Authority will stop making federal student loans
The nonprofit Massachusetts Educational Financing Authority, which provides student loans, today said that it will stop offering federal student loans on July 1.
That will affect thousands of Massachusetts students: MEFA made federal loans to 14,700 in the current school year.
The authority, which uses state tax dollars to make student loans, has about $300 million in federal loans on its books, including Stafford and Plus loans, out of a total of $1.5 billion. The other $1.2 billion are private loans.
‘‘Because of the unprecedented disruptions in the capital markets, it really has prevented us from securing funds for our [federal loan] program,’’ said Thomas Graf, MEFA’s executive director. It will continue to offer private loans.
A Stafford loan covers from $3,500 in tuition for a freshman to $5,500 for a senior and is offered at a low 6.8 percent interest rate. Many families apply for these loans as well as for additional private loans to pay for school. MEFA is one of many entities that make certain kinds of federal loans.
Students, families, and financial aid directors have been waiting for word about MEFA funding for next year’s loans. It had warned since March that it was unsure how much money it would have to lend for the 2008-2009 school year.
MEFA decided it would not be able to raise the money to make the federal loans in its usual way, through a bond issue. It’s still hopeful it will be able to raise money through bonds to finance its private loan business.
Last week, a large nonprofit student loan guarantee firm in Boston, Education Resources Institute Inc., filed for bankruptcy protection, causing disruptions for other student loan lenders.
(By Beth Healy, Globe staff)
