Thanks.Student Loans and the current Financial Crisis.?
Jack:
If you're asking about private educational loans, then you're definitely on to something - it is far more difficult right now to get a private educational loan than it has been as little as 6 months or a year ago.
Understand what's going on - a student loan is a high risk loan for any lender. Think about what they're doing - they're lending a large sum of money to an applicant that has neither the income to repay the loan, or the credit history to indicate that the loan is likely to be repaid. Any time a bank makes an educational loan, they're gambling that the borrower is going to finish school, get a decent job, and actually pay the loan on time.
That's what you call a totally unsecured loan, and that's very risky. When you buy a house or a car, the bank takes a security interest in the thing you bought - it's what they call collateral. If you don't pay - the bank repossesses the house or the car, and they can sell them to recover at least part of what you owed. What can they do with your education? Come take your diploma away?
Also remember - this is how the banks got into the huge financial mess - making risky loans to people who swore, up, down and sideways, that of course they would repay the loan. Lenders aren't playing that game right now, so unless you have the kind of income that would allow you to actually repay the loan - and a credit history that shows that you honor your financial obligations - you're not going to find many (if any) banks that will lend you ten or twenty or fifty thousand dollars.
This is the power of the federal guarantee - and it's why banks will continue to make Stafford Loans. If you're a lending risk, that becomes the government's problem - the bank walks away with their money.
Good luck to you - I hope that helped.
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