Paying for College

New York Senator Chuck Schumer has been pushing hard for a three point plan aimed at ensuring that private student loans are available to those who need them. The credit crisis has resulted in close to 30% of all private lenders closing their doors. Among the top lenders, most have tightened underwriting standards which has severely limited the supply of loans.

The following lenders have drastically reduced private lending:

Lender / Lost Volume
State Loan Agencies / $750 - $1,000 million
Sallie Mae / $300 - $900 million
EFP / $750 - $1,100 million
Bank of America / $700 million
Key Bank / $450 - $500 million
Campus Door / $375 - $450 million
Student Loan Xpress / $290 million
My Rich Uncle / $227 million
College Loan Corp. / $200 - $250 million
Wachovia / N/A

Senator Schumer has received and encouraging response from Margaret Spellings, the Dept. of Education secretary and hopes to have a commitment from the federal reserve and treasury by next week. The main three points of the plan are:

- Encourage colleges “to enroll in the Direct Loan program “as a backup for their students” in the
event that private loans become less available.” In dozens of calls that I have had with financial aid
administrators recently it seems more and more schools are heeding his advice.

- Establish a commission to ensure government loans will be available if private loan market collapses.

- Monitor implementation of rescue plan to ensure student loan market is protected.

This all comes as good news to college students who are finding it extremely difficult to pay for college. For most student enrolled in a four year school, the entire act of funding their education has been turned upside down in the last 12 months. We will see if this plan can turn things around.