Credit crunch hits home: Student loan plan halted as funding dries up (The Detroit News)

The state of Michigan has suspended one of its student loan programs indefinitely, shutting off one avenue for students to pay for college and raising troubling new concerns about the stability of the student loan industry nationwide. Blaming a credit crunch rooted in the collapse of the sub-prime home loan market, Michigan will not offer new loans through MI-LOAN, a program created in 1990 to help bridge the gap between federally subsidized loans — which are capped — and the rising cost of tuition.

Banks may require higher credit scores, charge higher rates and demand increased fees before lending, said Justin Draeger, spokesman for the National Association of Student Financial Aid Administrators, which has 13,000 members at 3,000 colleges and universities.

"In the short term, I think private student loans may take a hit," he said. "Obviously we’re concerned about that."

In the meantime, Draeger, from the National Association of Student Financial Aid Administrators, said the biggest player in student loans remains safe. There have been no indications that the federal student loan program, which the majority of students participate in, will suffer.

"I think it’s a little early to call it a crisis," he said.

The full article was originally published in The Detroit News on 2/13/08.