Private student loans getting scarce

Your child will be a college freshman this year, and you’re a little apprehensive. Will she pass Econ 101? Eat her vegetables? For some parents, though, such worries are eclipsed by a more immediate concern: paying the bill for the coming semester.

In recent months, several large lenders have stopped providing private student loans, stranding families that were counting on such loans to cover some of their costs. Borrowers who had been approved for loans from the company have been forced to look elsewhere for money.

Though some lenders still offer private student loans, “the list is shrinking,” says Kevin Walker, chief executive of SimpleTuition, a Web site that allows borrowers to compare loan rates. Last year, he says, SimpleTuition featured 77 lenders on its Web site; now it has 16.

Even at this late date, though, families have options. If your lender has left you high and dry, here’s what you should do:

•Contact the school’s financial aid office. Financial aid administrators can help you find other sources of funding, including private lenders that are continuing to make loans, says Jerry Cebrzynski, financial aid director for Lake Forest College in Lake Forest, Ill. And if you’re up against a payment deadline, most schools will give you a few more weeks, he says.

•Make sure you’ve maxed out your federal student loans. Unsubsidized federal Stafford loans carry a fixed interest rate of 6.8 percent and have more flexible repayment terms than private student loans. This year, freshmen will be allowed to borrow up to $5,500 in federal student loans, up from $3,500 last year.

Unsubsidized Stafford loans are available to all full-time students, regardless of income. But to qualify, you must file a Free Application for Federal Student Aid, or FAFSA. If you haven’t filed a FAFSA, you can speed up the process by applying online, says Kalman Chany, author of “Paying for College Without Going Broke.” For more information, go to www.fafsa.ed.gov.

•If Stafford loans won’t cover all your costs, consider applying for a Parent Loan for Undergraduate Students, or PLUS loan. Parents can borrow up to the amount of college costs, minus any financial aid the student has received. PLUS loans carry a fixed rate of 8.5 percent. That’s a lower rate than you can get on many private loans.