The Student Loan Shuffle

Newsweek, March, 2008 by Jane Bryant Quinn

Call your school, right now, to see if your usual lender is providing funds. If not, start the hunt.

How tight will it be when you look for student loans this year? On paper, loans should be cheaper, thanks to the interest-rate cuts driven by the Federal Reserve. But as America’s giant credit bubble bursts, students are getting splattered, too. The lender you borrowed from last year may have shuttered its loan window for 2008.

Federal loans—Staffords for students, PLUS loans for parents—will still be widely available, but from fewer players. To make these loans, some lenders relied on an obscure financing source called auction-rate notes, which recently ran off the tracks. Others got hit with high borrowing costs when municipal bond insurance tottered....