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How the Credit Crisis Will Affect Student Loans

News Flash: Credit Crisis Seeps into Student Loans


Lining up student loans may be a much tougher scene this Spring than it has been in past years. Many types of student loans were funded by lenders issuing securities backed by these loans. Now investors are shying away from this type of investment because of the negative way many mortgage-backed securities turned out. In this way, the credit crunch that began with mortgages is now affecting student loans. Because this was the main source of funding for private student loans, and especially for smaller companies, many loan providers will likely boost interest rates on private loans up to one percentage point, not accept borrowers with a credit score under 650, and insist that parents co-sign for their kids.

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