Mass. student lender is back in business
The Massachusetts Educational Financing Authority has completed its $400 million bond offering and can now offer student loans for the rest of the 2008-2009 school year.
The authority said today that it will offer a 7.75 percent fixed rate, lower than the federal government’s 8.5 percent rate on a parent PLUS loan.
MEFA makes loans to undergraduate and graduate students in Massachusetts and to residents of the Commonwealth who attend schools in other states.
MEFA was unable to raise funds in time for the fall loan season, due to turmoil in the student loan industry and to the shutdown of a part of the bond market it had long used to borrow money — auction-rate securities. The authority’s inability to lend for fall affected thousands of families who had relied on its low, fixed-rate loans in the past. Nearly 40,000 students took out MEFA loans last year.
‘‘On behalf of MEFA and the families we serve, I extend our gratitude to Governor Patrick and his administration for their strong support and cooperation through this unprecedented time in student lending,’’ said MEFA’s executive director, Thomas Graf. ‘‘The governor’s advocacy on behalf of MEFA strengthened our position in the capital markets.’’
The authority borrowed the funds at a rate of 6.2 percent.
Selling a student-loan bond offering was challenging enough in the current environment, but MEFA managed to complete its financing amid Wall Street’s meltdown over the weekend. Morgan Stanley was the lead underwriter. Goldman Sachs and JPMorgan Chase & Co. participated. About 10 institutional investors bought the bonds.
MEFA’s newly replenished coffers most likely will be put to work for the spring semester. In addition, Graf said, some families may elect to refinance loans they obtained for the current semester at higher rates.
(By Beth Healy, Globe staff)