The 2008 Student Loan BluesBy Nicholas von Hoffman
August 19, 2008
Back to school, kids, if you can scrape up the tuition. By some estimates as many as 200,000 college students may not find anyone willing to lend them money for school this year.
Millions of others are going to have to jump through more hoops, pay higher interest rates and/or get their parents to co-sign their loans. This last expedient depends on the parents having a credit rating good enough to satisfy the money-lenders.
When students get loans this year, they will pay more for them. In at least some cases students are looking at rates of 23 percent. With those numbers a young person might be better off borrowing from the mafia.
Students shopping around trying to get themselves lower interest rates had best be careful. They can inadvertently get stung with higher rates as a result of trying to get lower ones.
The New York Times explains it this way:
In few other areas of consumer life are you at risk of being penalized for seeking out the best deal.... To quote a rate, lenders check an applicants credit history. And every time a shopper asks a lender for a rate quote, it can show up as another inquiry on a credit report. Lots of inquiries send the wrong signals to the formulas that create the popular FICO credit score. The lower the FICO score the higher the interest rate a student will have to pay for tuition money.
Cashing in on the kids is no small business. Last year it amounted to more than $17 billion. The interest on that is a lot of cabbage for private, government-subsidized loan companies, which explains why some college loan officers have taken bribes to steer students to favored lenders. ..........(more)
The complete piece is at:
http://www.thenation.com/doc/20080901/howl2
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