Tough econ lesson for college students

Students at the Massachusetts Institute of Technology

TEXT OF STORY

Scott Jagow: We've talked so much about how difficult is for people to get home loans right now. Lenders have jacked up their rates and they've gotten a whole lot pickier about who they lend their money to. But it isn't just the mortgage market, it's also the whole lending industry a€¦ And it couldn't have come at a worse time for college freshmen, as Stacey Vanek-Smith has more.


Stacey Vanek-Smith: Here's a timely economics lesson: When lenders have trouble getting their hands on cash, loans become harder to get.

That lesson is playing out in the economy right now. Chris Low is an economist with FTN financial. He says one part of the lending market has been hit especially hard.

Chris Low: What we're seeing now is a bifurcated market where any loan that has government guarantee behind it, you can still get a decent rate, but other borrowers are not so lucky.

That is, people taking out private loans. And with federal aid stagnating and tuition skyrocketing, the market for private student loans has grown more than 900 percent in the last decade.

Low says rates for private loans like these have jumped as much as 2.5 percent in the last month. For college freshman, that could mean a difference of $1,000 a year in loan payments.

I'm Stacey Vanek-Smith for Marketplace.

About the author

Stacey Vanek Smith is a senior reporter for Marketplace, where she covers banking, consumer finance, housing and advertising.

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