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Five Reasons Not to Panic about Student Loans

Francine L. Huff
LoanBiz Columnist

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There's been a lot of sobering news about the student loan market lately. Although some financial institutions have tightened lending standards or pulled out of making student loans altogether, people who need financial aid shouldn't rule out loans completely. Here are five reasons not to panic.
  1. Federal student loans are still available. Although lenders who originate about 13% of student loans have dropped out of the lending game, there is still money out there to pay education costs. The federal government agreed to buy up student loans to help lenders that are having a tough time. That's good news for federal and private student loan companies, including Sallie Mae, which has said it would have to be more selective about making loans.
  2. PLUS loans are available to parents. If loans made directly to students don't cover all of the educational costs, parents can apply for a federal Parent Loan for Undergraduate Students (PLUS). They can borrow to pay for education costs that aren't covered by a student's financial aid award.
  3. Peer-to-peer sites are gaining popularity. Some people who are having a tough time finding student loans are turning to peer-to-peer lending sites for funds. Students can state how much money they need and the interest rate they're willing to pay. In some cases interest rates may be similar to what's charged for some private student loans. Students can make small payments on loans while in school then have larger payments after they leave school.
  4. A co-signer may be able to help. If a student doesn't have a high credit rating, they may have a better chance at being approved for a private student loan if they have a co-signer. Find a co-signer with an established credit history to get favorable terms.
  5. Exhaust all options. Before applying for a student loan, it's important to apply for as many other types of financial aid as possible. Grants and scholarship as well as work-study are possibilities and finding employment while attending school is also an option.
It's a tough time for education lending, but students shouldn't give up their goals of earning college degrees. Student loans and other types of financial aid are still available but students may have to work harder to find the help they need.

Sources
  • Baltimore Sun
  • "Peer-to-peer sites gaining as source of student loans," by Eileen Ambrose
  • CNN Money
  • "Student loan turmoil stresses families," by Tami Luhby

About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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