Another victim of the student loan crisis, the Pennsylvania Higher Education Assistance Agency (PHEAA) announced that it will suspend its student lending program. PHEAA, a federally-insured lender, has followed in the footsteps of the Michigan state loan program by pausing—indefinitely—its lending services.
On February 21, PHEAA hosted an emergency student loan funding summit to, “address a potentially devastating shortage of loan funds for students and families.” At the summit, State Representative and Chairman of the PHEAA Board of Directors William F. Adolph stated that like many homeowners, “millions of college students may now face foreclosure on their plans for a higher education.”
Days later, PHEAA announced that it had no choice but to pause its loan program. Loans to out-of-state students have already been suspended, and those to in-state students will be paused on March 7. Students who borrowed money prior to that date will not be affected.
The remaining Pennsylvania students will have to turn to banks to meet their student loan needs. Unlike lenders who participate in the federally-subsidized, price-regulated Federal Family Education Loan (FFEL) program, private lenders have more leeway in setting their prices and creating stipulations.
Though Chief Executive Officer and PHEAA Interim President James Preston stated that students can receive comparable rates by borrowing from banks, somewhat higher rates and additional restrictions are to be expected. Aside from loan suspensions, numerous lenders have had to add new eligibility criteria and to reduce lending benefits to stay in business. Lenders that could not compete have closed their doors entirely.