While college students nationwide are beginning to feel the effects of the credit crisis, Loyola’s community has remained relatively unscathed.  The concern mainly comes from students who are looking to take out loans, but because of the university’s standing, there has been little impact on campus.

“As a private school with a lower default rate, we still have lots of lenders who are willing to lend to students,” Cathy Simoneaux, director of the Office of Scholarships and Financial Aid, said.

The problems are more prevalent at community colleges, where banks are less willing to give out loans, she said.

However, there have been some exceptions. Students who have a history of bad credit, usually as a result of a failure to make a prior loan payment, or who don’t have a credit-worthy co-signer are at risk of being rejected by some lenders, but not necessarily as a result of current economic troubles.

“It’s always been a problem for (those types of students), because the banks don’t want to take that risk for the private loans,” she said. “From the bank’s perspective, there’s a question as to whether or not (they) should be borrowing large sums of money anyway.”

According to Dr. Walter Block, a professor of economics, the credit crisis originated when the government lowered the interest rate several years ago, which led to a housing boom. To pay for these new houses, people began to take out mortgages that they couldn’t finance. Banks began to use the capital from these loans to set up collateral for other loans.

“You’re building a financial edifice on quick sand, and the thing is tumbling down,” Block said.

As a result, banks are becoming less willing to hand out loans to riskier recipients, which encompasses college students. As the economic crisis shows little sign of improvement, Simoneaux leaves open the possibility of future threat.

“We wouldn’t want people to be overly concerned at this point, but everybody should really monitor the situation because this may impact things in the future, as to what happens next year,” she said.

Block compared the current crisis with the Great Depression.

“They’re trying to uphold a lousy system,” he said, referring to the government’s role in supporting failing banks. “They’ve learned nothing from the ‘30s or they’ve learned the wrong things from the ‘30s.”

Students, he said, will inevitably be affected.

“In a rising tide, all boats rise, and in a depression tide, all boats sink. Students are boats. Students will have problems.”

Masako Hirsch can be reached at [email protected].