Exit of College Lenders Sets Off Scramble To Fill Breach

[flashl]

Source: Washington Post

Nearly 50 student lenders, including some of the industry's biggest names, have stopped issuing federally guaranteed loans in recent weeks because of paralysis in the credit markets, confronting students with higher borrowing costs just as they are starting to apply for financial assistance for the coming school year.

These companies represented 12 percent of the market before they left, and analysts say this is just the beginning of an exodus. That is because virtually all student lenders have been shut out of their traditional funding sources on the debt markets. Dozens of other lenders that offer private loans, which have no federal backing, have also dropped out.

The escalating problems have persuaded the Education Department to prepare a "lender of last resort" program, which would provide emergency funds to a few dozen lenders designated to help students who are unable to secure federally backed loans.

"This is the equivalent of a hurricane coming, and staging food and water at the site," Education Secretary Margaret Spellings said in an interview. "Our responsibility is to be prepared for every eventuality."

Washington Post

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2008/04/09/AR2008040904278.html

[liberal N proud]

1. Does anyone know where there is a list of the dropouts?

[flashl]

2. Is this it?

1 in 10 Schools Are 'Dropout Factories'

[liberal N proud]

3. No, looking for the list of lender dropouts from your OP

But that other list is a sad story for America.

Shows the republicons and their NCLB doesn't want to educate the people then they don't want to pay for the welfare that the uneducated have to live on.

[flashl]

5. The 'payoff' from the subcriming of student loans has ended

The list of dropouts includes such major players as College Loan Corporation, HSBC Bank, CIT Group and Washington Mutual. Among the 100 largest lenders, which represent 92 percent of the federal loan market, 19 have left. In addition, firms have cut nearly 2,300 jobs.

There are two major kinds of student loans. One, which is federally guaranteed and offers a public subsidy to lenders, has a fixed interest rate set by the government and accounts for about $47 billion in student debt. The other type can command a higher rate determined by the market but has no such guarantee or support. These loans are estimated to represent $18.5 billion, and their rates have been climbing during the credit crisis. Both types of loans can be issued by a variety of lenders, including banks, private companies and state agencies.

Most lenders rely on the securitization of debt to generate enough cash to issue student loans. This process turns ordinary loans into securities, just like stocks, so they can be bought and traded on the debt markets. But lenders have been unable to securitize any loan made after Oct. 1, when a cut in federal subsidies to lenders went into effect.

No one is watching this, stories about the SallieMae feeding frenzy and student loan predatory practices been under radar.

[tanyev]

4. "Our responsibility is to be prepared for every eventuality."

Margaret, you do realize the Bush team doesn't have a very good track record with that? Maybe she'll hire Brownie's company to prepare for the disaster.