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Amid loan worries, a silver lining for students

Almost half of college students fail to collect all of the federal loans – fixed at 6.8 percent – that they are eligible to receive.

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Students on the University of California Berkeley campus.

Jason Forman/Medill/News21/AP/FILE

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The credit crisis has caused many students to worry that they won't get loans for college. But the sky isn't falling, say student aid administrators.

In fact, there may even be a silver lining: The flurry of public attention could prompt some borrowers to find lower-cost options they hadn't realized existed.

"We're hopeful that out of this bad news comes an environment where students ... review all their options ... [and] make sure that they use all their federal aid, state aid, and institutional aid before trying to get private student loans," says Haley Chitty, spokesman for the National Association of Student Aid Administrators.

Nearly half of undergraduate students don't use all the low-cost federal loans they and their families are eligible for before turning to private lenders, according to Consumers Union in Yonkers, N.Y.

Some students experience gaps between government aid and their expenses at school. For them, the credit crunch could mean higher rates or even a delay in their education if they have trouble qualifying for private loans as criteria become more stringent. But others may just be intimidated by the complicated federal aid application and instead turn to an easy-to-access private loan they've seen advertised. And parents sometimes don't realize they can take out low-cost loans to cover their student's expenses. Federal loans are currently fixed at 6.8 percent. Private rates can be twice as high.

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