Tighter times on campus

For college-bound students this year, a good credit score might be just as important as a good SAT score.

Universities are waiting to see how the financial crisis will affect private student loans, the standards for which began tightening even before the economy crashed.

"Early in the spring, the capital markets for private loans began to feel turmoil, and the cost of money went up ..." said Kevin Bruns, executive director of America's Student Loan Service Providers, which represents major financial organizations that provide guaranteed student loans. "It was totally because of the reaction to subprime mortgages. Investors lost confidence in underlying assets."

For student borrowers, that means tougher credit standards and possibly a re-evaluation of the colleges that they feel they can afford to attend. Current students might have seen their private lender collapse or refuse to provide more financing, causing an inconvenient but workable situation.

Few College of Charleston students, about 5 percent, take out private loans. But of those borrowers, one in six have asked the financial aid office for help in finding another lender who will grant them a private loan.

"It may be a situation where they're not getting loans for the year at all, or the lender is providing them loan funds for the fall term but not the spring term," said Don Griggs, the college's director of financial aid.

Financial aid counselors have been able to find those students loans elsewhere, and Griggs said he hasn't heard of a student dropping out because of funding restrictions.

Debbie Williamson, vice president for enrollment at Charleston Southern University, estimates that about 70 percent of students at CSU rely on federal loans but that another 30 percent rely on private loans. Some students have both.

CSU gives its students a list of preferred lending options. But the university will closely watch private loans, Williamson said, and consider changing the school's lending agencies if problems arise.

"We've not seen any problems right now, and the federal loans we're fairly optimistic about," she said. "It's the private loans we're watching very closely."

Lending institutions have also put in place stricter requirements for student borrowers, Griggs said. As recently as two years ago, students with credit scores between 625 and 650 could secure financing on their own; the threshold has since jumped above 700.

"Those students who have been able to get (financing) on their own, they may still be able to get the loan but they may need a creditworthy co-signer," Griggs said.

It doesn't help that parents who used to finance their student's education by tapping into their home's equity probably don't have that option anymore, he added. Home values have fallen, and many lenders have reined in home equity lines of credit.

Last week's federal bailout package could ease the student lending crunch. The $700 billion bill was meant to encourage lending, and failing student loan providers can request funds under the legislation.

Separately, Congress has increased federal loan limits for some students.

Though the private loan market has been hit more directly, federal loan assistance has also been affected. Some colleges like the University of South Carolina find federal loan funding through commercial lenders instead of directly through the U.S. Treasury.

A university with a high loan default rate, for example, could have trouble finding a lender. But that's not the case for USC, said Ed Miller, director of student financial aid and scholarships.

"I think there are resources (available to us), and partly because we are the University of South Carolina," he said. "As the flagship institution, the types of student we recruit here and are here are not the type that those lending institutions are typically going to have a problem with serving."

The financial crisis, however, could cause a long-term shift in student population, Miller said. Some students may opt to attend a public college in their home state and pay less for state school tuition, while the hassle of finding funds could deter students who live elsewhere from coming to South Carolina.

Griggs said he's seen that trend with the College of Charleston's out-of-state student population. Tuition for those students is $20,418 this year.

"It's probably going to affect a family's decision as to whether they go to an in-state university or go to Duke and pay $50,000 a year," Bruns said.

Reach Katy Stech at 937-5549 or kstech@postand courier.com.