Outlets that are still lending are especially averse to risk because of the mortgage-market collapse and worries about the health of the economy. That means students who were once eligible for loans might not be anymore, since standards have tightened dramatically. Lawmakers are working toward a bill that would allow the federal government to bail out student lenders by purchasing more of their debt, but it's unclear if that legislation will ultimately pass.
So how are some students shoring up college cash? Online, of course.
"Peer-to-peer" lending sites have allowed facilitated loans among users for years and may offer an attractive alternative to traditional loans. In many cases, borrowers outline the type of loan they are seeking -- including amount, purpose, duration and interest rate. Lenders review borrower profiles, photos and credit scores to choose a candidate, balancing the risks and potential returns. Then they bid on loans, usually in $25 or $50 increments, with higher demand leading to lower interest rates. Other P2P sites simply set an interest rate based on the borrower's credit rating. Usually, the sites earn money by attaching fees to their services.
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