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 "sub prime mortgage credit crisis" on the availability of federal and private student loans .

We want to assure families that we do not foresee any problems with the availability of Federal Stafford, Federal PLUS and Federal Grad PLUS Loans for the current year as well as for the 2010- 2011 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 Streamlined Electronic Loan Processing during the 2009-2010 academic year.

Families should be aware that the Congress is currently debating a number of proposals that would make significant changes to HOW federal student loans will be processed starting with the 2010-2011 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 2009-2010 year. The extent of the changes will be driven by the credit history of the borrower and his/her co-signer for the loan.

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:

Related Legislation

The Ensuring Continued Access to Student Loans Act of 2008 (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. On September 15, 2008 the House overwhelmingly passed H.R. 6889, which provides a one-year extension of provisions in the Ensuring Continued Access to Student Loans Act (ECASLA) that allow the Department to purchase FFELP loans. The motion to extend those provisions passed by a vote of 368 to 4 with 61 not voting. The Senate passed the legislation of September 17, 2008. The President signed the bill into law on October 7, 2008.

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:

Should the Government Help Private Loan Providers?

Additional References:

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 .

 

Updated October 20, 2009