US steps in to ensure students find loans
NEW YORK - A US program to support college-education lenders is ensuring students will get the government-backed financial aid they need for the 2008-2009 academic year, after a seizure in the credit markets threatened the flow of funding.
At Michigan State University in East Lansing, 6,042 students have received $26 million in federally guaranteed loans since early May, said Val Meyers, associate director of financial aid, last Friday. SLM Corp., the largest US provider of education loans, said Tuesday it is committed to providing aid to "every eligible" applicant this year.
Financing obtained for summer classes and reassurances from lenders have made college administrators confident that students won't be denied funds, said Judith Carter, financial aid director at Dickinson College in Carlisle, Pa. Aid officers at Fordham University in New York, Trinity University in Washington, and Smith College in Northampton, Mass., also said they anticipate no shortage of money even after dozens of private companies abandoned the business this year.
"We haven't had any problems to date and we don't expect to have any difficulty with loan availability," Carter said in an e-mail this month. Dickinson's tuition, room-and-board, and other annual costs total $47,834.
President Bush signed a law in May aimed at ensuring students can get government-guaranteed loans. The legislation allowed the Education Department to buy loans that private lenders were having trouble selling to investors because of the credit contraction tied to the subprime-mortgage crisis.
Jenny Nguyen, 19, said she lined up about $2,500 in federally guaranteed loans for summer courses at the University of California, Los Angeles. She is among 1,707 UCLA students who got federal loans totaling $3.7 million for summer school, said Juan Abenojar, a financial aid officer.
Students will borrow about $93 billion for the next academic year, 9.4 percent more than this year, according to Mark Kantrowitz, publisher of FinAid.org. That will include $70 billion in loans guaranteed by the government, a 13 percent increase, he said.
Sallie Mae is now getting funds at three-month Libor plus 0.97 percent. Libor is the London interbank offered rate, or price at which lenders typically provide funds to one another.
"Prices were going up and now they are going down for the first time in a year," he said.
College officials had expressed rising concern during the past six months that the credit contraction might curtail educational loans, said Patricia McGuire, Trinity's president.
"The lenders have tried to create panic among institutions and students to serve their own purposes and that's shameful," she said recently.
Dozens of lenders, including CIT Group Inc. and NorthStar Education Finance Inc., stopped making federally guaranteed loans after the government cut subsidies and investors shunned bonds backed by the loans.
Students at community colleges also are obtaining federal loans, said David Baine, vice president for government relations for the American Association of Community Colleges, which represents about 1,000 schools.
