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Sallie Mae decision follows market turmoil, comes as request for aid rises
By Tony Pugh
McClatchy Newspapers
Published on Sunday, Oct 26, 2008
BLOOMINGTON, IND.: On a recent Thursday evening, Neal Theobald, Indiana University's vice chancellor for budget administration, received a sobering letter from Sallie Mae, the nation's leading source of student loans.
''Because of the continuing turmoil and uncertainty in the credit markets, Sallie Mae has made the difficult decision to tighten the underwriting on all our private student loan products, which will require applicants to meet higher credit standards. We believe that this action will mean lower approval rates for these loans,'' Sallie Mae Executive Vice President Barry Feierstein wrote.
The lender also announced plans to ''adjust'' or raise its loan pricing.
''These decisions were not easy to make,'' Feierstein wrote, ''but the current financial markets provide no other choice.''
At a time when student financial-aid requests nationwide are up 16 percent from last year, Sallie Mae's decision to make fewer loans at a higher price will deepen the financial pain of millions of parents and students who are struggling to pay for college educations.
It's the latest example of how the Wall Street crisis is digging into the pockets of Americans who are far removed from New York's financial district.
Historically, when the economy starts to tank, students return to higher education in greater numbers.
''But with the credit crunch and money tight and the economy so bad, I think it's going to be difficult for students and families to pay that college tuition,'' said Roger Thompson, Indiana's vice provost for enrollment management.
''I talk to parents fairly regularly, and they're struggling,'' he said. ''Their kids are down to the last semester or two, money's tight and they're worried about their jobs, and they're just hoping they can get their kids the rest of the way through.''
Amanda Daugherty, 24, was just a toddler when her father died, and she was still in high school when ovarian cancer took her mother's life.
Now only two months shy of her master's degree in public health, the Lafayette, Ind., native owes nearly $70,000 after financing almost all of her six-year college education with student loans.
The size of her debt first hit Daugherty last year after she received, for the first time, a bank statement that tallied all her loans, which then totaled nearly $60,000.
''I kinda freaked out,'' she recalled. ''I saw it, and my stomach just turned. It almost didn't seem real. Fifty or sixty thousand dollars? I'm like, 'Really? I racked up that much?' . . . It's so overwhelming. It feels like I'll never be able to pay it off. How am I ever going to be able to buy a house?''
Her more immediate concern is finding a position in the ultra-tight job market. Daugherty's already applied for more than 15 without success. She wants to work for a nonprofit agency, but she fears that the troubled economy may be conspiring against her.
''I think there's going to be cutbacks in funding and I feel like people won't be as willing to hire new people into organizations,'' she said. ''I'm getting really scared because I don't know what to do if I can't pay. I mean if I don't have a job, can I claim financial hardship? I really don't know.''
BLOOMINGTON, IND.: On a recent Thursday evening, Neal Theobald, Indiana University's vice chancellor for budget administration, received a sobering letter from Sallie Mae, the nation's leading source of student loans.
Get the full article here.
Comments
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Akron, OH
Posted 08:41 AM, 10/26/2008
No worries here in Akron. Our city hall hero has guaranteed us that, once he leases the sewer system, that our children will receive whatever is needed in college loans.
The traditional loans, grant and scholarships can all tank, and Akron will have an abundance of money for our childrens scholarships.
Of course, there aren't any jobs here, and these fortunate children have to pay back their loan and then some.
Stow, OH
Posted 02:51 PM, 10/26/2008
Just one more way to keep the middle class in its place and keep us from advancing.Sooner or later only the rich will be going to college because the high paying jobs of the middle class are quickly evaporating .
