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More than 13 % of college loan lenders have dropped out from the program this month. Why? The combination of subsidy cuts by Congress last year and the credit crunch on the Wall Street have cut the market’s profitability.
"The ongoing turmoil in U.S. credit markets ... could leave millions of students in a last-minute dash to secure the financial assistance they need to attend college this academic year," said Sen. Christopher Dodd, D.-Conn, head of the Senate Banking Committee.
The U.S. Department of Education has surveyed school, college, and graduate students. The survey shows that more than three out of four families rely on the federal loan program like Stafford loans which are not subject to credit check. Most students also assume that they will receive their college loans with poor credit history. Unfortunately, it may not be true in the upcoming months. The lenders’ profit margin is increasing squeezed. The margin may reduce as much as ¾ of a percentage point. If the government does not step up to help with funding, may families might only have a handful of lenders in the coming year.
Both colleges and the government are getting ready for student loan crisis. Lawmakers are pushing for bills that would allow federal officials to buy debt from lenders and put more money into the market. Nevertheless, parents and students also need to be more financially prepared.
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