As lawmakers in Congress continue to debate the government bailout plan the Bush administration presented last week, some students and administrators at Kent State try to determine how the proposal and the financial crisis will affect the abilities of students and parents to borrow money to cover education costs.
Ramifications of the bailout – if Congress votes to pass it – could include fewer private loan lenders and higher interest rates. The tumultuous state of the financial industry, in general, may yield difficulty for some consumers with securing credit.
According to Gregory Cendana, vice president of the United States Student Association in Washington, D.C., a national student advocate organization, nearly two-thirds of the 15 million college students have no choice but to take out loans, the average of which amounts to $19,000 per student.
Cendana said one of the challenges has been cuts to programs designed to help with financial aid, discouraging some students from attending college.
“What we encourage is to have students contact their Congress representative,” he said. “An investment in students is an investment in the future, which is an investment in the economy.”
Last year, about 3,000 parents of Kent State students who took out some form of financial aid borrowed money from private lenders. This year seems to be on track with last year, with 2,300 parents securing loans – a number that is still developing, said Mark Evans, director of Student Financial Aid.
“I don’t know if the government bailout affects our daily operations, other than some students may have to find a different lender,” Evans said. “But then again tomorrow is a different day, and we don’t know what the federal government will do.
“What’s being done in Congress is going to affect everybody, all the taxpayers in the country,” he said. But he said Kent State is in a better position than other higher education institutions may be.
“Kent has positioned itself so it’s relying on federal government and not private lenders for loans,” Evans said. “We will process a private loan through any lender a student chooses; that’s the law. Kent State doesn’t make any money off of private loans. We want to give Kent State students the best interest rates as possible.”
Pete Goldsmith, vice president of Enrollment Management and Student Affairs, said he does not know what the effect of the financial crisis and bailout will have on university enrollment, but the situation concerns him.
“As the man responsible for enrollment, I worry all the time, but I think what you have to do is adapt and adjust to the reality and still try to achieve your goals,” he said. “(Enrollment at Kent State) grew about 1 percent this year, and I would guess that would be a reasonable expectation this year.
“The problem is that if loans are harder to get, attendance becomes more difficult, so sometimes families resort to using credit cards or to taking fewer credit hours or going to community colleges,” Goldsmith said.
Because it is early in the school year, no statistics are available to document the number of students who have dropped out of the university because of financial hardships, Goldsmith said. But there is evidence that students are having trouble.
“Anecdotally, we’ve seen an erosion of the number of credit hours students are taking, particularly on the regional campuses,” he said.
Evans encourages students who are having or expect to have problems paying for education expenses to contact the Financial Aid office to explore their options before deciding to reduce the number of credit hours or drop out of school.
JP Moorage Chase, a lender of education loans, also finds itself in the midst of the crisis.
“Because there’s so much influx, we don’t know how it’s going to pan out,” JP Moorage Chase spokesman Tom Kelly said. “There may be both direct and indirect impacts. The end result of whatever Congress does will affect the cost of funds and the availability of student loans, credit cards and lots of other consumer loans.”
Even though Congress is still debating, Kelly advises students to first look for grants, then for loans backed by the federal government. Their last option would be to take out loans from private lenders, but try to have a co-signer because interest rates may be lower.
Contact public affairs reporter Holly Schoenstein at [email protected]