This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Paying for College in a Post-Credit World

For a related story on colleges and cheaper tuition, click here.

Student loans used to be some of the easiest, and cheapest, forms of credit available. Not anymore.

The credit crisis has reduced access to student loans, thanks to a combination of defaulting lenders and tightened restrictions. Meanwhile, the cost of college tuition and fees continues to soar, rising at four times the rate of inflation since 1982, according to the National Center for Public Policy and Higher Education.

Here's what you need to know if you've got college bills to pay:

Federal versus private aid: Federal aid, which includes grants, loans and tax benefits, still represents the lion's share of funding for undergrads. Federal dollars accounted for 56% of aid in the 2007 to 2008 academic year, according to the College Board. Private sector loans represented 12%, an increase of 3% over the past decade. (The remaining 32% came from state and institutional sources.)

The rise in private funding is in part due to the relatively low limits on federal funding. Until last year, dependent undergrads were limited to a total of $23,000 in federal loans over their undergraduate careers. Although the limit was recently raised to $31,000, many borrowers must still turn to private loans to make up the difference.

The problem with private sector loans? They're not subject to the same rate caps and protections as federal loans. That means the average borrower pays interest at nearly double the federal rate of 6.8%. Furthermore, lenders have tightened their standards due to higher default risks. Lenders such as Wachovia (WB) and Bank of America (BAC - Get Report) have stopped offering private loans altogether. And lenders that do offer student loans, such as JPMorgan (JPM - Get Report) and Citigroup (C - Get Report), have tightened standards so that these loans are now out of reach of families without good credit.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
C $52.90 0.00%
BAC $15.64 0.00%
JPM $62.60 0.00%
WB $17.20 0.00%
AAPL $130.28 0.00%


DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs