Money Matters

The tightening of the student loan market couldn't come at a worse time for many students, says Jevita R. de Freitas, director of George Mason University's financial aid office. Due to the economic downturn, she's seen many grad students lose their jobs over the last year. Now they need help paying for school and covering living expenses, she says.

The growing demand for loans and a shorter supply mean that you'll need to be especially savvy about your loan shopping this year. Here are some tips to get you started:

  • Start early. Students can start applying for financial aid even before being accepted by a program. Fill out the Free Application for Federal Student Aid in January, says de Freitas, and by April or May you'll know what federal funding you can count on and what additional financial needs you'll have. Check out grad school fairs and Web sites like to review your financing options. And consult your school's financial aid office to find out which lenders are currently making student loans.

  • Limit your borrowing. "We try to get students to borrow as minimally as possible," says de Freitas. "The more free funds you can receive the better." Consult your department, financial aid office and Web sites like for information about scholarships, fellowships and other options.

  • Explore your options. If you do need to borrow, be sure to exhaust all your federal loan options before turning to a private loan, experts urge. "The federal loans are more available, they're cheaper and they have better repayment terms," says Mark Kantrowitz, publisher of

Grad students are eligible for two types of federal loans. The Stafford loan program allows graduate students to borrow up to $20,500 each academic year. Graduate students who need more can tap the Graduate Plus loan program. Unlike other federal loan programs, the Graduate Plus program examines applicants' credit histories for foreclosures, repossessions and other red flags. "But because it's a federal loan, the credit checks are more lenient," notes de Freitas.

If you do have to seek a private loan—because you've got dings on your credit history, aren't making satisfactory academic progress or aren't a U.S. citizen, for example—shop around, comparing interest rates and repayment terms.

  • Consider cosigners. You may need a co-signer for a private loan if you have a blemished or limited credit history. Applying with a parent or other credit-worthy cosigner can also improve the interest rate and other terms you receive.

You can also ask family, friends and even strangers for help directly, either informally or through peer-to-peer lending networks such as and www.fynanz. The sites allow students to post ads describing their educational and career goals as well as the financial help they need to make those dreams a reality. Investors then provide loans of whatever amount they wish. The process gives students access to low-cost loans; investors earn a return on their investment and have the satisfaction of helping students get an education.

—R.A. Clay

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APA's loan program closes

Aug. 31 spelled the end of the student loan and loan consolidation program Chase bank offered to APA members.


"As part of a business-wide review earlier this year, Chase decided to exit the affinity channel for its student loan business, in which the APA relationship was included, in order to focus on opportunities in our core channels," explains Chase spokeswoman Mary Kay Bean.


If you already have one of the loans, she says, don't worry. Chase will service existing loans until they are repaid, and terms will remain the same. The company will also continue to offer private student loans to consumers.


—R.A. Clay