Navigating the Loan Market
Navigating the Loan Market
It’s been in the news a lot. The Mortgage Loan Crisis not only affects home owners but it also affects every level of borrowing for the consumer. This includes the loan market for college and universities.
This year, 2008, is one of the most competitive in a long time for college admissions among students. With many students enrolling in school and many applications for loans being filled out, there was some worry about meeting the needs of all the students who need financial aid.
Even though there are some lenders who have dropped out of the federally funded college loan market, the Department of Education has stepped in with a stop gap measure to help students who need help. There are three specific things that the DOE has done that will help students and their families navigate this market. First, they have raised the loan limits by $2,000.00 per year. Second, they have changed the rules on loans for parents of students to make it easier to qualify for a loan and to repay it. Even though there is still money available, it will still be a little bit of a mess to get to the loans.
Third, the DOE has done one other thing that will make the loan market better able to stand the amount of money that is needed. They have agreed to buy the debt for federal student loans if other lenders and investors don’t step in and help fund the market. This not only makes it a secure loan but it also encourages other lenders who have dropped out of the college loan markets to get back into funding these loans.
Despite all the maneuvering, the federally funded loans will be available. Because private loans are more expensive, the federal loans look better and cost less than the private loans.
As with any large purchase or investment, you need to shop around and get the best loan available for the money. Remember that it not simply paying back what you borrow but it is also paying the interest on the money you borrow. Sometimes the up-front costs look great but you could wind up having to pay a great deal more than you bargained for at the end of the loan because of the way they are funded. Therefore, you need to look at the full amortized schedule as well as the up front costs before you make a final determination. You’ll be glad you did the work needed to find the perfect loan for you and your student.