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Treasury to Aid Private Student Lenders

Treasury to Aid Private Student Lenders
11/26/2008
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Scholarships.com Staff

Yesterday, the Federal Reserve and Treasury announced a new program to further shore up the banking industry in the face of a recession that appears to still be worsening.  The program would devote $200 billion to shoring up consumer credit markets, including credit cards, car loans, and student loans.  The hope is that this new program will make these forms of credit more widely available to people who need them, including students who depend on private loans to help pay for school.

The New York Times explains that this is the first time the federal government has intervened to finance consumer debt and describes the program as " com[ing] close to being a government bank."  Coupled with recent efforts to expand and sustain federal student financial aid programs, namely the Federal Family Education Loan Program (FFELP), the federal government has expended a fairly vast amount of resources on student financial aid.  However, some are questioning how the money is being spent.

The Project on Student Debt is one organization that has encouraged the federal government to exclude private student loans from rescue packages.  While the lending industry has been hit hard in the last year, this organization is one of several voices urging that students be steered towards more affordable means of financing their educations.  The National Association of Student Financial Aid Administrators, while supporting the Treasury's decision, also called for a reevaluation of the role of private loans in paying for college.  Private student loans, which carry higher interest rates than federal loans, are intended to be used as a last resort after Federal Stafford Loans, campus-based aid programs, and scholarship money have been exhausted and students are still coming up short on their education expenses.

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