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President George W. Bush Speaks On The Brewing Student Loan Crisis

In his weekly radio address, President Bush spoke about the brewing
crisis in the student loan markets.  WATCH VIDEO

In his address he mentioned the “Lender of Last Resort Program” for
student who cannot secure funding for college.  He further mentioned
the need for the ability of the govenment to step in and buy the loans
when necesarry to provide liquidity to the system.

He also signaled to the Senate get something started, as the House of
has already passed the ”Insuring Continuing Accessing Student Loans
Act” and the Senate has yet to act on the issue.

The Presdent would need a bill on his desk, before June 1, 2008 to avoid
any major problems with loans for the September Semester.

Wall Street Journal Blames Congress For This Mess

Yesterday the Wall Street Journal reported on the student loan
crisis brewing in the United States, blamming the legislature for
passing the “College Cost Reduction and Access Act”, last fall.

This act reduced the interest rate paid by borrowers of Federal
Guaranteed Loans. Next congress convinced private lenders to
cut the rate for Stafford Loans by .70 Basis Points & cutting the
popular Consolidation Loan Products by .65 Basis Points. 

The problem is, this action reduced profit’s in these products
making them less disierable products for investors who purchase
these assest backed securities. These are the market makers who
keep this wheel spinning. Without them, the wheel stops.

Now congress, ( The Same Guys That Caused This Mess ), are in
the process of putting together a Tax Payer Bailout to fix there
mess. The bill proposes that the Department of Education would
purchase those loans ( And There Risk !!! ) from the lenders with
tax payer money.

Perfect example of why our Government has no place in trying to
control prices in a Free Market Economy.

We will keep you posted.

2008 Student Loan Default Rate Projected To Increase

Increases in the student default rate are projected, as congress
extened the “Cohort Default Rate“, which projects the percentage
of college students defaulting on student loans.  The extention will
move this gauge out to three years, rather than two years.

Colleges with a Cohort Default Rate of 25% for three years face a
possible loss of Federal Financial Aid for their institutions. This is
going to be an issue for students as funds for education get tight.
Students should apply as early as possible to avoid getting caught
in the cross-fire.