Congress to bail out student loans

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    A recent extension to legislation passed by Congress involving the buying out of federal student loans will not affect the daily life of a TCU student, but it will greatly impact those lenders providing the loans, a campus financial aid official said.

    The Ensuring Continued Access to Student Loans Act of 2008, which authorized the Education Department to buy federal student loans from education lenders, originally included only loans made in the 2008-09 school year. However, as of Nov. 7, loans made in 2009-10 are also eligible.

    Michael Scott, director of scholarships and financial aid, said there will be no direct impact on students. He said this does not mean that students wouldn’t have gotten loans.

    “Students just wouldn’t have had as many banks to choose from, and now they will,” Scott said.

    Because of the credit crisis, lenders can no longer sell their loan portfolios to the secondary market, Scott said. These lenders were not able to sell, or get money for, the loans they had already made, so they were unable to offer new student loans, he said.

    But since Congress has agreed to buy the federal loans these lenders could not sell, the lenders will now have the liquidity to make more loans, he said. This extension is aimed at the big picture: ensuring that lenders will remain in the program, he said.

    According to the financial aid Web site www.finaid.org, a total of 168 out of approximately 2,000 education lenders have exited or suspended their participation in all or part of the federally-guaranteed student loan program.

    The most prominent lender to suspend has been College Loan Corporation, said Mark Kantrowitz , publisher of finaid.org, in a telephone interview. Others include Student Loan Xpress and the Pennsylvania Higher Education Assistance Agency, he said.

    Kantrowitz said the legislation will allow more lenders to participate in federal loans. Those that are already involved will be healthier, he said.

    Only a handful of lenders have returned to the federal loan program so far; National Education is the most recent returnee, he said.

    About 3,200 TCU students received federal student loans in 2008-09, said Melet Leafgreen, assistant director of loan programs. The only difference in 2009-10, if any, will be that students might have more options in choosing a lender, she said.

    In a capitalist system, choice and competition among competitors is a good thing, Leafgreen said. She said TCU keeps a list of recommendations – based on a yearly survey of product availability and customer service – for students who need help choosing.

    Even though there were some smaller schools having trouble finding lenders and money, for TCU this was never a concern, Scott said.

    According to the Education Department, its programs have supported 50 percent, or $8.7 billion, of the Federal Family Education Loan Program loans disbursed thus far this year.

    The Federal Family Education Loan Program was created by Congress in 1965 as a public-private partnership to deliver and administer guaranteed education loans for students and their parents, according to usafunds.org. Stafford loans, PLUS loans and Federal Consolidation loans are all included in this program.