Planning for College: Evaluating the Educational Loan Climate

Educational loan availability should be part of the consideration you make when determining if it is the right time to go to college. Whether you are seeking a degree for the first time or trying to go back to school for a second degree, deciding how you will pay for school is as important as any other decision you will make. Think about the job market, credit market and number of students applying to school in a given year to give yourself an idea of whether this is the right time to go back.

Job Market Considerations

Many students think it is a good idea to go back to school when the job market is slow. If you lost your job, you may considering pursuing another degree while the market recovers. On the one hand, this does seem like good timing. However, you should keep in mind what is happening in the loan market during a slow economy. Many lenders are seeing a high number of defaults on home loans and other student debts. They will be less likely to extend financing at a reasonable rate, and you may have difficulty securing a loan at all if you have bad credit. Furthermore, fewer employers will be willing to help pay the cost of education in a bad economy. 

Credit Market Considerations

When the economy is slow, the credit market tightens up. This means there are simply less loans available, and it can also mean the available loans are more costly. Know the national prime interest rate, and watch the rate fluctuate over time as you consider when to apply for your loans. If the rate drops drastically, this may be a sign lenders are needing extra encouragement to simply make a loan. If the rate rises sharply, you may be facing higher financing fees. It is best to seek a loan when the prime rate is recovering from a previously low level. The credit market is opening up again, making loans available, but it has not fully recovered, which would make loans more expensive. 

Student Loan Market

You may not know exactly how many students you will be competing with for a place at your school of choice, but it is important to watch trends to anticipate years when applications will be high. When a lot of students are applying for college, many are also applying for college loans. This can be a bad time to go to school. You will have to compete against a higher number of people to secure grants and scholarships. When it comes time to get loan funds, you are being compared to a much larger group of students for consideration. A bank will not fund every single loan, so you will have to be on the better end of the scale if you want to get a loan with good terms. When an economy is slow, more students tend to go back to school, so this could also be a bad time for you to go back if you are in need of financing to do so.

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