The New York State Higher Education Loan Program will allow students to borrow up to $10,000 dollars a year or up to $50,000 for four years. Students will only be eligible to apply after they have exhausted all other financial aid options, specifically "federal, state and institutional aid," according to the New York State Higher Education Services Corporation Web site.
The loan is available to New York residents working toward an associate's, bachelor's, master's or doctoral degree at a college in New York and will be available for the spring 2010 semester. Students can start applying in December.
The interest rate for the loan will be between 7.55 and 8.75 percent, slightly higher than the 6.8 percent rate on an unsubsidized Federal Stafford Loan, but lower than most private loans.
The bill to create the program was passed in the New York State Legislature in April to give college students another option for paying for college besides private loans, which often have interest rates between 12 and 17 percent.
The loan program will include a tutorial in money management, credit and student loans, which students will be required to take before receiving the loan.
An instructional program is typical of federal student loans, said Kaye Devesty, director of Syracuse University's Office of Financial Aid and Scholarship Programs. The new loan, she said, comes largely in response to a decrease in private loans being offered to students.
"In the past year and a half or so, the lenders that used to have educational programs have been reduced. We've seen a number of lenders get out of the alternative loan business, and we've been concerned about that," Devesty said. "The (Higher Education Service Corporation) took a step in the right direction."
Existing private lenders have made it difficult for students to keep a loan, said George Kazanjian, senior attorney in the office of counsel and regulatory compliance at the HESC, at a public hearing in September. The new loan was put into place because many private lenders either stopped offering higher education loans or have tightened credit restrictions on existing loans, Kazanjian said at the hearing.
Ross Rubenstein, a professor of public administration at SU's Maxwell School of Citizenship and Public Affairs, studies higher education policy and said often students think that "sticker prices," or what schools list as tuition, is the burden of costs, Rubenstein said.
But what is actually increasing is the "net price," or the amount of money people pay for college out of pocket, after financial aid, he said.
"If the net price increases, students are going to start relying on loans," Rubenstein said.
New York State received $97 million to finance the loans for this year from the State of New York Mortgage Agency by selling tax-exempt bonds. The state plans to eventually provide $350 million in student loans, according to a HESC news release.
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