By Erin Kelly

Recent announcements by several loan-granting organizations that they would require federal aid and not offer private student loans in the upcoming academic year, has made some nervous during this time of increasing economic hardship.

Jenna Quilty, a sophomore psychology and elementary education major, said the loss of private student loans could make attending college more difficult for some students.

“Many students rely heavily on financial aid. Many [students] choose colleges and universities based primary on just that,” Quilty said.

However, Northeastern Financial Services has ensured that Northeastern students and parents will continue to have access to federally guaranteed loans by moving to a federal financing program, said Seamus Harreys, dean of financial services.

This federal financing program includes the Stafford Loan and Plus Loan, which cover the federal parent loan, as well as the federal guarantee loan, Harreys said.

The House of Representatives approved a bill to ensure that money is available to provide student loans in the 2008 academic year, attempting to put a safety net under the $85 billion student loan market, according to local media reports.

Although the bill has not yet been signed into law by President George W. Bush, the House and Senate in Congress approved it to secure federal loans, which will hopefully have an effect on private borrowing, Harreys said.

“Our hope is that this will ensure a general sense of optimism around investing in and providing equity financing private educational loans for parents and students,” he said.

The subprime mortgage crisis is the culprit behind the sudden drop in private student loans, said John Kwoka, an economics major.

“This problem actually began with the subprime mortgage disaster. Lenders generally got spooked and started to tighten up standards on all sorts of loans, including student loans,” he said.

The student loans in question are not government provided nor government guaranteed loans, Kwoka said.

“These [loans in question] are from banks and other private lenders that have gotten worried about the risk of defaults and losses, and so have stopped much of their lending to students,” he said.

The loss of private loans would have a devastating effect on students around the United States, especially now that about one-fifth of all student loans are private loans from banks or other institutions, Kwoka said.

“If that supply of funds dried up, it would place students – both new and existing students – in a terrible bind. Some would simply not be able to go to college or maybe they could not finish,” Kwoka said. “And that would narrow their employment opportunities and shrink their earning power, and make it harder to pay off loans they already have.”

How the loss of private student loans will affect students at Northeastern is hard to determine, Harreys said.

“For federal loans, I don’t think there will be any effect with parents or students having access to those funds,” he said. “With private loans, we don’t know, some use Bank of America, some use Massachusetts Educations Financing Authority, some use other lenders. How that will shift out remains to be seen.”

Northeastern officials will be watching the national and local scenes closely during the next 30 to 60 days to see what will happen with private loans for the 2008 academic year, Harreys said.

“Our hope and our goal as an institution is to minimize any detrimental effect on any incoming students as well as current students,” he said. “In many ways we’re looking to see what’s going to happen and how the market reacts to the new federal registration, where the pinpoints to where students and parents have trouble are and how the institution can help.”