How will the financial crisis affect student loans for 2009-2010 year?

The banking and lending crisis will have no effect on the government's Stafford Lending program for 2009-2010. The US Department of Education is continuing its practice of guaranteeing all Stafford loans, which has the effect of making Stafford loans risk-free for the lender. When there's no risk, there's no worries, and the lenders are more than happy to make Stafford loans - more so than just about any other form of loan.



In fact, hidden deep down within the current stimulus bill is a provision that would increase the amount of "service fees" that the lenders get to charge the government for making Stafford loans. Critics charge that this is yet another example of the government welfare enjoyed by mega-lenders, but the lenders claim they need this increase to make Stafford lending worthwhile.



It's possible that this could benefit borrowers - in the past, when the lenders used to receive higher fees, the lenders would compete on "borrower perks", in order to entice borrowers to borrow from them, rather than the competition. Most of those perks were eliminated when the government slashed lender fees, but if they go back up again, maybe the borrower perks will return. No guarantees there.



As for non-government loans - the private or alternative loans - as of right now, that lending market is still pretty much dead and buried. A handful of banks are making these loans, and they all apply ultra-conservative lending analyses. If you're lucky enough not to be rejected flat out, chances are pretty high that you'll be asked for a cosigner.



Congress and the Administration are well aware of the problem, and there seems to be bipartisan consensus for the need to revitalize the educational lending market. I think you'll see that a significant amount of the bank rescue funds will be destined for student lending. I can't tell you exactly how that's going to work, or how quickly it's going to happen. 2009-2010 may be a very difficult year for any form of student borrowing other than Stafford, Perkins and PLUS loans, but there is a light at the end of the tunnel. Time will tell how long it will take that train to reach the station.



Good luck, I hope that helped.How will the financial crisis affect student loans for 2009-2010 year?Not quite sure but I'm guessing grants and scholarships will also be effected.

It's one of those things where we will all have to wait until we see what our schools give us.