Cahill ends effort to bail out lender

Massachusetts Treasurer Timothy P. Cahill yesterday said he was calling off efforts to assist the state's student loan authority, based on a college survey indicating most students have found other loan sources by now.

Cahill said he believes there is no longer a student loan crisis in the state, citing a poll of 41 colleges by the Association of Independent Colleges and Universities in Massachusetts that says 70 percent of schools each had fewer than 15 students unable to secure loans. No college said it had more than 100 students still hunting for financing.

"It seems like most of the students in the state of Massachusetts have gotten alternative funding sources," Cahill said. He said he would stop trying to persuade legislators to approve state backing for a $400 million bond offering by the lender, the Massachusetts Educational Financing Authority.

Last week, responding to pressure from the Legislature, Governor Deval L. Patrick had urged the state pension fund, which Cahill oversees, to invest $50 million in MEFA's planned bond offering.

Cahill opposed that move and suggested instead the state offer public funds as collateral for the bonds. The pension board has not moved to take up Patrick's proposal.

But yesterday, Cahill said he was relieved the state had not pledged funds for a cause that no longer appeared to him to be an emergency. Further, he said he wasn't certain why MEFA would pursue a $400 million offering now if most students didn't need loans.

But 51 percent of schools in the survey said many students would refinance other loans if MEFA obtained funds.

The loan authority offers fixed rates, which have been popular because many lenders offer only variable rates, which can rise unpredictably.

MEFA's chief, Thomas M. Graf, said the authority would continue to try to secure funds at attractive terms to offer to families this year.

Cyndi Roy, a spokeswoman for Patrick, said, "There is no question that MEFA needs these funds to offer families the most affordable opportunity to send their children to school." She said the governor will "continue to work with MEFA to make sure low-interest loans are available to students for this entire school year."

Cahill said that while students made do this year, "It's definitely troubling" that the loan authority's problems weren't addressed by other state officials in the spring, when they first came to light. Coming on the heels of the Massachusetts Turnpike Authority's financial problems, he said, the state is giving a poor impression to the market.

"It doesn't really send a consistent message," Cahill said. "It's like Massachusetts is lurching from one crisis to another crisis, instead of managing their debt more proactively."

Beth Healy can be reached at bhealy@globe.com.