Since the beginning of this year student loan companies have struggled to react to the effects of the auction rate securities (ARS) failures that have made it more difficult to secure funding. Lenders have successfully used ARS in the past to raise capital each year in order to have available funds for students loans. In addition, federal legislation has reduced the fees that are paid to lenders for making student loans.
As a result over 120 lenders nation wide that had participated in the Federal Family Education Loan Program (FFELP) have either exited the FFELP program or suspended their participation in one or more FFELP programs. The FFELP program includes: Federal Stafford Loans (Subsidized and Unsubsidized), Federal PLUS Loans and Federal GRADPLUS loans.
Some lenders have remained in the FFELP programs, but have determined that they will not approve loans based on the default rates or loan volumes at particular colleges and universities. Community colleges and proprietary (for-profit) institutions have been targeted specifically for these reasons. However, other state and private colleges are not exempt from these decisions. Many private colleges have attempted to limit student and parent borrowing in the past few years by increasing grants and scholarships. With lower tuition and fees, state colleges' student require fewer loans, as well as, smaller loans. Each of these situations reduces the colleges' loan volume and make them less
attractive to lenders.
Families who are first time student loan borrowers should contact the college Financial Aid Office to see if the College has a Preferred Lender List. Although, you are not required to select one of those lenders, it would be a great way to start your lender search. The Financial Aid Office can also let you know if there are any lenders that will not lend to students at that college. Also, check with any bank that you have a relationship with to see if they offer student loans.
Repeat student loan borrowers should check with your lender to see if they still participate in the FFELP program. If the lender has exited the program you may also want to turn to the Financial Aid Office at your college for guidance.
Here is a partial list of lenders that are not offering loans FFELP Loans for the 2008-2009 academic year. These lenders had a presence in the New England region prior to pulling out of the FFELP program:
AMERICAN EDUCATION SERVICES
COLLEGE SOLUTIONS NETWORK
STUDENT LOAN EXPRESS
TD COMMERCE BANK
For a more complete list of those lenders that have exited FFELP, you may want to check out http://www.finaid.org/.