Many students across the country may scramble to get funding for the next academic year, but for now Penn administrators say students should not be worried.
In response to the national credit crisis, banks and private lenders across the country have been cutting or eliminating student loan programs, creating a shortage of available funds.
The drought in capital markets for student loans may affect the ability of financial institutions to offer federal and non-federal loans, but will likely hit private lenders like Sallie Mae - who rely on the capital market in order to secure loans - the hardest.
Though private lenders that issue non-federal loans may tighten credit requirements or completely eliminate loan money given to students at "low-completion rate" schools, Student Financial Aid director Bill Schilling said he does not expect problems for Penn students.
Penn Vice President of Government and Community Affairs Bill Andresen said that Penn's consistent repayment of loans and high graduation rate ensure that lenders will not disappear but added that if things continue to deteriorate, other schools may see a shortage.
"With all the tumult in the market these days, it is a little unclear how things will work out," he said. "But it is highly unlikely that any Penn student in the fall that wants a loan [will be] unable to get one," he said.
Penn recently issued formal requests for information to banks in order to build a list of available lenders for the coming academic year. Schilling said that it has received "positive responses" from almost all of the banks they approached. The final list of available lenders should be on the Student Financial Services Web site around May 1.
SFS will contact students whose current lenders have since discontinued their loan programs. These students will have to select new lenders for the coming academic year.
Congress is also doing what it can to ensure that federal loan money does not dry up.
Andresen, who represents the University before Congress and the Bush administration, said that "there is clearly a bi-partisan commitment in Congress so that this doesn't become an insurmountable problem."
"I get a strong sense from listening to members on both sides of Congress that they are committed to figuring out some way to fix it," he added.
But not all experts share Andreson and Schilling's confidence.
Finance professor Richard Marston cautioned that a credit crunch could potentially create a bigger problem than anticipated.
"I suspect many Penn families will find it difficult to get private loans for next year's tuition," he said.
He added that though it would not be "impossible for a family that searches widely for funding" to get money for student loans, problems in the credit market will also have repercussions in the home equity market, posing a "serious financial problem for Penn's families."Comments powered by Disqus
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