Loans for two-year colleges harder to come by

The New York Times reported today that some of the country’s largest banks, including Citibank and JPMorgan Chase, are extending fewer loans to students at two-year colleges and for-profit institutions (though not at top universities):

The practice suggests that if the credit crisis and the ensuing turmoil in the student loan business persist, some of the nation’s neediest students will be hurt the most. The difficulty borrowing may deter them from attending school or prompt them to take a semester off. When they get student loans, they will wind up with less attractive terms and may run a greater risk of default if they have to switch lenders in the middle of their college years.

Tuition and loan amounts can be quite small at community colleges. But these institutions, which are a stepping stone to other educational programs or to better jobs, often draw students from the lower rungs of the economic ladder. More than 6.2 million of the nation’s 14.8 million undergraduates — over 40 percent — attend community colleges. According to the most recent data from the College Board, about a third of their graduates took out loans, a majority of them federally guaranteed.

loans.jpgAs the Class of 2008 prepares for their next move after graduation, to what extent is this phenomenon limiting their choices? Have you — or your students, or your children — found it increasingly difficult to get loans this year? Has it caused you, or them, to put college on the back burner?

image at here_for_now’s site at flickr.com/creativecommons

Katy Murphy

Education reporter for the Oakland Tribune. Contact me at kmurphy@bayareanewsgroup.com.

  • Nextset

    This Brave New World we are in may involve economic collapse. The sun will still rise but there will be no more throwing money at sacred cows.

    All loan programs that make no economic sense will likely vanish. For example, consider student loans to HBCs, student loans to 2 year colleges (except to narrow programs like the Police Academy and the Nursing program, etc) as well as the loans to certain vocational programs – if the default rate is historically high, the loans will likely no longer be made in favor of better uses for the money. Loans there aren’t “loans”, they are “subsidies”. Subsidies will be radically cut back.

    People will adjust their lives accordingly. It’s possible the 2 year colleges, if they survive the crash, may have to refocus their efforts on vocational programs that lead to the valuable state licences and certificates that in turn justify the relatively higher expense the students have staying out of the job market. In an economic crash, jobs are more precious than ever, and subsidies are taken away.