Student Loans

An updated version of this paper can be found here.

In May of 2008, Congress passed the Ensuring Continued Access to Student Loans Act (ECASLA) in response to concern that credit market conditions could disrupt federal student loan availability. The law gives the U.S. Department of Education temporary authority to purchase federally backed student loans made by private lenders, effectively providing a secondary market for the loans. Congress opted to leave the new purchase authority largely undefined in statute, giving… more

I recommend early focus on education finance matters. The administration needs to meet and improve upon campaign promises requiring substantial resources. There are pressing student loan issues and pent-up demands for No Child Left Behind (NCLB) funding. Because the stimulus and budget are being developed now, you have a window of opportunity to address all three areas.

A not-so-funny thing happened on the way to the housing bubble. We created a college tuition bubble as well. As with housing, a toxic combination of easy credit and unsophisticated and unrealistically optimistic consumers has driven college prices sky-high.

Those prices aren't coming down anytime soon - and as the credit crisis continues, that means there's a risk that students who max out on federal loans and need extra private aid won't be able to borrow enough to afford expensive colleges.

"Private loans are a terrible tool for promoting college access," said Stephen Burd, a senior fellow at the New America Foundation, a group dedicated to fixing challenges for the next generation. ... Outside Article

“We are very wary of the government bailing out private student loan providers, many of whom engaged in predatory practices by pushing high-cost private loans on high-risk borrowers,” says Stephen Burd, senior fellow at the New America Foundation, a nonpartisan public policy think tank. ... Outside Article

For months, the Wall Street credit crisis has made many families nervous that the widespread availability of student loans will dry up. But no matter how many banks fail, there is no danger that families will be deprived access to federal student loans. None.

More than 100 banks have stopped issuing student loans, but about 2,000 continue to originate federal student loans. The government maintains two "fail-safe" systems. To date, not a single student has been unable to get a federal Stafford Loan. Every family, regardless… more

"The vast majority of our schools report a very small number of students who still need loans at this time," says Richard Doherty, who heads the Association of Independent Colleges and Universities in Massachusetts. According to an August AICUM poll, 70 percent of their members have had less than 15 students experience difficulties in obtaining private loans. Only a "tiny percent" reported over 50 students with similar problems.

To be honest, says Doherty, the notion of a student loan "crisis" was "perhaps overplayed" by the media.… more

...In addition to financial aid, the law will also dole out matching grants aimed at boosting the number of first-generation and low-income college students, and will give $510 million to Hispanic, black and other minority-serving institutions.

Overall, the measures will relieve some pressure on students and families — but not too much, said Jason Delisle, an education researcher at the New America Foundation, a nonpartisan think tank in Washington, D.C. Lawmakers would have liked to do more, but they had… more

. . . Stephen Burd, senior research fellow at think tank New America Foundation, said some lenders were having financing problems. "We just don't think the government should let the loan industry define the terms of the intervention." . . . For the complete article, go to Reuters.com.

APM's Marketplace | Student Loans Are Getting Whacked

Bank of America and a unit of Citigroup have joined a growing list of lenders cutting back on student loan programs. At the same time, the House passed an emergency bill that would enable lenders to have more cash to keep making loans. John Dimsdale reports.

TESS VIGELAND: OK, here's another side-effect of the credit crunch: Student loans are getting whacked. Today Bank of America and a unit of Citigroup joined a… more