By Giles Morris - Daily News Staff

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Paying for college gets more difficult each year, but the fallout from this year’s subprime lending crisis may make it even more difficult for this year’s high school graduates to pay for a four-year degree.

“The broader dislocation in the capital markets has definitely affected the student loan industry,” said Tom Graf, executive director of MEFA, a Massachusetts nonprofit that deals with student financial aid. “Clearly there’s a trend where [investors] are hesitant to enter the market and it’s a nationwide phenomenon.”

Locally, high school graduates may be insulated from the effects of the lending crisis this year, because many attend schools in the UW system that offer federally regulated Stafford loans and have substantial grant awards.

“I don’t have any firsthand knowledge of our students being affected,” said Michael Mack, guidance counselor at Rhinelander High School. “Our local scholarship program is pretty incredible.”

About 50 percent of RHS graduates will go on to attend a four-year college. Of that group about 40 percent will attend a school in the UW system. Nearly 30 percent of RHS graduates will attend a two-year institution like Nicolet College.

Bill Peshel, director of Financial Aid at Nicolet, thinks that as private secondary loans, which students often use to offset living expenditures, become more difficult to obtain, schools like Nicolet may see an increase in enrollment.

“Students may start looking at lower cost schools, particularly when you can come here and get your first two years of your university degree without having to pay living expenses,” Peshel said.

Schools that offer federal Stafford loans fall into two categories. Direct lending institutions like UW-Eau Claire and Marquette University receive money allocations from the federal government and provide loans to their students directly. Federal Family Education Loan Program (FFELP) institutions like UW-Madison and Nicolet College use banks to supply the same loans. Both types of schools offer subsidized and non-subsidized Stafford loans which can make around $6,500 available annually at 6.8 percent interest for qualified students.

Susan Teerink, director of Financial Aid at Marquette University, said that she does not expect her students to be adversely affected this year by the decreased number of lending institutions because Marquette as a direct-lending institution does not rely on banks, but the situation may worsen.

“We are telling our students to fill out their FAFSA forms early this year, so that if they have trouble borrowing from certain lenders, we can help them. At this point I’m not hearing from students that they’re having problems. We are taking the issue very seriously,” Teerink said.

Administrators around the state are saying that Wisconsin students may be in better shape than students in other states because of the number and value of state tuition grants available to them. They say that while they remain vigilant concerning the fallout of the subprime lending crisis, they do not foresee it limiting students’ ability to attend college.

“There’s a friendly competition between FFELP schools and direct lending schools but we’re all in the business of getting young people through college. Students do not need to panic. There is money available,” said UW-Madison Financial Aid Director Susan Fischer.

Fischer said that around 2,000 of UW-Madison’s 17,000 undergraduates have to look for new lenders as a result of the crisis, but over 200 banks are still ready to provide loans. She believes the larger impact of the subprime lending crisis will not be felt until next fall, when some students typically apply for private loans to cover living expenses.

Private secondary loans are less available and more expensive than ever before. Eventually, that situation will make it harder on students who need loans to pay for schools with tuition price tags significantly greater than the money made available to them through federal loan and grant programs.

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