Are loans becoming harder to come by?

October 1, 2008 5:12:27 AM PDT
The Wall Street crisis and credit crunch are causing concern for thousands of local college students and Triangle residents.Many are worried about their ability to get loans, especially given the sale of Charlotte banking giant Wachovia. For thousands at NC State and other local colleges, if you have a loan now, you should be okay. If you don't, experts say you could be in trouble. At NC State nearly 2,000 students receive financial aid through Wachovia. "I talked to a few of my friends they're pretty much saying this is all falling apart we don't know what to do though so we're all generally kind of nervous," NC State freshman Derek Spicer said.

Most college students need some kind of financial aid and some use private bank loans to help. Tuition at Peace College in downtown Raleigh is almost $23,000 a year.

"Some of us are not as wealthy as affluent students, so we have to get loans," former Peace College student Sannia Delphonce said.

Their concerns are valid says Duke Finance Professor Campbell Harvey.

"Anytime you slice up a firm it's going to get more difficult to get any type of loan. There is a lot more uncertainty with Wachovia now," Harvey said.

A Wachovia spokesperson tells Eyewitness News that anyone who currently has a student loan shouldn't notice any changes. The bank will continue to offer federal Stafford loans, but stopped issuing private loans last month.

"I'm fairly confident. I'm fairly confident in this right now so I'm not too worried but overall I'm worried about the financial system," Spicer said.

NC State's financial aid office says more and more private companies have stopped issuing student loans. Harvey says it's a trend we should get used to.

"In a credit crunch it's more difficult to get any type of loan whether consumer, small business, big businesses and a student, very difficult to get funding," he said. "It's going to be a significant problem for all schools around here."

Harvey also says colleges and universities need to step up and offer loans to students at least on a temporary basis.

He says parents and students should call their chancellor or president's office encouraging them to do so since schools have the capital and they don't want to see students leave.

Many experts on Wall Street say all kinds of loans are going to be harder to find if a federal bailout does not come soon. But some mortgage brokers say, bailout or no bailout, the difficulties are already here.

"The belt-tightening in my opinion has surpassed common sense and borrowers who should be granted loans are being penalized," Mortgage Broker Tony Tidwell said. "I believe Wall Street right now is a lot of hype designed to bail people out who have made bad decisions. And I believe that it's going to correct itself."

Many students say they don't know what the correct course for the economy is, but they don't like the way loans are heading.

"I just really don't know. And I hope Congress can come up with a new plan so that maybe we can help our country out, because we really are in a bad situation right now," Delphonce said.

Wachovia bank, which is being bought by Citigroup, announced Tuesday it will stop writing all student loans which aren't backed by the government.

"Well that's sad. I actually bank with Wachovia and I didn't know that. So that's pretty distressing as well," Delphonce said.


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