Bad economy making it difficult to get a student loan

Along with having difficulty refinancing a mortgage because banks are tightening their lending practices, add another victim to the housing crisis -- student loans.

College students who don't have a loan co-signer or good credit are having a difficult time getting loans, and students who attend trade schools are having a worse time because lenders aren't comfortable with such students, said Brian Cox, chief business development officer at TuitionU.com, a Web site that helps students find and apply for loans.

Starting Wednesday, TuitionU is formally rolling out TuitionFlex payment program, which lets schools create tuition payment plans for students that want to pay annual tuition in 12 equal monthly installments, or take up to 10 years to pay back.

The loans are meant to be used by students who have already tried to get traditional loans on campus, or have failed to get a loan from the federal government to finance their college education, Cox said in a telephone interview. All other avenues, including scholarships, should be explored first, he said.

"We want to be the gap, the end of the road for when they still owe money," he said.

For example, a $10,000 loan through TuitionFlex at the typical 5% fixed interest rate would cost the student $108 per year. An $8 monthly administrative fee is billed to the school. Students must pay the $300 application fee.

By comparison, graduate Stafford loans, which are typical government student loans, have a fixed rate of 6.8%. Federal PLUS loans have a fixed interest rate of 8.5%.

While TuitionFlex is available Wednesday for all schools using TuitionU, the new program was started two months ago at about a dozen schools.

Beyond tuition, loans can be for any expenses on campus, such as books, room and board.

"Anything that the school charges you, you can include," Cox said.

Trade schools and community colleges are being pushed aside by big lenders that are becoming more conservative in who they lend to, he said.

That hurts students, but also the colleges they could go to, Cox said.

"Schools will not do well if the financial folks don't help these students find financial aid," he said.

Aaron Crowe is a freelance journalist in the San Francisco Bay Area. Reach him at www.AaronCrowe.net