The Credit Crunch Equals Less College Money: Calculate Your Student Loans

Even celebrities once needed help paying for college.

For example, Oprah Winfrey received a scholarship to attend Tennessee State University and Garth Brooks earned a track scholarship to cover his expenses at Oklahoma State University. For aspiring college students with financial needs who do not get a full scholarship, however, a student loan has been the way to go. Only now student loans are becoming pricier and, in some cases, may be harder to get.

Government-backed student loans are probably the only un-securitized personal loans that don't consider your credit rating. And a couple of years ago, they went from variable-rate to fixed-rate, meaning falling interest rates aren't going to directly benefit anyone who's taking out federal student loans.

Most graduate students will pay 6.8% on their first $20,500 of yearly educational expenses and, with decent credit, can normally get 8.5% on anything more than that. Undergraduates—especially those going to pricey private colleges—will be more likely to have to turn to private loans for part of their student costs, where credit matters and interest rates may be variable.

But with the credit crunch, some lenders are cutting back and easing out of the student-loan business. CIT Group (CIT), which stopped originating private student loans late last year, has announced that it will become the latest lender to stop originating government-backed student loans.

Though the most common indices for private student loans – Libor, or the London Inter-Bank Offered Rate, and the prime rate -- are falling, some lenders are increasing the amount they add on to the index. Chase Bank (JPM) now can add up to 9% on to Libor, up from 8% a year ago and Citibank (C) student loans can now charge 4.5% over the prime rate, compared with 4% a year ago, according to finaid.org.