An Education in Student Loans

Graduation day should have been a happy one for Tyrone Bailey. The first in his family of three children to earn anything beyond a high-school diploma, Bailey, 24, received a bachelor's in criminal studies from Westwood College in Torrance, Calif., two years ago. But even while the day's pomp and circumstance played out, his thoughts turned quickly to the tough job market and the $20,000 in loans he borrowed directly from his alma mater that were set to accrue a whopping 18 percent interest rate.

Not long ago, low-interest student loans were as easy to come by as a pass to get out of gym class. But the economic downturn and ensuing credit crunch put an end to that. As relatively cheap, private bank and federally backed loans became harder to come by, some colleges, vocational schools, and online institutions filled the void by lending directly to students like Bailey. Loans from traditional sources like Student Loan Marketing Corp., commonly known as Sallie Mae, fell by more than 50 percent from 2007–08 to 2008–09 after years of rapid growth, according to the College Board.


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