Law School Discussion

"Credit Crisis May Make College Loans More Costly"

TallisUmbras

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Re: "Credit Crisis May Make College Loans More Costly"
« Reply #1 on: March 03, 2008, 01:43:44 PM »
I think this is not surprising given the current credit situation, but it's still troubling to read that the issues have now spread to the much more reliable Federal loans programs. 

In addition, I think the fact that certain lenders are apparently leaving the Federal loan program suggests that those lenders screwed up.  My reasoning?  It's not generally logical to leave a program that guarantees you will be paid back, even if the borrower defaults.  I am suspicious that these lenders gave out too many private loans and now they're struggling to collect on them.

Regarding private loans, this is just another demonstration of why Federal loans can be preferable.  They're not as open to the weaknesses in the market.  I am troubled by the increasing lender origination fees, but those are a limited percentage of the total principle, which is far better than even a .5% increase in the overall loan rate.