Feds bail out student loan industry

The national lending crisis reached the student loan market months ago but the federal government is now stepping in to bail out the student lending industry.

Meanwhile" N.C. officials claim that federal student loan availability in North Carolina is expected to stay stable through the next academic year.

The U.S. Department of Education first stepped in last spring. This is the second time it's provided financial assistance for the lending industry to minimize potential disruptions in the student loan market.

""I am using the authority granted by Congress to … help ensure continued" successful disbursements of student loans" stated U.S. Secretary of Education Margaret Spellings in a press release in late November.

The education department is planning to buy more of the Federal Family Education Loan Program's student loans, which it began buying last spring.

The N.C. State Educational Assistance Authority, a state-sponsored lending agency that provides most of the student loans for the state, is in good shape to continue providing loans.

It is true that the state of the financial market has put some pressure on the capital which provides loans" but we have adequate funds for students" said Julia Hoke, director of legal affairs and general counsel for the lending agency.

A private bond from the N.C. State Employees' Credit Union funds a large portion of the capital used by NCSEAA to provide loans for students.

That support is partly why they are still able to lend to students while other states are having difficulty, said Steve Brooks, the agency's executive director, earlier this year.

Tabatha Turner, associate director of financial aid at UNC, said that while need-based federal loans will remain secure for the next academic year, more financial aid applications are expected due to the economy.

Students who want private loans also might have a harder time because the availability of those loans depends on the financial security of banks and other private lenders, Turner said.

There is not a sizeable portion of students at UNC who use these loans" but for those who do they will definitely be affected" she said.

N.C. students borrowed a total of $118 million in federal, private, state and institutional loans in the 2006-07 academic year. Federal loans made up $105 million of that. Private loans constituted an estimated $8.5 million, Turner said.

The remaining difference was covered by the state and lending institutions.

Although the loan market is secure for now, problems could arise in the future if the financial market does not improve, Hoke said.

 We have made arrangements and have capital secure for the following year" but our economy is difficult" so we can hope that things improve.""



State & National Editor Ariel Zirulnick contributed reporting.

Contact the State & National Editor at stntdesk@unc.edu.