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How Schools Are Reaching Out to Students Affected by the Credit Crunch

Here's a statement upon which both Obama and McCain would agree: Young intellectuals dropping out of college in our current economic crisis will only weaken the economy in the long run. Colleges concur, and are finding ways to ensure that students survive the credit crunch.

The problem
In the past, when students didn't qualify for any federal loans or they needed more financial assistance than federal loans could provide, they turned to private loans. Now, banks are tightening lending standards and raising interest rates, and many of them have abandoned the student loan business entirely. According to FinAid.org, since August 2007, 36 lenders have suspended writing private student loans. Where can cash-strapped college students turn?

Some school-level solutions
Colleges themselves are looking for ways to attract students and retain the ones they already have. Here are some of the most recent accommodations they've made in this bearish market.

Federal direct loans>>
Since independent lenders no longer offer competitive student interest rates, more and more schools are ditching the Federal Family Education Loan (FFEL) program and turning to a more stable lender -- the federal government. Benefits of the federal direct loan program include the guaranteed availability of loan capital from the U.S. Treasury and the eligibility of all schools and their students regardless of default rate or loan volume. Which is probably why nearly 400 new colleges have joined the direct lending program this year, and student borrowing through the program has grown by nearly 50 percent, as reported by the U.S. Department of Education.

Emergency student loans>>
You may not be aware that most schools already have some form of emergency student loan program in place. While these loans won't cover your entire tuition bill or solve the nation's economic crisis, they can provide some immediate relief for you. Check with your school to determine its policies and your eligibility for emergency funds.

Tuition freezes>>
In an effort to make college more affordable, some colleges are freezing 2008-2009 tuitions at last year's levels. Notable examples include all public colleges in Ohio, the 64-campus State University of New York, and the University of Maryland's 13-campus system, all of which are freezing in-state undergrad tuition. Given the steady annual tuition increases at most colleges and universities, tuition freezes are certainly something to consider.

Increased financial aid>>
In addition, more colleges are setting aside financial aid funds for middle-class families, guaranteeing to meet need for families with incomes under $100,000. Stanford University, for example, has announced no expected contribution for families making under $60,000 a year. Those making under $100,000 a year should expect to receive scholarships and grants to cover tuition at the California school. Even students with family incomes higher than $100,000 are eligible for some scholarships and grants. This shift toward need-based rather than merit-based assistance is probably not a long-term solution, but it can provide essential aid to students at a time when it's needed most.

With a little help from your school, you can survive the credit crunch. Now if only they could help you manage credit card debt....


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