Current Credit Market and Student Loan Issues
During the past few years, there have been numerous 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 .
NEW FOR 2010-2011 :
On March 25, 2010, the U.S. House of Representatives and the U.S. Senate passed The Health Care and Education Affordability Reconciliation Act of 2010 ("HCEARA"-H.R. 4872) . This bill makes major changes in several federal student aid programs AND mandates that, effective July 1, 2010, all federal student loans (Stafford, PLUS, and Grad PLUS) will be originated through the Federal Direct Loan Program. The Family Federal Education Loan Program, which permitted private lenders to originate these loans, is eliminated effective June 30, 2010
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 continue to see changes in these programs for the 2010-2011 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:
- The National Association of College and University Business Officers have summarized many of the important issues in Student Loans and the Credit Crunch
- The Congressional Research Service prepared a report for Congress on the Economics of Guaranteed Student Loans.
- The Project on Student Loan Debt has also posted information on The Credit Squeeze and Student Loans.
- More information on the Index Rate Mismatch issue
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.
- New undergraduate Stafford loan limits effective July 1, 2008.
- Resource Page from the Department of Education
Should the Government Help Private Loan Providers?
Additional References:
- Student Lending Analytics' Blog - SLA is not affiliated with any bank, lender or other financial service firm serving the student lending marketplace.
- Impact of the Subprime Mortgage Credit Crisis on Private Student Loan Programs
- Student Loan Options in a Tight Credit Market from the Project on Student Loan Debt
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
Updated June 21, 2010