All Dried Up: Student Loan Provider Files for Bankruptcy
Education Finance Partners, a San Francisco-based student loan company, has filed for Chapter 7 bankruptcy protection, saying it has less than $1 million in assets and between $10 million and $50 million in liabilities (“Student Loan Company Files for Bankruptcy in Austin,” The Austin American-Statesman, Dec. 18, 2008).
According to the bankruptcy filing, the student loan company owed the New York attorney general’s office $2.5 million, an amount Education Finance Partners had agreed to pay in order to resolve an investigation that accused the lender of offering more than 60 schools monetary compensation in return for placing the lender on preferred lender lists.
Education Finance Partners also owed $1.2 million to the Brazos Higher Education Service Corp., a nonprofit student loan services provider, for pending arbitration in a lawsuit filed in California as well as $750,000 to both Morgan Stanley and NBF International Holdings Inc.
The ailing student loan lender has been crippled by the credit crisis for months. Unable to secure new financing, the lender was forced to shut down its main office in San Francisco as well as a second office in Austin, Texas in September, a month after it announced that it would stop making student loans and that it would have to lay off 113 employees.
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