Question

CH3.1 Discussion Question: What happens to college students when the economy goes sour? Read the attached article under "CH3" and write a small paragraph (20 lines max) with a summary and answer the following questions: 1. Why does the government subsidize student loans? 2. What will likely happen as a result of lenders pulling out of this market? 3. Should the government do anything? CH3.2 Discussion Colleges, trade schools feel the pinch as lenders quit or restrict school loans Ang 29, 2008, 11:90am CDT Updated Aug 29, 2008, 11:50am CDT Rebin K.Ceoper The Business Review Mildred Elley is losing 60 to 70 recruits a year who fail to qualify for loans, as banks and other lenders continue to tighten standards and abandon the education funding business. The for-profit college, with campuses in Latham and Pittsfidd, Mass, dipped into its operating budget for the first time in school history this year to fund scholarships, fearing the tight lending market might strip enrollment, school officials said Four yar colleges two-year collegs, and propistary or for profit itade wchools all have been two year collcges, and propridary or for-profit frade schools all have been ed MacBook A Thoe cotainly is a lot of trepidation in the marketplace." sid Steven Dodd, president of Key Edacation Rsources, the school funding rm of Key National Finsnce. Fortunately, most Sienas stadents still are able to qualify for loam Nationwide, 30 lemders have stopped offering privse colege loans, and 132 abandoned or curtailed thair participation in Risk, mgalations thet make the business less lacnative, and inveso critical of securikies thet lenders rely on to raise capital, have prompted the mass esodus stadent loan progams since the begineing of ust year The ones hurt most tend to be those with a bed credit history,said Steven Dui, dinector of financial aid at The College of Saint Rose in Albany. Some students can't quality for a loan whether they have a co-signer ar mat. But the fedaral govemment stepped in July 1, iscreasing Suflford loan limits by $2,000 beyond This is unprecedented. Lenders continue to leave every wknid Mark Kantrowitz, whe follows the edacation funding merket and is pablishr of Finsid on $3, 500 allotted for first year students, 54,500 for second-year students and $3,300 for those Wachovis Corp, stopped offiering private loms to undergradaate shadents this monch, following big name landers Bank of America Corp and Citigroup Inc. n thair thind and fourth years l'm of the mindset that every litde bit helps," Lawyer said Key Educatios Resources, which serves about 750,000 families, has seen an increame in its pay- "These loans never really were that profibable," said David Cuder, vike president of Firs Niagrs, which pulled out of the college loan baincss last fall har more than 20 years you-go tution paymest plan Dodd sid First Niagan had what Cutler considers a small portfoli about $52 million in college loam t 3A00 bomower--when sew foderal regulations made the loa" บง time-consunng and too risky to contine Market sighteming also has forced a lot of parants and students to apply for funding later in the Private loans have petty mach dried up," id Johe Stechak, president and CEO of Bey Straies Colleg. The problem realy exploded in the spring of this year ycar Borowers ane spending a lot mone time reviewing loan and financial aid application But the education market han't had much impact at law schools, according to Richard Ladwick vice president for enrollment and student aftairs at Albany Law School "Oer students are an exceptiondly gpod risk." he said. The defult rale of Albuny Law graduates in 2007 was zeno pecent Stalents aho are having a lot harder time fieding lenden wling to consobdate mobiple loans Stashack,whose college serves 4,500 stadents on eight New York camposes, incloding about 600 in Albany, foars the difficuly in obtainingcoation low could lwe a long-srm offict on schools Stadents who are unable to consolidate mulipk loas are at a greaer nisk for delauh, which rts colleges and could raise inerest mes Mildred Eley has annual nevenue of betwea 59 million and $10 nuilion The school has adhelarships of $1,000 to 58,000 t 64 sudents sine wnr Fath Tako deciled earler the year to fund the new scholanship program out of the school's operating balget amounting to a 16 pencent shane of Mildred Elley's net ncome. ฯ think hat's "ublanal ek k of mmey," Takes said. The tight lending market alo has been Ki by private liberal ars schools annd te n Tea ben chlegine said Mary Lae proilnt Soe founcal said an Sena Celkge in LoudonvEle. "We are very concemod about the cconomy. We are vary concemed about affor dabily ad w are very concemed ahout access, she sad. MacBook Air t "There certanly is a lot of tRpidation Ehe markeplace,-sand Steven DodL president Education Resources, the school Key m of Key National Finance Nationwide, 30 lenders have stopped offering private oollege loam, and 132 ahundoned er Fortunately, most Siena students still are able to qualiy for loans. curtailled thee participation in federal Risk, regulations that make the business less lucrative, and investors criticall of securities tha lenders rely on to raise capital, have prompled the mas esodus. student loan progras since the beginning of lasd year The ones hurt most send to be those with a bad aredit hastory, said Sheven Dwire,director of inancial aid at The College of Saint Rose in Albuny Some students can't qualify for a leun whether they have a co-signer or not This is unprecedented. Lenders contimae to leave every wooksaid Mark Knto it wh follows the education funding madket and is publisher ol Finaidong But the Eederal government stepped in July I, increasing Stalfond loan limits by $2,000 beyond the $3,500 alfofted for first year students, $4,500 for econd-year anudents and $5,500 for thase in their thind and fourth years Wachovia Corp stoppel offiering privale loans to undergrsduane sludents this month, following big name lenders Bank of America Com and Cigroup Inc T'm of the mindset that every little bit helps Lawyer said These loans never realy were that peotiheble. said David Cufer, vice eesident of Fi Niagara, which pulled out ofthe colke g loan busines last all afct non than 20 years K ey İdacation Resurces, which Krve.hout 750,000 families, ha rm a, incra" in is pay as you-go tuition payme nt planDodd sad Market liglecning also has Krced a lot of parents and sudents to apply fer funding later in the year risky to continue. Barrowers are spending a lot moee tite reviewing loan and financial aid spplication S Cellege. "The roblem really esploded in the spring of shs yeu Students also ฮe havng ala harder imu Snding lendas wing woonsidae multiple kan". vice presdest for enroliment and uadent affairs al Abany Law School Stushack whese college srves 4,300 udontson ci New York campuss, insluding ah 600 in Alhany,s the difficulty in ohaniung consolidatien las oodd huve a long-can cfledt The defash rate of Alhany Law graues in 2007 was aero per en burts coleges and could raise interest res Maand Eleyhm "maltevenw ofbevoen So million aฝ sam TheKhal kas enee

Answer 1

When the economy goes sour, banks are willing to give fewer loans as student loans, in order to prevent themselves from loss because of default on student loans. This will lead to fewer students being able to afford college education, leading to a decline in student enrollment rates in college.

1.

Governments subsidize student loans so as to be able to send more students to college and make them worthy enough to take part in the economy’s labor force and thus contribute to the economy

2.

With lenders pulling out of this market, college enrolment rates would fall, leading to increased unemployment and economy becoming worse off

3.

Government needs to step in and make sure enough student loans are being provided in the economy, else it would make the economy worse off by shooting up unemployment rates.