The Boston Globe this past week had several articles on the changing student loan landscape. It seems that the mortgage crisis has spread to the student loan sector and more than 50 lenders have left the market for federally backed student loans in recent months.
Last week Citigroup, one of the largest private student loan lenders, said it would stop lending at some schools and end its federal loan consolidations.
Pre this credit crunch, student loans have been among the easiest and cheapest loans to get – allowing millions of Americans to go to college as long as they promised to pay the bills after graduation. Last year for example students and their parents borrowed nearly $60 billion in federally guaranteed loans, a figure that has grown more than 6 percent annually over the last five years after taking into account inflation.
It was no wonder that schools could keep increasing tuition rates by 8-10% a year because they knew that students would be able to borrow the money.
Now those days are over and some schools that we charging $30,000-$45,000 are going to have spaces this year because students will not be able to borrow the sums they need to go these schools.
This will not impact schools like Harvard and Yale, but the impact will be felt at the private schools like Trinity College in Hartford which costs $50,000-a-year.
It is basic economics of supply and demand. The supply is all the colleges in the U.S. The demand is the number of students who can actually afford to attend these schools. The supply is changing, so schools will have to lower tuition and fees in order to meet the lower demand for their product.
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