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President 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

Graduates usually worry about how they will
pay back their studet loans, however; now
some have a different problem.  The problem
that has arised is that they are paying back
too much. They are paying back too much
because the system is flawed right now.

WATCH VIDEO

We’ll Keep You Posted.

F. Mattern

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.

Congress Aware Of The Student Loan Crisis

There is recent concern in congress to reslove the Student Loan Crisis,
as many high school seniors will be completing their loan applications
in the comming weeks. Many lenders have suspended their lending in
the area of student loans, sure to cause a problem in the short term.

Congress is aware of the probelms and are seeking solutions. President
George W. Bush supports legislation passed last week to allow the Dept
Of Education to purchase govenment guaranteed loans. The US Senate
is working on their verision and the Presdient is expected to sign it.

We’ll keep you posted.

Sallie Mae Announces It Is Dropping Student Loan Consolidation’s

Student loan consolidation market just got a hair-cut, as Sallie Mae
the countries largest student loan lender announced it was getting
out of the student loan consolidation business. The move is sure to
hit millions of college graduates in 2008.

Sallie Mae had already announced in January, that it would be cut-
ting back on making students loans, taking a much harder look at
the students ability to pay back the loan.

Bank of America announced last week that it was also stopping its
student loan lending, joining 46 other feaderal student lenders who
have also ended their exposure to student loans.

With the sky-rocketing cost of college tuition and the credit crisis
hitting students in 2008,  many students may have to wait untill
the business cycle corrects or until Uncle Sam come to the rescue.

WATCH VIDEO

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.