Student Loan Blog : student loan crunch

Student Loan Crunch Affected Some Private Schools, But Crisis Largely Avoided

Student Loan Girl — Tue, 28 Oct 2008 20:59:00 GMT

The student loan crunch that began this past spring failed to become the widespread crisis that experts predicted, according to the results of a survey by the National Association of Independent Colleges and Universities. Still, the NAICU reports, some of the private colleges surveyed have had to scramble to help their students get the loans they need to pay for school (“Student-Loan Crunch Sets Back Some Private Colleges, but Most Manage,” The Chronicle of Higher Education, Oct. 22, 2008).

More than 500 NAICU member institutions responded to the survey, including 450 private colleges and universities that participate in the Federal Family Education Loan Program, the federal student loan program that relies on private, third-party lenders to provide the majority of federally backed loans to students. Of those schools, 85 percent found that their students were dropped by at least one private lender, and 27 percent of the schools said that their students had struggled to find a replacement lender.

Schools reported that their students who weren’t able to get a private student loan often had to take time off from school, drop down to part-time status, work additional hours, or use a credit card to make up the difference in their college expenses.

Three-quarters of the colleges surveyed saw an increase in demand for student aid, but 67 percent reported no negative impact on their enrollment. This is “a good sign,” said David Warren, president of NAICU, even though he speculates that many families may had not yet felt the full impact of the downturn when they were surveyed on Sept. 10., only days prior to the Lehman Brothers bankruptcy filing.

“On the one hand, we avoided anything we’d call a crisis,” Warren said. On the other, we see some clear signals of what may be in store for families right on the edge.”

Only 18 percent of respondents said they had fewer returning students than anticipated, while 19 percent reported having a smaller freshmen class than expected, which came as a surprise to Sarah Flanagan, NAICU’s vice president for government relations and policy. “I thought our sector was going to be OK.”

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

President Bush Signs Legislation That Boosts Availability of Student Loans

Student Loan Girl — Thu, 08 May 2008 16:15:00 GMT

On May 7, President George Bush signed into law legislation intended to help stabilize the $85-billion student loan industry and to avert a predicted shortage in student loans.

The law will allow the U.S. Department of Education to buy bundled student loans that lenders have been unable to sell to investors. Sales of these loans will create capital to help lenders make new loans.

In addition, the measure will allow the Education Department to loan federal money to guarantee agencies, so those agencies can issue student loans, if necessary, under the “lender of last resort” system,” according to an article in The Chronicle of Higher Education (“Bush Signs Student-Loan Bailout Bill Into Law,” May 7, 2008).

The new law is expected to simplify that system, under which students who have been denied student loans can petition the government as a last resort, by allowing the Secretary of Education to designate an emergency lender for an entire school instead of on a student-by-student basis.

Rep. George Miller, D-Calif., chairman of the House education committee and a chief backer of the legislation, said the passage of the bill should send a strong message to the public (“Bush Signs Student Loan Market Stabilization Plan,” Reuters, May 7, 2008).

“With this bill signed into law,” Miller said, “students and families now have every assurance that they will continue to have access to all the federal student loans they are eligible for, no matter what happens in the nation’s financial markets.”

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

Bush Urges Congress to Act Quickly on Student Lending Law

Student Loan Girl — Fri, 02 May 2008 23:06:00 GMT

“A slowdown in the economy shouldn't mean a downturn in educational opportunities,” said President Bush in his most recent radio address. “Members of Congress now have a chance to preserve this opportunity, and they should take it.”

His remarks were the rare instance of a president devoting a national address solely to an issue of higher education, according to an article in The Chronicle of Higher Education, (“President Bush Pushes Congress for Quick Law on Student Lending,” April 28, 2008).

In his speech, the president reaffirmed the need to protect student loans from the credit crisis and expressed his support for HR 5715, the House of Representatives version of a bill that would help struggling lenders remain in the federal student loan market.

The bill, which passed the House 383 to 87 in mid April, would help lenders raise capital to make new loans by allowing the secretary of education to buy loan packages from lenders.

“This bill provides the necessary tools for safeguarding student loans without permanently expanding the government's role in their financing,” Bush said. However, he concluded, “A delay of even a week or two may make it impossible for this legislation to help students going to school this fall.”

The president’s support puts additional pressure on the Senate to take similar action when it comes to its version of the bill, the Strengthening Student Aid for All Act (S 2815), which is now pending a vote in the Senate.

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

Kentucky Lender Puts Brakes on Student Loans to New Borrowers

Student Loan Girl — Mon, 21 Apr 2008 21:50:00 GMT

Citing ongoing fallout from the national capital market crisis, Kentucky officials announced the state’s student loan agency will stop making student loans to first-time borrowers beginning May 1 until it can secure additional financing, according to an article by Nancy C. Rodriguez in the The Courier-Journal (“State to Suspend Student Loans to First-Time Borrowers,” April 18, 2008).

The Kentucky Higher Education Student Loan Corp., also known as The Student Loan People, will continue to make student loans for its returning borrowers based on the availability of funds.

In the meantime, the student loan company has asked the U.S. Treasury to allow the Federal Financing Bank to temporarily help the state fund new student loans until confidence in the market is restored.

A few months ago, the state also announced it would be phasing out three loan-forgiveness programs for health care, education, and public prosecutors due to federal cutbacks and overall market instability.

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