College students struggle for loans

The credit crunch has officially arrived on campus.

In a new survey, private colleges report their students are finding it significantly harder to secure the private loans they need to pay tuition bills. More alarmingly, nearly half of colleges say some students have been forced to take time off or go part-time as a result.

The survey, released Tuesday by the National Association of Independent Colleges and Universities, confirms anecdotal evidence that the federal financial aid system has held up reasonably well during the financial meltdown.

But it paints a more troubling picture for students who need private loans to supplement their federal ones.

"We had not expected to find incidences of students already stopping and dropping out," said Sarah Flanagan, vice president for government relations at NAICU. "There are certainly a concerning number of students who have had to change their educational plans because of a lack of credit."

Three-quarters of the 504 schools surveyed reported more requests for institutional aid this year, and despite the largest cohort of 18-year-olds since the Baby Boom, one in five colleges reported a smaller incoming class than expected.

Only about one-quarter of American college students attend private — or independent — colleges, and they typically have to borrow more than students elsewhere. But they're also generally considered more attractive lending candidates, Flanagan said, because of factors such as higher graduation rates.

According to last year's numbers from the College Board, the average list price at public four-year colleges was $6,185, compared to $23,712 at private four-year colleges.

That's why the findings are troubling: If private college students can't get loans, students at public, community and for-profit schools are struggling at least as much.

The survey was conducted in September, before the latest tightening of credit markets.

"There are only so many options. We've awarded them the maximum grants and scholarships and loans," said Sue Standley, the financial aid director at Augustana College in Rock Island, Ill., which recently announced next year's tuition hike of 3.9 percent — the lowest in 25 years — six months earlier than usual to help students plan ahead. Tuition, fees, room and board this year run $37,800.