No slowdown in federal cash for Virginia students

While the faltering economy has left some people struggling to get car and home loans, Virginia students are having no problems getting federal money for college.

Virginia colleges and universities report no disruptions with students receiving federal loans, grants and scholarships, which constitute most financial aid, according to the State Council of Higher Education for Virginia.

Financial aid officers with Tidewater Community College, Old Dominion University, Hampton University and Virginia Tech said money for students has continued to flow during the economic downturn.

Conditions have been tougher, however, for some people relying on private loans, which are often a last resort when other forms of financial aid don't cover all the bills. About 23 percent of all student loans are non federal, according to the College Board.

"The effect of the credit crunch in Virginia is in lenders of private loans tightening credit requirements, so the students who are having problems are those with credit issues," Lee Andes, assistant director of financial aid for the state higher education council, said in an e-mail.

"It is not new for students to be rejected for private loans, but aid administrators report that numbers are up this year due to tighter restrictions," Andes said.

Kevin Burns, director of financial aid at Norfolk State University, said he's heard of similar cases among some of his out-of-state students, whose costs are higher.

"It's becoming more difficult because the credit has dried up," he said.

Private loans, unlike most federal loans, require applicants to submit to a credit check. "If they've raised the credit scores, fewer will qualify," Burns said.

In addition, some banks have retreated from the private education loan business. Bank of America discontinued its program in April, said spokeswoman Nicole Nastacie, but will continue to service existing loans. She said private loans made up only 15 percent of the bank's student lending business; it still offers federal loans.

Wachovia, which also handles federal loans, now offers private loans only to medical, law and graduate students. As of August, it no longer accepts new applications from undergraduate students.

"Wachovia is constantly evaluating our organization, and in the current environment, we felt it was prudent to stop accepting undergraduate private loans," spokeswoman Christine Shaw said.

Current private loans, however, will continue to be serviced.

Many banks are still participating in the federal student loan program. Colleges continue to provide federal financial aid in the form of grants, most notably the Pell Grant, Perkins and Stafford loans, and the work-study program.

The federal loans, regardless of whether they're offered through schools or lending institutions, are guaranteed to be paid if a student defaults, and they tend to have more favorable terms and interest rates.

Work-study and Perkins loans, as well as most Stafford loans, are based on financial need. Federal PLUS loans for parents require a credit review.

Veronica Finch, director of financial aid at ODU, said students should not be deterred from their goal of a college education.

"They should do their homework and research to find the best affordable fit for them, using all of the financial aid information and resources at hand."

Denise Watson Batts, (757) 446-2504, denise.batts@pilotonline.com