Private student loans seen costlier, harder to get

WASHINGTON (Reuters) - Student loans from private lenders are becoming more difficult and costly to obtain because of tighter credit market conditions, according to a survey released on Tuesday by a higher education group.

The National Association of Independent Colleges and Universities, which has nearly 1,000 members, said its survey was an indicator of what students will face this autumn.

"There is widespread uncertainty about what the full extent of the credit crunch and its impact on student borrowers will be, and what safeguards the federal government will have in place to avert a crisis," David Warren, president of the association, said in a statement. "Institutions are looking for national guidance."

About one-third of the group's institutions or 315 schools responded to the survey conducted earlier this month.

Of those, 176 institutions said they had received information from preferred lenders about making non-federal private loans for the 2008-09 academic year. Within this group, nearly half said at least one of their lenders was tightening credit requirements for private loans while 20 percent said lenders were boosting interest rates.

Another 111 institutions that responded said they had not received any information from private lenders about the new academic year.

The chairman of the U.S. Senate Banking Committee expressed concern about the survey results.

"We must do everything in our power to ensure that Americans have options when trying to finance a higher education, and private student loans should be one of them," Sen. Christopher Dodd, a Connecticut Democrat, said in a statement.

Several members of Congress have asked the Bush administration for urgent help to stabilize the $85 billion student loan market.

Groups in Iowa, Montana and Michigan recently reported funding complications for college student loans due to the broadening credit crunch that began last year with subprime mortgages.

Education Secretary Margaret Spellings told a congressional hearing this month that federal student aid would continue to be available and that the administration was monitoring the student loan market.

(Reporting by Julie Vorman, editing by Leslie Gevirtz)