Private colleges avoid loan crisis, for now
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Sheryle Proper is breathing a sigh of relief these days over what didn't happen this fall at Allegheny College.
Back in March, as the school's director of financial aid, Ms. Proper and her staff were looking squarely at a crisis: About 175 returning students, 10 percent of all campus borrowers, faced the prospect of losing their Stafford loans worth $6,500 to $7,500 each because private lenders were pulling out of the market for the 2008-09 school year.
Her staff moved quickly to help identify other lenders, and Allegheny joined the Federal Direct Loan Program, enabling those students and incoming freshmen to get Stafford loans, if needed, straight from the U.S. government. Though terms and rates in some cases were less favorable, Ms. Proper said, the school managed to avoid -- at least for this academic year -- something far worse.
"What would have happened is what I hear happened at other schools," she said. "Students suddenly in the fall owed that amount and didn't know where to go."
The close call on her campus reflects findings of a survey released yesterday of private colleges nationwide.
The poll concludes there is "no widespread student loan crisis" for reasons including quick response by campuses. Still, the survey did confirm what some have long feared -- that at least some students are suspending their studies or cutting back to part-time status because they can't get loans.
The absence of a widespread crisis does not mean the worst has passed. The true impact on campuses may not be known for some time, said the group that did the survey, the National Association of Independent Colleges and Universities.
That's partly because the Sept. 10-30 poll that drew responses from 504 colleges was finished just before this month's stock market plunge that deepened the credit crisis. The survey did not cover public campuses.
In March, NAICU's initial survey found the credit crunch had begun affecting availability and prices of private student loans. At the time, NAICU's president, David L. Warren, called it "a warning flare" signaling potential trouble this fall.
Though some colleges like Allegheny had to hustle behind the scenes to keep money flowing to their students, fears that college-goers would be driven wholesale from campuses have not come to pass.
"The survey shows that independent higher education and our students weathered the student loan crunch through September," Mr. Warren said. "To varying degrees, individual students and institutions were impacted by the crunch, but no widespread access crisis materialized in the first half of the fall semester."
Still, there was distress. About one in five campuses surveyed reported fewer returning students or new freshmen than expected.
Of the 485 campuses responding to a question about private loans, 11 percent reported having more than 50 students unable to secure a private loan this year; 46 percent had 11 to 50 students unable to do so; and 43 percent said either no students or fewer than 11 could not get a loan.
Almost half the campuses said some of their students who were denied loans suspended studies or dropped to part-time status.
During a conference call hosted yesterday in Washington, D.C., the National Education Association and the "got tuition" campaign introduced reporters and others to Ash McDaniel, a George Washington University student. She received $46,000 in financial aid, but still struggled to get the remaining $7,000 she needed from a bank, even after her mother offered to co-sign.
Robert Brandon, invited to address the callers, said the real problem lies in rising college costs and lagging government aid that existed long before this year's credit crisis.
"There needs to be major recommitment to investing in higher education," said Mr. Brandon, coordinator for the Campaign for College Affordability, an alliance including student and consumer groups. "There needs to be more direct [government] aid. There should be a way to make debt more affordable."
First Published October 22, 2008 12:00 am