Current Credit Market and Student Loan Issues
There have been a growing number of stories that families may be hearing about the potential impact of the "subprime mortgage credit crisis" on the availablity of federal and private student loans for the 2008-2009 academic year.
We want to assure families that we do not forsee any problems with the availability of Federal Stafford, Federal PLUS and Federal Grad PLUS Loans for the 2008-2009 academic year. While families are always free to utilize any lender of their choice, we have identified a number of major lenders who have indicated their desire to participate in our electronic streamlined application process during the 2008-2009 academic year.
Families who have previously participated in these programs will notice that "borrower benefits" have been curtailed in many instances as recent legislation mandated cutbacks in subsidies that the government paid to lenders in the Federal Student Loan Program
We do anticipate that families who utilize private alternative loans to supplement financial aid awards will see changes in these programs for the 2008-2009 year. The extent of the changes will be driven by the credit history of the borrower and his/her co-signer for the loan. We have identified a number of lenders who plan to offer these loans to undergraduate and graduate and professional students for the 2008-2009 academic year.
Please review The Credit Crunch and Student Loans: Don't React Before Getting the Facts from the National Association of Student Financial Aid Administrators.
Background:
- The National Association of Student Financial Aid Administrators released The Student Loan Credit Crunch: A White Paper on April 29, 2008
- The National Association of College and University Business Officers have summarized many of the important issues in Student Loans and the Credit Crunch
The Ensuring Continued Access to Student Loans Act of 2008 ("ECASLA")
This legislation (H.R. 5716) was originally approved by the House of Representatives on April 17, 2008. President Bush signed it into law on May 7, 2008.
- New undergraduate Stafford loan limits effective July 1, 2008
- Resource Page from the Department of Education
Other Legislation
- On April 24, 2008 the National Association of Student Financial Aid Administrators ("NASFAA") released a side-by-side comparison of all legislation designed to provide liquidity in the FFEL program.
Lenders' Perspective:
- When the Lender Is A Borrower: How Education Lenders Get Funds to Make Loans
- America's Student Loan Providers
Additional References:
- Impact of the Subprime Mortgage Credit Crisis on Private Student Loan Programs
- Lender Layoffs and Loan Program Suspensions
- Student Loan Options in a Tight Credit Market from the Project on Student Loan Debt
- March 10, 2008 letter from the president of the Consumer Bankers' Association
- Additional Recent Articles on this Topic:
- "Panic Is the Enemy" posted on the Higher Ed Watch Blog on 2/21/08
- "The Credit Crunch Takes It Toll" posted on Inside Higher Ed on 1/23/08
- "Congress Urged to Tackle Student Loan Squeeze" posted on The Hill on 2/25/08
- 2/28/08 Letter To Department of Education Secretary Spellings
- "Credit Crisis May Make College Loans More Costly" posted on The Washington Post's website on March 3, 2008
- "How the Credit Mess Squeezes You" posted on The Wall Street Journal's website on March 3, 2008
- "College loans see subprime fallout" posted on The Boston Globe's website on March 7, 2008
- "A Student Loan Credit Crunch - But for Whom ? " posted on Inside Higher Ed on March 12, 2008
- "Fewer Options Open to Pay for the Cost of College" posted on The New York Times on April 12, 2008
Policy Issues:
There has been a huge amount of growth in alternative student loans over the past decade. Several aspects of these programs are currently being studied by members of Congress in an effort to solve some of the problems that borrowers have encountered. For more information, go to legislation .
- Paying the Price: The High Cost of Student Loans and the Dangers for Student Borrowers from the National Consumer Law Center
- Coordinating Private Educational Loans with Federal Student Aid and Other Assistance from the National Association of Student Financial Aid Administrators
- Solving the Student Loan Credit Crunch by Mark Kantrowitz, the publisher of FinAid.org
- Private Loan Policy Agenda from the Project on Student Debt
- Who Borrows Private Loans from the American Coucil on Education
- Trends in College Pricing 2006 from the College Board
