Student loans flow despite credit crunch.
Arkansas Business August 18, 2008 | Waldon, George COLLEGE CAMPUSES ACROSS Arkansas are bustling with activity as staff help students get squared away for the fall semester. A big item of potential concern, the availability of student loans, is no longer deemed problematic amid the shuffling of paperwork. go to website citi student loans
“Students should be in good shape for the upcoming academic year,” said Tony Williams, executive director of the Arkansas Student Loan Authority. “I don’t believe there will be any problems this year.” Fears are subsiding that a national credit crunch, induced by the real estate lending scene, will adversely affect student loans in the state.
Arkansas students are expected to borrow more than $500 million to fund their collegiate endeavors during the 2008-09 school year.
“Loan volume will be up this year, and I don’t think any student will have difficulty finding access to funds,” Williams said.
In May, the U.S. Department of Education became a safety net for the national student loan program. The agency was authorized to buy federally guaranteed student loans from lenders who can’t find an investor to buy their loans.
The stopgap move by Congress and President Bush shored up the secondary market for the student loans and prevented financial channels from drying up.
State Gives Line of Credit The state Board of Finance provided an $80 million line of credit to the Arkansas Student Loan Authority to help provide funding on the local scene. It too is a stopgap measure.
The move came after a planned $250 million bond issue by ASLA was scrapped after the national bond market fell apart earlier this year. The money was to fund student loans for 18 months.
During the 2007-08 school year, ASLA provided about $70 million in student loans. That total represented about 8.5 percent of the $470 million loaned to Arkansas students attending college in-state and elsewhere.
The federal action helped stabilize the student loan market, but the offer to buy federally guaranteed student loans for 1 percent of the loan value plus $75 isn’t awe-inspiring for lenders.
“It is at a lower price than banks are accustomed to getting,” Williams said.
Simmons First National Corp. of Pine Bluff specifically noted a decrease in premiums in the sale of student loans as a contributing factor to its reduced earnings during the second quarter. go to web site citi student loans
[ILLUSTRATION OMITTED] Some lenders are choosing to curtail or halt student-lending activity while the financial markets seek equilibrium. Wells Fargo and Citibank are among those no longer making new student loans in Arkansas.
Other lenders are continuing to offer new loans to existing student borrowers, but aren’t taking on any new customers.
“There may be situations where students got a loan from a certain lender last year but they will have to look elsewhere this year,” Williams said.
Still others are cutting back on funding smaller and less lucrative loans to students attending community colleges. However, the defensive posturing by some lenders isn’t widespread enough to seriously drain the financial pool.
[GRAPHIC OMITTED] “Some lenders are changing their loan practices,” said Kristina Burford, director of financial aid at North Little Rock’s Pulaski Technical College. “We have not had any difficulty finding lenders who want to help our students.” The availability of adequate capital for student loans appears to be settled for this school year. But a more permanent fix awaits policy-makers in 2009.
“If there is a train wreck coming, it will be next year if Congress doesn’t take care of the problem,” Williams said. “We’re going to have to see some liquidity in the market and see some higher yields from the federal government.” By George Waldon george@abpg.com Waldon, George
happy birthday steve — you look great!
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