Private Loans Dry Up - Student Card Use Rising
Lenders are eliminating private loans to college students…
Student lending giant Sallie Mae reports that 8% of all students have private loans to help bridge the gap between student loans, grants and help from their parents. These loans, which average $7,694 per student, are getting harder to come by according to a new study. “The Student Market for Credit Cards: Issues and Trends,” by Maryland based firm Kaulkin Ginsberg shows that more than two dozen lenders have cut back or stopped lending to college students this past summer.
The timing couldn’t come at a worse time, with the cost of tuition rising as much as 20%, federal grants and loans failing to keep pace and a slump in the student job market. “A spillover from the overall credit crisis caused many investors to become a little gun-shy to invest in private student loans, even though historically they are safe,” Kaulkin Ginsberg Consumer Finance Analyst, Dimitri Michaus said. Those curtailing private lending to students range from major institutions as Citi, Bank of America, JP Morgan Chase, Wells Fargo and Wachovia to smaller lenders, including CIT Group, College Loan Corporation, Education Finance Partners, EduCap, Nelnet, NextStudent and Student Loan Corp.
Studies by the American Council on Education, U.S. Public Interest Reseach Group, Sallie Mae and Gallup find that between 25 - 33% of college students are using credit cards to pay for tuition. With the private loan market tightening, Michaud says, that number may well increase. “Students are using credit cards as a last resort to pick up the slack when they have difficulty getting loans or jobs to cover their expenses,” he says. Unfortunately, at the same time there is a movement to tighten access to student credit cards.
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