Financial aid collapse

Derika Downing
Critic staff

Director of financial aid tells of how the national deficit affects student loans.

By now, just about everybody is familiar with the major economic crisis that has hit this country, but what effect has this problem had on student loans?

Tanya W. Bradley, LSC’s director of financial aid, says the national deficit has affected student loans in two ways.

“In places like Pennsylvania, their state agency stopped processing federal student loans,” Bradley said, “So schools have had to find other lenders or go to direct loans, like Stafford and Parent PLUS loans.” These loans “cut out the middle man,” i.e., the lenders and guarantee agencies.

“But that kind of national problem hasn’t really hit Vermont,” Bradley said, “Because VSAC [Vermont Student Assistance Corporation] has always been able to secure the funding for federal loan programs and alternative student loans.

“Because 90 percent of our loan volume is through VSAC, our students have at least been able to borrow through an entity that has the funding,” Bradley said.

“The other piece that has affected our students is that lenders have raised the criterion for the FICO (Fair Isaac & Co) credit scores, a measurement of financial strength,” Bradley said. “Many of our students have tried to use alternative loans in place of the parent loans because the parents have bad credit, and more of the loan burden falls on to the student.”

Because of these setbacks, the student seeking financial aid often needs a co-signer, “somebody who is credit-worthy and who promises to pay the loan if the student defaults [is unable to pay the loan within an allotted amount of time].” Finding a reliable co-signer is one of the biggest problems for students in need of financial aid. “There’s obviously a credit problem in this country,” Bradley said.