Personal Loans Increasingly Popular as Credit Card Law Goes into Effect
With credit cards and student loans harder to get, personal loans likely to take their place.
Online, February 22, 2010 (Newswire.com) - With new credit card law in effect, and federally-guaranteed student loans about to dry up, young adults and their families will have no choice but to turn to personal loans to pay for tuition, books, room and board and other associated expenses.
Pre-qualify for a personal loan up to $250,000. Click here to learn more.
As of February 22, credit card issuers are no longer allowed to set up tents and tables on campus, offering tee shirts and other gifts to students who apply for credit cards, unless applicants can prove their income is sufficient to make payments on their maximum balances. Students who do not qualify for the credit cards on their own may be able to use co-signers. Unfortunately, getting credit cards or using the cards they already have might not be any easier for their parents.
There has been a huge increase in the number of tuition payments made with credit cards, according to student loan originators and collectors, Sallie Mae, but that is about to come to an end.
Credit card issuers had nine months of lead-time to prepare for the new legislation. They used that time to close millions of accounts and more than 40% of banks cut existing credit lines. Even cardholders whose accounts were not closed or cut back will likely be paying increase interest rates and fees. Compared to this same time last year, consumers are paying 30% more for credit card use, according to Bankrate. Adding insult to injury, those who have accounts they do not use may be subject to non-usage fees.
As of the 2007-2008 school year, 52.9% of full-time college students take out student loans, most of them federally originated or guaranteed through programs like the Federal Family Education Loan Program. That option, however, seems likely to become a thing of the past.
The House voted last year to end FFELP, and the Senate is poised to do the same thing soon. Even Education Secretary Arne Duncan is calling for an end to the program. Last week, in a conference all with reporters, he expressed his disgust with the lenders who take advantage of the program.
"The banking industry has had a free ride from taxpayers for too long. They have had their bailouts. They have had their subsidies, and they've paid themselves very well while working families and students are struggling to make ends meet."
He did not say how struggling families and students would pay college expenses in the absence of the federally guaranteed loans, credit cards and credit lines, personal loans will be one of the few remaining options.
