The Financial Crisis and Student Loans

With the growing mortgage crisis in the United States, many student are worried about receiving and paying off college loans. Large numbers of private investors including Wachovia have fled the student loan business due to the collapse of their mortgage systems. Although this mishap in the American economy is unfortunate, it has also been a wake-up call to many American families financing college through private investors. Without the help of private institutions, people are looking more to the federal government for help, but isn't this what they should have been doing all along? The fixed rates on a government loan run from around 6.8% to 8%, compared with an adjustable 8% to 20% for a private one. The average credit-card rate tops 13%. So if government loans are so much better than private and credit loans, why have Americans waited so long to really take advantage of them? The answer is convenience. It is much easier for students and parents to charge tuition to a credit card or find the nearest private investor than it is to spend hours applying for student loans. Research done by the American Council on Education indicates there are more than 1 million students across the country who may very well be eligible to receive aid but are not getting it. A major reason students don't apply for federal loans is that they don't understand how to. FAFSA( Free Application for Student Aid) is a huge advantage for college students who meet certain requirements, especially those with low incomes, but with 145 questions, it is longer and more eye-crossing than the standard tax form and takes about 10 hours to gather all the documents required and actually fill it out. Even after students have applied to FAFSA, they have to distinguish the fine print within the aid programs surrounding it. Some college financial aid officers, for example, are balking at helping student apply for the new federal $4,000-a-year "TEACH Grants," which are supposed to help aspiring teachers pay for college.This is because the name "grants" misleads students. The program actually consists of loans that will be forgiven only if the student gets certified as "highly qualified" and works full time teaching a "high-need" subject at a federally designated, low-income school for at least four years within eight years of graduation. Those who don't jump through all those hoops could see $16,000 worth of "grants" turn into a $24,000 bill after interest charges. Many students that have been relying on private loans need not worry too much about the ability to finance; however, they will not acquire the needed financial assistance without a hefty amount of research and time.