Will The Student Loan Crunch Make It
Hard For You To Attend College?

Whether or not you believe we are in a recession or not, it’s no argument, we are in a credit crunch. That being said, the primary question students and potential students are asking themselves is this, “Will this tightening of the dollar keep me out of college?”

Make no mistake about it, this tight money market is having an impact on decisions people are making concerning college. Some students slightly panicked when they heard various lenders were dropping out of the student loan program. So what’s going to happen and should you be concerned?

Education Secretary Margaret Spellings has a “Plan B” on standby if student loans fall out of sorts. She is seeking to quiet the concerns that the tight credit market might make it difficult for students to get college loans.

Spellings said in an interview, that her department had reviewed the law and concluded that it has the authority to quickly free up money from the U.S. Treasury, if needed, to finance student loans.

She said the money would be provided so that guarantee agencies (non-profits that traditionally back student loans issued by banks) can offer loans directly in the event that we end up in a credit crunch jam.

Spellings said she was clarifying her authority to do that because there had been confusion about whether she would first have to go to Congress and seek legislative action before going to the Treasury. That could be time consuming, and legislative politics could cause further delay.

Students, financial experts and lawmakers are worried that the nation's ongoing credit crunch may make it even harder for students and their families to find student loans. Due to the weak dollar, nearly two-dozen lenders have dropped out of the federally backed student loan program. Thankfully, that hasn't been a problem thus far, because those abandoned ship aren't the biggest providers and others have stepped in to fill the void.

Spellings cautioned, she was only providing a safety net in the event the federal government's help is needed. She likened it to preparing for a hurricane that might, or might not, hit. "This is the equivalent of staging food and water," she said.

Students are figuring out now where they are going to college in the fall and will seek financing in the coming months. Experts predict the impact of the tight credit market on students will become clearer sometime around this summer.

Joe Elliot of StudentLoanWhiz.com, advises all students and parents to make securing financial aid a top priority. Says Eliot, “Don’t wait until the last minute; now is the time to seek scholarships, grants and other sources of financial aid. If those avenues don’t fund your education entirely, you should have enough time to process your student loan application in time for the up coming school year.

Elliot says he’s thrilled with the fact that Education Secretary Margaret Spellings had enough forethought to avoid a potential student loan shut down. The announcement made by Spellings should calm the fears of most aspiring students. The welcome and much needed statements came a day after Massachusetts Democrat Edward Kennedy, the chairman of the Senate education committee, introduced legislation seeking to ensure students would have money to pay for college.

Due to the earlier confusion about the education secretary's authority, the bill includes language stating that Spellings can go directly to Congress to free up capital for college loans.

Kennedy's bill also would improve the terms of loans parents take out for their children by allowing repayment to be deferred while students are in school. The legislation also would increase tuition grants to the poorest students.

California Democrat George Miller, the chairman of the House education committee, said he plans to introduce similar legislation next week.

If you are seeking financial aid, don’t let the credit crunch derail your educational dreams. There is educational money out there and with the help of the StudentLoanWhiz, you’re sure to get the money you need.