Students using College Loan Corp. and Sallie Mae as lenders for federal loans will not experience significant problems following the changes the two corporations have made because of subsidies cut from the market, a financial aid officer said.
Federal student loan corporations are either cutting back or quitting loan programs because of congressional actions in September 2007.
The College Cost Reduction and Access Act was renewed and signed by President Bush on Sept. 27, according to the White House Web site. It states that Congress will cut money from the federal loan market to increase money going toward direct-lending programs and grant student aid.
In an e-mail statement, Joanna Acocella, the chief communications officer of College Loan Corp., said Tuesday that it will stop providing Federal Family Education Loans on March 1 because the new law has made it difficult for “mid-sized” corporations like College Loan Corp. to continue to provide federal loans to students. College Loan Corp. will continue disbursements to students currently using College Loan Corp. federal loans.
There are plenty of other lenders available through TCU and the financial aid office is already working closely with College Loan Corp. users to find the right lender, said Mike Scott, director of scholarships and student financial aid.
Another issue at the heart of all of this is political struggle, Scott said. He said Democratic leaders prefer direct-lending programs.
However, the congressional changes made toward direct-lending programs helped increase grant student aid by $20 billion, said Melissa Wagoner, spokesperson for Sen. Ted Kennedy, D-Mass.
Kennedy, chairman of the U.S. Senate Committee on Health, Education, Labor and Pensions, sponsored the bill when it was enacted in September 2007.
It is the biggest federal increase in financial aid since the G.I. Bill was enacted in 1944, Wagoner said.
The College Cost Reduction and Access Act cut subsidies on the Federal Family Education Loan Program by 0.55 percent for for-profit lenders, and 0.35 percent for non-profit lenders to reallocate funds for the direct-lending programs and grant aid, according to The Chronicle of Higher Education.
College Loan Corp. is only the first example of many lenders that will eventually experience the consequences of the political struggle, Scott said.
Sallie Mae, the nation’s leading lender of educational funding, is now more selective about the educational loans it will make, according to the Chronicle.
Students with “at-risk credit” who attend colleges with low graduation rates are likely to be denied a private loan, according to the Chronicle.
“The problem is it looks good on paper, but the end result is not as beneficial as Congress had anticipated,” Scott said.
Most lenders are not experiencing any problems right now, but eventually more lenders will experience cuts in their programs, and access to private student loans will become an issue, Scott said.