Surviving the Student Loan Credit Crunch

While the recent credit crisis has prevented many from buying cars or homes, the situation is not nearly as bleak with federal education loans.

Recent federal legislation - in effect for the 2008-2009 school year only unless the provisions are extended - allows most undergraduate dependent and independent students to borrow an additional $2,000 in the form of an unsubsidized Federal Stafford Loan.

This temporary funding is on top of the regular borrowing limits for dependent students: $3,500 for the first year; $4,500 for the second year; and $5,500 per year for the third year and beyond. Independent undergraduates can borrow $4,000 per year more than the dependent student annual limits during the first two years of study, with an additional $5,000 per year permitted for the third year and beyond.

This new legislation has also made it easier for a parent to pass the credit test for the Federal PLUS loan, which permits parents of undergraduates to borrow up to the total cost of attendance minus any financial aid received. One can now also request that repayment be delayed until after the student graduates, leaves school, or drops below part-time status.

To learn more, we highly recommend a free Financial Aid 101 article on our good friend Kal Chany's web site. It covers the steps involved in applying for financial aid for the 2009-2010 school year, as well as providing tips for completing the FAFSA and PROFILE aid forms.

Still feeling pressured by those tuition bills? Check out our top 6 Ways to Make College More Affordable.