumer is calling for a commission to monitor the student loan market, which he says might be drying up. The effect? Students are now making decisions with their wallets as to which campus they'll walk on.
"We are seeing an increase in the amount of students applying to state schools as opposed to those private colleges," says Verdel Jones, Director of Guidance at Plainedge High School.
With the average cost of a private school more than double what a public school is, it's easy to see why, and easy to understand why students like Gabriel Solis, a freshman at Pace, is giving up on his $30,000 a year loan.
"I'm transferring to a cheaper school. I'm transferring to a state school where it's like six grand," says Solis.
As for Loftus' prospects: "I'm basically looking at places that are going to be easier to afford," he says.
A prospect much easier said than done.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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