FAP785: The Missing Free Stuff, Student loan troubles

04.28.08 | FAP785: The Missing Free Stuff, Student loan troubles

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Student Financial Aid News
+ Back from PodCamp NYC
+ Chronicle: Rarely does a president devote a national address to a higher-education issue; several experts could not remember one since a televised speech on student aid by President Nixon. But on Saturday, Mr. Bush reaffirmed recent comments by other administration officials on the need to protect student loans from the national credit crunch. And the president even more strongly supported a bill the House of Representatives passed this month.
+ That bill (HR 5715) seeks to stem the withdrawal of lenders from the government’s guaranteed-student-loan program, which dozens of them have left in recent weeks. It would allow the secretary of education to buy packages of student loans that companies have struggled to sell to investors, thereby giving those companies money for new loans to students.
+ NASFAA: “More than $9 billion of auction- rate bonds sold by student-loan agencies in states from Pennsylvania to Utah have trapped investors in debt that’s not paying interest,” Bloomberg reports. “The collapse of the auction-rate market drove interest costs paid by states, hospitals and student-lending agencies as high as 20 percent, and froze investors in securities they couldn’t sell. Now, holders of student-loan debt are stuck with bonds paying less than the 0.76 percent rate on the one-month Treasury bill. The bonds pay nothing because of a formula designed to ensure that borrowers don’t pay more interest on their debt than they receive from their student-loan clients.”
+ NASFAA: “Two months ago, as a sense of crisis descended upon the student-loan industry, JP Morgan Chase & Company stood up and said that it not only would continue to supply government-backed loans, but would do so at a discount,” The Chronicle of Higher Education reports. “‘It sounds so self-serving,’ a company spokesman, Thomas A. Kelly, said at the time, ‘but if you are doing business with a major bank doing student lending, they’re going to be there tomorrow.’ That was two months ago. Last week the bank’s student-loan division, Chase Education Finance, announced that because of higher financing costs and lower federal subsidy rates, it would no longer offer government-backed loans at colleges with high-risk borrowers. And today officials at Chase are telephoning the colleges that the bank is still willing to serve to tell them that the discounts it promised in February to maintain - reimbursing students for both the borrower origination fee and the default fee that are required under the federal program - will no longer be paid by Chase on the borrower’s behalf.”

Scholarship Update
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+ How did no one tell me about the Bargainist?
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