You may have seen this piece in the 1/23 issue of Inside Higher Ed:

The Credit Crunch Takes a Toll

For months, college officials have been nervously eyeing the tumult of the subprime mortgage crisis, the aftermath of the student loan scandal, signs of a coming recession, and other financial indicators, and wondering if, or when, the gathering winds would hit higher education. Tuesday, the first big wave did - blasting only the for-profit sector, for now, but worrying others.

The article is continued at: http://www.insidehighered.com/news/2008/01/23/credit.

While many eyes are fixed on Harvard's income-contingent tuition, Dartmouth's free tuition for families with incomes under $75,000, and additions to the list of "no-loan" schools, we at Hardwick~Day think a more immediate concern is whether and how families will find loan capital to finance whatever their contribution is this fall, and we think the IHE article understates the seriousness of the situation.

IHE focuses on lenders' retreat from the proprietary (for-profit) sector, where credit worthiness and repayment experience poses greater risk, but securitization of loans as a source of loan capital has come to a halt, and banks show every indication that they will limit exposure to student loans and raise credit standards as a way to ration this capital.

There will simply be less capital available for both guaranteed and private loans.

Back-end benefits are likely to all but disappear, so any borrowing will likely cost more. Even highly creditworthy families may find it is harder, and it takes longer, to get their student loans squared away.

I've attached a useful matrix the Minnesota Private College Council has produced for its members, outlining the dimensions of this threat.

I am writing to suggest two immediate steps:

1. It would be a great idea for financial aid directors to talk with lenders who have authority and credibility about availability of capital, credit standards, back-end benefits, and other loan features and requirements. While these kinds of conversations last fall were probably conducted with the objective of determining a preferred lender list that reflected due diligence, objectivity, and an effort to conform to the "Cuomo" standards, we're suggesting now that the objective is to know early whether your families will encounter higher hurdles and if so, to counsel and assist them accordingly.
    
2. This would also be a good time for admissions counselors and financial aid staff to get briefed on the capital markets, sources of student loan capital, and the ways in which families may experience and react to the financing process as they receive letters of admission and financial aid packages. We’d be happy to help with that. Please call or drop a note if you’d like to discuss this matter, or if we can help.

Best regards,

Jim Day