President Bush Signs Legislation Into Law
May 8, 2008 7:09 am Student LoansPresident Bush Signs Emergency Student Loan Bill
President Bush this week, signed the student loan rescue package
into law, just in time for the 2008 Student Loan Season. The law
will allow the Department of Education to purchase student loans
from lenders, there by injecting liquidity for lenders to make new
loans to students for college.
The liquidity problem was caused by a law passed last fall, called
the “College Cost Reduction and Access Act”, which mandated a
reduction in interest rates on student loans. This law had caused
a lower return-on-investment for the investor’s that usually buy
these loans as investment grade securities, thus providing money
to lenders to make new loans to students.
The law does not address the root of this problem…….which is the
interest rate at which the loans are purchased. Rick Vonk, head of
education lending for Key Bank said the law will not bring investors
and lenders back unless the Dept of Education buys them at prices
that return a profit !!!!
We will be keeping a close eye on the situation in comming months.
Mark Sands
