A fellow writer has sent me this great article that will answer a lot of questions about the current student loan crisis. I know that the current economic status is depressing and it seems as though their may not be an answer for college this coming year but as college students we must push for a change! This is the most important year for change because of the presidential elections. I want to take this time to encourage all college students to make their voice heard by voting. College students make up a large portion of the voters in America but rarely go out to vote. Our future is left in the hands of the retired community, who actually make the effort to go out and vote. Make a difference this year as your financial future depends on it!

Here is the article, written by Tisha Kulak who is a writer at www.creditorweb.com, about the current economic crisis and how it will affect college students this year. Thanks Tisha for another great article!

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Economic Crisis Cuts into College Funding

As family continue to struggle with the growing concerns of the economy, the money once save for college funds are now being used to keep the family afloat. More and more students need more financial assistance than ever and it is not going to be easy this time around. By February, the financial crisis of the mortgage market had gone beyond being an issue solely for homeowners. The crisis had spread to areas once considered to be stable, including the bonds for student loans. Here’s why:

Loan Crisis Lowdown

Local and state governments acquire money for public or semi-public programs from what is called the market for auction-rate securities. These securities typically offered a very low interest rate to government borrowers. It also allowed banks and other lenders access to cash investments, through bond auctions. They could sell their investments on a weekly basis and get the money back, essentially allowing them to earn a higher return than if their money were placed in a bank. Every investment was insured by a bond insurer, who guarantees such debts. However, the bond insurers also provide insurance to other debts, including dub-prime mortgages. As a result, banks no longer believe the bond insurers will be able to guarantee the student loans as well as they have in the past.

Lenders Are Suffering Too

Additional strain on student loan companies is the incidents of default. Lenders are taking huge losses in recent financial quarters. Realistically, the debt collectors brought in to collect on the defaulted loans are the one industry who stands to gain anything from this financial crisis. Subsequently, the auctions for the loans have become virtually abandoned, as the investments are now considered too risky. Interest rates are being raised, and adding to the damage, the federal government had cut it subsidies in 2007. States and their universities have started to cut or cancel their own student loan programs. Private lenders are taking their companies out of the lending business. State programs once supported by the government have begun canceling their federal student loan programs.

Making Promises

Through all of this, students are stilling being told not to worry. They are being directed by government officials to apply for the direct loan program through the Department of Education. The Department of Education has been making an effort to reassure future borrowers that there will, in fact, be enough money. However, the evidence is strong that the student loan industry is not as strong as it once was and students will be faced with many issues, including increased interest rates on loans or worse, no funds available at all for loans.

Students Hit Hard

Students are coping in different ways depending on their own personal situation. Some hit hard by the lack of financial assistance are leaving four-year universities and opting for a community college. Those less fortunate have had to abandon the idea of higher education all-together. Student who have forged ahead to complete school are now facing higher than usual debt situations. This, in turn, causes another major concern because high paying jobs are getting harder to come by, leaving students in a bigger bind.

How to Deal

Students will soon begin applying for financial assistance in the coming months. Planning to fund college may take a lot more effort than in recent years. Students still eligible to receive college scholarships from high schools and community organizations should consider researching as many as possible. Carefully weighing the pros and cons of starting at a community college and transferring later may be an option for many. It would also be worthwhile to take time and research scholarships and grants that are available on a national level. Parents and students alike may be surprised to learn of the variety of funding offered through philanthropists and companies that will help pay for college.

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Tisha Kulak is a writer for Creditorweb.com, where she writes about credit card offers, student credit cards and college finances.