MU financial aid director discusses economy, loans

Thursday, October 2, 2008 | 7:46 p.m. CDT; updated 11:12 a.m. CST, Wednesday, February 11, 2009

COLUMBIA — With the latest economic events raising anxiety about credit, students and parents might be wondering about the status of their student loans. For right now, Joseph Camille, director of student financial aid at MU, says there is no effect.

Camille, who has worked in student financial aid for  more than 30 years, points out that the economy won't have an immediate impact on student loan interest rates. What he has seen this year, however, is more students changing their Free Application for Federal Student Aid forms to reflect changes in income

Q Will the economy have a direct impact on student loan interest rates?

A There's always a chance of anything happening. But interest rates on student loans are regulated by federal law, so the federal law would have to change. And I don't think that's likely.

Q Why not?

A It's pretty much locked in for this year. The vast majority of student loans have been guaranteed by the federal government for years. It's not like the housing market where they weren't guaranteed.

Q Are federal student loans the most common type of loan used by MU students?

A Just under 90 percent of our loans are federally guaranteed student and parent loans.

Q Are you seeing any early signs of economic distress in students or parents paying for their children's education? Is the financial aid office getting more questions?

A Not any more than usual. (Pause.) Let me go back on that. The federal government requires students to complete the FAFSA, and there you put down your income and assets for the prior tax year. So for the '08-09 academic year, you would put down what you earned in '07. That's the normal procedure. If parents incomes are reduced, hours are cut back or if somebody moves from a higher-paying job to a lower-paying job, or if they are laid off, then there is a process that we can use to use current income, to use 2008 income. We did have more people apply to do that this year than we have in the past.

Q Can you tell me more about that process?

A We've had a lot of people apply for special circumstances. We use this year's income — we can verify that their income is reduced and then we revise the FAFSA and put this year's income on it. There was more than usual.

Q What about in the last couple of weeks? Has the economy created any problems for student loans?

A We've not seen anything unusual in the last couple of weeks. The vast majority, 95 percent of the students, have their loans for this '08-09 academic year.

Q So what about next fall? Do you think there will be a difference in the way student loans are processed?

A I can't speculate about what's going to happen. What I do know about next fall is the federal government will be guaranteeing the vast majority of our student loans — approximately 90 percent. ... Our students will still be in reasonable shape.

Q What about alternative loans?

A Approximately 10 percent of the total value of student loans (at MU) are private or alternative loans. ... Their interest rates follow the market more. From what I've been reading and listening to, it appears that interest rates are headed down.

Q Why do you think they are headed down?

A Because the federal government wants to make more money available. ... The federal government raises its interest rates when it is afraid of inflation. It's not afraid of inflation right now, it's afraid that there won't be enough money for the markets to have money to lend. One of the ways you address that is you lower the interest rates.

Q So with alternative loans, if the interest rates go down, they are following the market?

A Interest rates on alternative loans go along with the market. The federally guaranteed loans are passed by legislation.

Q Have private or alternative loans seen a change in interest rates?

A No, if they've done them for this year, they're not going to change their interest rates for this year. Students have already got their loans for this year. They might change them for next year.

Q Could other aspects of student loans change?

A Anything is possible. I think there will be few, if any, changes over the next year in the guaranteed federal student loans offerings.

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