U.S. House makes move to back student loans

April 17, 2008

As reported in Bloomberg:

April 17 (Bloomberg) — The U.S. House of Representatives, trying to avert a looming shortage in available student loans, approved allowing the Department of Education to buy federally guaranteed loans that lenders are unable to sell to private investors.

The action is intended to address a crisis in the market that has forced Citigroup Inc.‘s Student Loan Corp., SLM Corp. and about 50 other lenders to stop writing some forms of student loans. The companies cite increased borrowing costs, cuts in government subsidies for education loans and a lack of investor interest in securities backed by loans.

Without government action, demand for federally backed student loans would outstrip supply, industry officials said. About 7 million borrowers will need more than $68 billion in federal loans this academic year, according to Education Department estimates.

The measure would “ensure America’s families can continue to access the federal college loans they are eligible for regardless of what is happening in the credit markets,” said Democratic Representative George Miller of California, the chairman of the House education panel. The legislation approved today also would increase the amount students could borrow.

Congress is considering other measures, and lawmakers have urged the Treasury Department and the Federal Reserve to take action to provide liquidity for federally backed loans.

The global credit crunch has raised student-loan makers’ financing costs, and they’re unable to raise the rates they charge for federally guaranteed loans because the rates are locked in by the government.

Our perspective:

Next year we have my fourth child going off to college. I remember sitting with our tax attorney when they were younger asking,

 “How will we were ever going to afford to put our 4 children thru college?”

His answer:

 “You’ll never be able to save enough, that why they have the student loan programs.”

Thank God for Sallie Mae!  It has helped to provide a great educational opportunity for our children.

The cost of college continues to increase. When our oldest son started at St Joe’s in Philly back in 2000, it was $22k a year. Now it cost $42k!

Are you taking steps to help underwrite the cost of college?

Do you have a college savings fund for your children?

What steps can we collectively take to insure that college will be affordable for the next generation 20 years from now?

What are your thoughts on the House taking these steps?

Do you have a question?

 

Let us know your thoughts?

 

You may email george@hbsadvantage.com

 

Hutchinson Business Solutions ……Your CFO on the Go.

 

Creating Opportunities Today,…Defining Savings for Tomorrow.

Visit http://www.hutchinsonbusinesssolutions.com/ to learn more about saving opportunities available for your company.

 

Spread the good news….. share this information with a friend.

One Response to “U.S. House makes move to back student loans”

  1. What this article is writing about is badly needed. Nothing really has changed in terms of payback from students. The “risk” stayed the same as in past years. If the banks and other traditional loan institutions will refuse giving loans to educatate the future, next generation, it is the goverment who has the duty to step in. After all, the current financial (dredit) crise is not the result of bad loans to students, but rather to homeowners.
    Thanks for this article and the good information provided.

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