So Far, So Good for Federal Student Loans
The current credit crunch has many wondering how financial aid awards will be affected. The Office of Student Financial Aid does not anticipate that federal loans, namely Stafford student loans, will be affected by the current economic situation. Congress recently passed the Ensuring Continued Access to Student Loans Act of 2008, which is providing assistance to education lenders for 2009–10 so that they may continue offering federal Stafford loans to students. If this credit crisis lasts beyond the upcoming academic year, however, the lending situation may change.
The problems in accessing credit for the upcoming year will occur with consumer loans that might be used for funding education, such as home equity loans or private, alternative educational loans. The alternative loans are not insured by the federal government, and lending agencies set their own terms. If the cost of credit goes up, lenders may increase interest charged or fees assessed, or they will suspend lending because they no longer show a profit with these types of loans. At UW–Madison, about 10 percent of students who apply for aid access alternative loans.
Knowing that, what is the best way to protect your student’s ability to borrow in these challenging economic times? Sandi Cechvala, with the Office of Student Financial Aid, says, “If we had the answer for that, we’d certainly share it with all of our students. But there are two things we always suggest: pay all of your bills on time to keep a good credit score and be sure to access all of the federal loans you can before you look for other means of funding.”
The process of applying for 2009–10 financial aid begins soon. The FAFSA (Free Application for Federal Student Aid) for 2009–10 is available online beginning January 1, 2009. Don’t wait to start the process; visit www.fafsa.ed.gov/ for more information.
For further information, please contact the Office of Student Financial Aid or the Parent Program.