Broke at Big U? Short-term college loans may help
Many universities lend small sums at low or no interest
College students know all too well what empty pockets
feel like. An unbudgeted rent deposit, surprise school fee or emergency car
repair can flatten a wallet faster than a floating keg can kill a frat party.
But there is a way to get hold of some quick cash: short-term emergency student
loans from the college.
Details vary from campus to campus (see chart for some examples), but typically, loans of
up to $1,000 are available with little or no interest. You can get them within
a day or so of applying, but you also have to repay them within a few months.
Still, for a temporary cash crunch, they may be an attractive alternative to
running up credit card debt, taking a cash advance, pawning grandma's necklace
or humbly asking parents to fork over more money.
No organization keeps statistics on the number of colleges
that offer short-term or emergency loans. But many colleges include details
about them on their financial aid Web pages. The programs seem to be most
prevalent at public colleges and universities.
"If it's available at your school, it's an ace up your
sleeve if you need it," says Kalman A. Chany, author of "Paying for College
Without Going Broke." He says an emergency loan can be helpful if, for
instance, you find yourself short for the housing bill or a relative dies and
you need a plane ticket home.
Not an emergency beer
The loans are meant to be a financial bridge for
urgent needs. For example, Appalachian State University in Boone, N.C., offers one-month,
interest-free loans capped at $275, with a 1 percent fee (maximum: $2.75). The loans have a "nearly 100 percent approval rate," according to Donna Jones, a business officer at the college.
Most applications come at the very beginning or
end of the semester, and the most common recipients are students who struggle with rent while waiting for financial
aid, says Jones. Others have
unforeseen medical expenses or need car repairs. Jones says the college won't
extend loans to cover court costs or routine bills.
As with most loans, consumers need to understand the terms,
fees and potential downsides if they fail to repay, warns Chany. Defaulting on a
short-term student loan could lower your credit rating, cost you late fees and
keep you from registering for classes.
College officials say they're actually making fewer
short-term loans than they were a decade or two ago. That's because changes in
the system have sped up disbursements of traditional financial aid, meaning
that fewer students are caught in a financial bind while waiting for their
money to arrive.
Jones recalls an afternoon 20 years ago when 150 Appalachian
State students were lined up for emergency loan checks. Today, the college typically
makes fewer than 10 short-term loans per semester.
If it's available at your school, it's an ace up your
sleeve if you need it.
|-- Kalman A. Chany
Author, "Paying for College Without Going Broke"
Several factors are behind the dramatic drop. Students apply
a lot less often than they used to because they have more options for traditional
financial aid, says Jones. And the university has tightened lending requirements as it tries to ensure
that students have a way to repay.
The University of Nebraska has seen a big drop in
applications, too. In the 1991-92 school year, the college awarded $1.4 million
in short-term loans. Last year, it gave out just $123,000 worth of 90-day loans
(capped at $500, or $1,000 with a co-signer), says Craig Munier, director of
the office of scholarships and financial aid at the school.
Munier says the program was created years ago to help
students who had expenses while waiting for their financial aid checks. But
with that system streamlined, short-term loans are less vital today.
"It seems that maybe its necessity is significantly less
than it once was," he says. "But when you have a car that's not running and you
don't have a way to get to class, getting $500 to get your car repaired is very
|COMPARE SHORT-TERM COLLEGE LOANS
||Requirements and other info
|City College of New York
||Up to $500,
|To be used only for tuition. Must be repaid by registration time the following
semester. Must have 2.0 GPA. Also offers emergency grants of up to $1,500
Ohio State University
||Up to $500,
|Must be repaid within 90 days. Must have a job if seeking more than $150
|University of California at Los Angeles
||Up to $200,
|Must be repaid the following month. Can seek an additional $350 "living expense
loan" upon proof of employment
|University of Florida
Up to $1,000,
1% a month interest
|Must be repaid in same semester
|University of Georgia
||Up to $250,
interest rates vary
|Must be repaid by midsemester
|University of New Mexico
||Up to $800,
1.5% annual interest
|Must be repaid within 45 days. Must have 2.0 GPA
|University of Washington
||Up to $2,500,
|Must be repaid by the next quarter or when other funds such as financial aid come in -- whichever comes first. $30 service charge
See related: Americans look abroad to avoid student loan blues, How credit scores impact some student loan approvals, 4 last-ditch, high-cost loans to avoid, Credit management 101 for new college students
Published: August 29, 2013
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