"The subprime crisis? What is that? I haven't heard of it, but it sounds bad. If I knew more about it, I would probably be worried," said senior Erica Bouteiller.

News reports and headlines threatened our economy with this crisis since August. But what is it all about?

"The subprime crisis is in fact the ongoing crisis in the financial sector stemming from a large number of defaults on mortgage loans, thus also home foreclosures, said Dr. Lucjan Orlowski, professor of economics and international finance.

Many borrowers were not able to pay their loans back which resulted in significant losses throughout the economy.

"In 2007, as many as 1.3 million properties in the United States were subject to default notices, auction notices and bank repossessions," said Orlowski.

A great deal of the loans that were defaulted on were a specific type of mortgage loan called a subprime loan. A subprime loan is granted to higher risk borrowers, whom have lower credit scores, undocumented income and uncertain income projections, according to Orlowski.

This loan starts off at a higher rate than a typical loan due to risk and is an adjustable rate mortgage (ARM), where the interest rate fluctuates. Therefore, the interest rate tends to increase progressively throughout the loan term.

The trouble behind this crisis began in 2002 when housing prices started to soar and banks gave out numerous loans.

"Eager to maximize profits, the larger U.S. banks began granting mortgage loans to more risky borrowers, mainly on the basis of adjustable interest rates. At the same time, the banks were able to transfer the credit risk to financial market investors through a sale of collateralized mortgage obligations (CMOs)," said Orlowski.

A CMO is where banks sell their mortgage debt (money owed to them) to investors who combine all debts into a security which yields a higher profit than traditional interest payments.

However, as interest rates increased borrowers began to default on their loans, greatly diminishing the value of CMOs in addition to banks losing loan principals.

"The credit losses are the result of extremely lax lending standards in the last several years, where just about any borrower could have bought a home without any down payment and have no verification of income," said Peter M. Nagykery, president of Structured Financial Solutions in Manhattan.

He also said that this caused a lot of people to buy homes that they couldn't afford or that they had speculated on the continuously rising prices. This in turn caused home prices to rise more than they should have and now these homeowners are finding they owe more than the house is worth and cannot afford the mortgage, which often results in foreclosure."

When a house is foreclosed upon, banks are forced to sell/auction it at a discounted price in order to sell it fast and get cash. Therefore, banks are barely recouping their principal and losing much anticipated interest.

"Over 900,000 households are in the foreclosure process, up 71 percent from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04 percent of all mortgages, the highest rate in the report's quarterly, 36-year history," according to the Web site cnnmoney.com.

Prime loans granted to borrowers with good credit and documentable income suffered as well.

"Aggravating the problem in the subprime market was that a lot of formerly prime borrowers speculated and bought a lot of investment properties so that the delinquencies are rising on prime loans as well," said Nagykery.

These investors whom bought more properties on the realization that loans were easily obtainable, speculating a low interest rate are now suffering as they can no longer afford the mortgages with soaring rates.

Banks are losing principal and anticipated interest from both prime and subprime loans.

But how does this crisis effect the college student?

First of all, banks are becoming more conservative in whom they are loaning to, requirements are becoming stricter. Therefore, it will be harder to get a loan.

Secondly, the job market is declining. The Labor Department reported that employers cut another 63,000 jobs this past month, according to cnnmoney.com.

College students will face higher competition for a job.

"Because of the elevated financial risk and decreasing consumer confidence, job creation in the near future is likely to fall, except for highly specialized occupations," said Orlowski. "Our graduates will need to gain unique skills in order to find suitable employment."

Nagykery believes we are only halfway through this crisis and expects these problems to continue for another 2-3 years.

"This issue doesn't effect me," said junior Chris Gradilone. "But knowing that mortgages are a considerable driving factor in the economy, the large default rates that have been present in the market should be of concern to all."