October 18, 2008 Private college loans in jeopardy Some students might have to cut spending to afford school By KELLY DAY email@example.com MUNCIE -- Ball State University sophomore Ben Lamm is funding his college education entirely with private-sector student loans from his bank. Every month, on top of tuition, he pays $445 to live at Windermere Place luxury apartments with one roommate, $12 to have cable in his bedroom and about $30 for his electric bill. Plus, he eats out about twice a week and goes shopping once a month for clothes or shoes. His parents pay his cell phone bill. Despite the recent credit crisis likely driving banks to be more selective about which students receive student loans next year, Lamm said, he isn't worried about his finances. "I'm having fun. I really don't care about money," he said. "I'm gong to make enough to pay it back anyway." And he could be right; as a construction management major and an A and B student, he would be considered a low-risk loan candidate for most banks. In the construction management field, jobs aren't very hard to come by, he said, and he expects to make around $50,000 a year starting out and eventually $100,000 to $150,000 a year. But not everyone will be as marketable as Lamm upon graduation. Some students majoring in fields with poor job outlooks or those with lower grades -- higher-risk loan candidates -- might have to find a new way to fund their education, said Michael Hicks, the director of the Bureau of Business Research and associate professor of economics at Ball State. "I think we're about to see a resurgence in banks actually taking the characteristics of the borrower (into consideration and) looking at those in more detail than we have in former years," he said. Hicks anticipates other changes, as well. As more students will need to work to get through college, jobs will be more difficult to get. And those who work to pay for school might have to take fewer credit hours each semester, extending the length of their education, he said. In addition, fewer jobs will be available after college, prompting more students to head for graduate school. And soon, Hicks said, students will have to begin to cut back their spending on inessential products and services. "I think we're going to see a lifestyle cutback among students. (It's going to be) the end of cell phones and cable access and (there will be more) doubling up roommates," he said, adding later that students will begin to live similarly to the way students did in the 1970s and '80s "where people (didn't) have cell phones or TVs in their dorm rooms." But students don't seem to be making that change yet. Miranda Gegenheimer, a senior criminal justice major, anticipates having $10,000 in debt when she graduates. She realizes the possibility of not finding a job, so she lives at home and limits her spending. When she sees the way some of her friends live, it worries her. "It's kind of frustrating for me to see that, and it's going to come back to get them eventually," she said. "I have friends with three or four credits cards and they use one to pay off the other." To senior Jeanette Smith, it is important for students, and everyone, to continue to spend their money as they always have. "I don't know much about economics," she said, "but if the economy is going downhill, we shouldn't just stop spending, we should keep feeding the economy and help it grow." Even if the economy improves, though, Hicks said students will still have to expect lower availability of loans and most likely fewer jobs. "This is a done deal," Hicks said. "Even with the stock market going up some days, the private lending sector is going to change. "The real economy is buzzing along very well, people are producing goods and services ... the share of income that Americans spend on energy is lower than it has been in 20 years," he said. "It's all the financial market shock. The demands of the market place are telling (banks) to look very seriously at risk."