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Monday, May 05, 2008
By ISOLDE RAFTERY, Columbian staff writer

Beth Rosenlund is a parent with a dilemma: She earns enough money so her 12-year-old daughter won’t qualify for significant college financial aid, but she doesn’t earn enough to save for college.

“It’s a rut,” she said. “You either qualify or you don’t.”

But several recent measures — from Washington, D.C., to Washington state — are providing relief to parents like Rosenlund. Students will now be able to borrow more federal dollars, hopefully curbing an unsettling trend toward high-interest private loans. And in this state, politicians are working to make college more affordable for lower-income students.

The U.S. Congress passed a bill last week that would increase how much a student could borrow in federally backed Stafford Loans. President Bush has said he would sign it.

All students, regardless of credit history and family income, may take out Stafford Loans, which typically charge lower rates than private loans. Students may borrow up to $19,000 over four years.

The bill is a response to the growing number of students who are turning to private loans to bridge the gap between the federal loans and the cost of college.

While Stafford this year is charging 6.8 percent, private loans reach up to 16 percent.

But even private loans are tougher to secure these days, said Alyson Galloway, with the Washington State University Vancouver financial aid department. A slowing economy has resulted in lenders putting tighter restrictions on the loans, she said.

Chase Bank and Bank of America are no longer providing private loans to students at Clark College and other community colleges.

Galloway said that for students attending pricier institutions, lenders have started to raise interest rates on private loans.

And students who attend schools with lower graduation rates or where a higher number of students default on loans could also have trouble finding banks willing to lend, she said.

That’s where the new law could help. Dependent undergraduates would be able to borrow up to $31,000; students who aren’t supported by their parents could borrow up to $57,000.

Rep. Deb Wallace, D-Vancouver, is chairwoman of the Higher Education Committee and has started looking into the impact of the credit crunch on student loans.

She became more interested when her daughter, headed to graduate school, told her that she had yet to hear about loans she’d applied for months before.

“It takes me three days to get approved for a mortgage,” Wallace said. “What’s happening?”
She has asked officials at the Higher Education Coordinating Board to research how long it’s taking to process loan applications, and how many loans have been rejected.

Good news in Washington

There are silver linings in Washington state, too.

The state launched the College Bound Scholarship — full tuition for low-income middle school students who pledge to maintain a 2.0 grade point average throughout high school.

Wallace has made it her mission to let students know about the scholarship. She said she worries that students may be receiving so much information that they’re not hearing about the most fruitful opportunities.

Like Opportunity Grants, for example. Those $2,500 grants are for lower-income transfer students.

“I’ve asked a room of students, ‘How many of you have heard about the Opportunity Grants?’ ” Wallace said. “Nobody raised their hands.”

Vancouver mom Rosenlund can’t sign her daughter, Daina, up for the College Bound Scholarship because of the rigid income restrictions. She may qualify for a Pell Grant, which provided the neediest students with $4,731 this year.

For now, Rosenlund will learn what she can about paying for college, and she’s going to start saving money.

Problem is, Rosenlund said, “I don’t even know how much I should be putting away.”