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Student Lenders Reconsider Leaving Federal Program

May 28, 2008

by Administrator

Weighed down by an economic downturn and a cut in federal subsidies, student lenders have been lining up at the FFEL exit sign for months. But if the past two days are a sign of what’s to come, many are reconsidering their departure. On Wednesday, Margaret Spellings sent a letter to numerous student lenders pledging the Department of the Treasury’s support in helping them get back on their feet.

According to The Chronicle of Higher Education, the Department of Education’s plan to purchase loans student lenders have trouble selling had three student lenders declaring their plans to return within two days. Though the funds are meant to be a temporary, one-year solution to the student loan crunch, the decision was enough to convince NorthStar, the Brazos Group and Graduate Leverage to return to the FFEL program.

"Many details still need to be worked out, and we will share those as they become available. But the good news is we’re back in the federal student loan business, and students and families will have more loan options for the upcoming year,” stated NorthStar’s Chief Executive Taige Thornton on the company website.

The security now provided by the federal government may be enough to lure more FFEL student lenders back into the business. It may also prove incentive enough for student lenders to relax the increasingly tight criteria used to judge potential borrowers. While the credit crunch is certainly not over, the current federal aid contributions may prove sufficient in convincing some, if not most, lenders to return to the workforce.


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