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Posted by vida

As the U.S. economy continues to spiral downward with a rash of foreclosures, bankruptcies, failing businesses and lost jobs, an unlikely casualty has surfaced — the federally guaranteed student loan program. 

In order to stave off a crisis for millions of students who depend on the loans to attend colleges and universities, Congress proposed legislation that would allow the U. S. Department of Education to purchase student loans that lenders are unable to sell to investors. The measure was approved by the House of Representatives; and similar legislation will be considered in the Senate.

The same subprime mortgage crisis that shifted economic troubles into high gear also encouraged lenders to make a hasty exit from the business of providing federally guaranteed student loans. Of course, the elimination of hefty subsidies was the real kicker for the 50 or more banking agencies that bolted, leaving a void of loan options for parents and college-bound students.

Even Sallie Mae, a heavy hitter in student loan circles, stopped its consolidation of student loans and has all but ended its reign in this arena. Sallie Mae backed off when incentives for student loan lending were cut drastically in recently-passed education legislation, transforming student loans from a cash cow into a ball-and-chain of losses.

However, once this new legislation makes its way successfully up the approval chain, it is expected to quell any concerns about a shortage of students loan funds. And hopefully, traditional and accredited online schools will be able to continue to offer necessary financial aid to all who are eligible.

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financial aid, student_loans, accredited online schools, colleges and universities, college students, lenders, Sallie Mae, education, subprime mortgage crisis

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This entry was posted on Thursday, April 17th, 2008 at 5:47 pm and is filed under financial aid. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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