Overhaul of Student Loan System in the Works

Student Loan Girl — Mon, 22 Jun 2009 15:30:00 GMT

A bill to overhaul the student loan industry may reach Congress as early as next week; education-committee chairs are working behind the scenes on a piece of legislation that would eliminate the third-party student loan system called the Federal Family Education Loan Program, The Chronicle of Higher Education reports (“Behind the Scenes, a Student-Loan Overhaul Takes Shape,” June 16, 2009).

Although few details have been released about the proposed legislation, lenders and a large number of Congressmen are hoping the FFEL program won’t end up on the chopping block like President Obama has proposed. Already as many as 13 counterproposals to the elimination of FFELP have begun circulating Congress, including a detailed plan from lending giant Sallie Mae.

It’s not likely, however, that the FFEL program will survive this legislative session, some Congressmen say, considering taxpayers could see as much as $94 billion in savings over the next 10 years if FFELP were eliminated, according to estimates from the Congressional Budget Office.

Obama had originally suggested that these savings, which have been readjusted down to $87 billion, could be used to increase Pell Grants award amounts each year at a rate equal to the Consumer Price Index. It now looks like Congress will, instead, propose that the money be infused into the Pell Grant program to allow appropriators to “continue to set the maximum [Pell Grant] award” so as not to end up capping the maximum award amount.

Share this post: email this | del.icio.us | reddit

Weakening Economy Contributes to Sallie Mae’s $159 Million Quarterly Loss

Student Loan Girl — Tue, 28 Oct 2008 00:17:00 GMT

Student loan provider Sallie Mae reported a $159 million loss this quarter as the ongoing credit crisis continues to pose financial challenges for borrowers (“Sallie Mae Reports $159-Million Loss and More Delinquencies by Borrowers,” The Chronicle of Higher Education, Oct. 23, 2008).

Sallie Mae said that a rapid rise in delinquencies on private student loans this year has contributed to its losses. To account for these delinquencies, the student loan giant had to more than double the amount it reserves to cover the cost of these losses to $263 million from $102 million just a year ago.

To help stem further financial losses from borrowers with “higher-risk accounts,” Sallie Mae chief financial officer, John Remondi, said the company is taking a more aggressive approach in its debt collection efforts and is more closely analyzing customers who ask for a forbearance, which allows borrowers to temporarily reduce or postpone their student loan payments.

Borrowers requesting a forbearance will be more strictly scrutinized, Remondi said, to ensure that they are “one, committed to serving their debt, and two, have the actual ability to benefit from a forbearance.”

Share this post: email this | del.icio.us | reddit

Student Loan Blog : Sallie Mae, The Chronicle of Higher Education

Overhaul of Student Loan System in the Works

Weakening Economy Contributes to Sallie Mae’s $159 Million Quarterly Loss