College Student Loan Crisis

The Boston Herald reports:

Bay State students are reeling in the wake of news that the hard, expensive slog of higher education may get even harder thanks to economic threats to the student loan business.

“I wouldn’t be here if not for these loans,” said Boston University junior Danielle Beneville, 20, of Massapequa Park, N.Y.

An early education major who has a $10,000 merit-based scholarship, Beneville has taken $100,000 in loans to attend BU.

Student loans “were very important - they allowed me to choose where I thought would be best for me,” Beneville said.

On Thursday, the Massachusetts Educational Financing Authority became the latest financial institution to warn that the worldwide credit crunch could lead to more limited availability of loans.

“The unprecedented disruption in the capital markets, which began with the subprime mortgage crisis, has impacted student loan lenders across the nation,” Thomas M. Graf, executive director of MEFA, wrote in a statement on the nonprofit’s Web site Thursday. “How much capital MEFA is able to secure remains an open question.”

MEFA offers “very good service and terms for their loans,” said Tony Erwin, president of Massachusetts Association of Student Financial Aid Administrators and the director of financial aid at Northeastern University. “It would be a significant loss for Massachusetts families.”

Approximately 431,000 students attend colleges in Massachusetts, according to the U.S. Department ot Education. About 50 percent of students nationally depend on loans, Erwin said.

Dan Huynh is 22, a BU senior studying aerospace engineering and the son of small business owners from Fresno, Calif. He took out about $30,000 in loans for his last two years in college.

“My parents don’t make too much money so I took these loans to not be a burden to them,” he said.

Huynh regards the loans as vital because, he said, “it allows students in general to have the opportunity to go to college.”

Most BU students receive direct federal loans and should be unaffected by MEFA’s challenges, said BU spokesman Colin Riley.

The problems in the debt markets so far have caused about 50 of 2,700 active lenders to say they will not be participating in the student loan market, Erwin said. Others, such as Sallie Mae, have tightened credit requirements for borrowers and stopped offering loans to students attending some for-profit career schools and community colleges.

A recent Northeastern University grad, 24-year-old Megan Healy of Orange County, N.Y., is now applying for $60,000-per-year business schools which would be impossible without loans, she said.

“I’m very concerned” about the effect of the credit crunch on the loan market, she said. “An undergrad degree now is like a high school diploma, so you have to consider graduate programs if you want to be successful.”

The solution to high tuition is lower tuition.This can happen when enough people realize separating education from state is a good idea.Without the subsidy from the federal government colleges couldn't push tuitions year after year.