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Credit Crunch Impact on Student Loans Across the Country

Dear Parents and Prospective Students,

College students heading off to campus this fall will face a radically different student loan situation than they did only a year ago. The credit crunch that has rattled mortgage lenders has now spread to the education market, and numerous news stories have circulated about the impact of the economic downturn on student financial aid.

Southern Connecticut State University's Office of Financial Aid is closely monitoring the impact of these developments. To avoid confusion and help dispel concern, our office is eager and available to help students and families gain the information they need to finance an education at Southern. Below are some points about the impact on federal aid and the impact on alternative (private) loans. If you require further information, please contact our office at (203) 392-5222.

 

Federal Family Educational Loan Program (FFEL)

  • FFEL (Stafford, Unsubsidized, Perkins) will continue to be available to eligible borrowers and is not based on the credit of the applicant.

  • Parent Loans for Undergraduate Students (PLUS) and Grad PLUS loans are based on the borrower's credit.  Borrowers should apply for these loans as quickly as possible to prepare to cover their semester charges.

  • For our student and parent borrowers, Southern Connecticut State University provides five student loan lenders to choose from that have excellent repayment rates, good customer service, and expedient processing.

  • Some lenders have chosen to exit the FFEL program.  Our financial aid office will monitor this issue and will notify you if you need to choose a new lender. If your previous lender is no longer participating, you will have to complete a new Master Promissory note with the lender of your choice.


Impact on Alternative/Private loans

  • Many lenders are increasing the cost of their alternative/private loan products for some or all borrowers based on credit ratings.  If you wish to continue borrowing through the same alternative lender as in the past years, we encourage you to contact the lender to see if there will be any changes for their 2008/2009 alternative loans.

  • Make sure that you have exhausted all of your federal borrowing options.  Did you file a FAFSA (http://www.fafsa.ed.gov/)?  If not, you should do so immediately to qualify for a Stafford loan and, if you are eligible, other aid.

  • Consider the monthly payment plan. The university offers a monthly payment plan that allows you to spread out your payments over several installments throughout the semester.  More information about this plan will be forthcoming on the bursar's Web site.

  • Ask your parent to consider applying for a federal PLUS loan. These federal loans carry a fixed interest rate and have flexible repayment options.

  • Contact your lender.  Ask why you were denied and if there is anything you can do to improve your chance of qualifying for the loan.  Sometimes a small issue or error in your credit report can keep you from qualifying. This may be something you can fix.

  • Apply early!  Don't wait until July or August to secure an alternative loan.  As credit standards have tightened, you should line up your funding by May or June.  This will give you plenty of time to explore other options should you have trouble getting alternative loan.  You should apply for enough for the whole year to avoid multiple credit inquiries that could damage your credit score.

  • Do NOT apply for other alternative loans.  Applying for multiple alternative loans can further damage your credit score.  Contact our office if you were denied an alternative loan to make sure you have exhausted all of your other loan options.

  • Did you apply with a creditworthy cosigner?  If not, consider asking your parent or another relative to cosign the loan.  You are more likely to be approved with a cosigner and you may qualify for a lower interest rate, too.