by Edwin Mora
(Second of two parts) Lending options for Latino college students are diminished as a result of the nation’s economic instability.
Even those non-federal lenders still remaining after some have abandoned the college-loan business due to the credit crunch are tightening the reins on their lending standards.
“Private loans are now charging higher interest rates, demanding higher credit scores and insisting on co-signers,” says Ronald Johnson, director of financial aid at the University of California-Los Angeles. “With tighter restrictions, students will find that their lender options have dwindled.”
Due to new demands by private lenders, it is anticipated that students without co-signers will not be eligible for private funding, Johnson points out.
Tuition fees for undergraduate students present the new scenario. At UCLA they add up to about $25,000. Latinos make up 14.1 percent of its 12,579 admitted freshmen for the fall 2008 semester.
According to a recent Pew Hispanic Center study, when compared to other ethnic/racial groups such as non-Hispanic blacks, full-time undergraduate Latino students receive the lowest amount of financial aid funds and take out larger federal and non-federal loans.
Private funding for college is a common alternative.
In some cases, it supplements federal student loans. In the last decade, more and more students have resorted to private lenders to cover their higher education costs, according to The College Board.
Of the estimated $62.3 billion in overall student loans in the 1997-98 school year, about $60 billion, or 96 percent, came out of federal loans. These include those provided through states and institutions.
A decade later, the same types of loans paint a different picture. Of the estimated $162.5 billion total in 2007-08, about $143.5 billion, or 88 percent, came from federal funding; the remaining $19 billion, or 12 percent, came from non-federal loans.
Financial aid advisors at both UCLA and the University of Texas-El Paso pronounce that at this point, those students in need of assistance will not find themselves in financial limbo. Federally guaranteed loans and grants are still available at institutions for students who demonstrate monetary need. State-sponsored assistance, on the other hand, is becoming less common as some states struggle to stay afloat during this economic downturn. Some have started reducing their higher education budgets. This could result in tuition fee increases.
On Nov. 4, a budget cut of $65.5 million for the University of California was posed by Gov. Arnold Schwarzenegger. This was in addition to a $48 million reduction already included in the state’s budget proposal.
As part of a contingency plan, UCLA’s Johnson says there are some limited types of funding that his offi ce can deploy on a case-by-case basis. However, he points out, UCLA cannot replace the money made available by private lenders.
Raúl Lerma, University of Texas-El Paso fi nancial aid director, cautions, “For the next year we will be ready for people who might have lost their job, but we may have to do some financial aid recalculations based on the applicants’ household income at the time.”
Both financial aid advisors say that they have not seen a substantial influx of students to the fi nancial aid offi ce this semester, but this may change in the upcoming year.
Details as to how the nation’s economic stimulus plan agreed upon by President Barrack Obama and Congress could affect the college aspirations of Hispanic students remain to be clarified.
Of extra concern to high school graduates with exemplary education credentials but whose immigration status remains clouded is whether The Dream Act, rejected by past Congresses, will finally become a reality when voted on by a friendlier Congress this session. It would not only provide them with more affordable higher education opportunities, but allow those who perform well a chance to adjust their status and remain in the country Hispanic Link.
(Edwin Mora reports for Hispanic Link News Service in Washington, D.C. Email him at edwin.mora@gmail.com). ©2009
