Will current economic woes affect my student loan?
Does the Current Credit Crisis Affect Student Loans?
How the Government is Trying to Prevent the Student Loan Crisis
Student Loan Lenders Dropping Like Flies
Should I Let My Student Loans Go to Collection?
How Does the Plight of Student Lenders Affect My Existing Loans?
Do I Need to Have Good Credit to Get Student Loans?
With so much attention being paid to the possibility of a student loan crisis, many people are wondering what exactly is causing this crisis. The core problem lies with the actual student loan lenders, many of whom are dropping like flies in the market. Some are closing down completely or being forced to lay off thousands of their employees. It’s difficult to get an exact reading on just how many lenders have backed out of the student loan market, but it’s been estimated that well over fifty have stopped making loans permanently or at least temporarily. Some of the other larger lenders will be able to pick up the slack, but they simply cannot make up for the loss of dozens of major lenders.
Right now, it appears that the recession and the national credit crunch are mostly to blame for many lenders no longer offering student loans. On October 1st, a cut in federal subsidiaries went into affect and lenders have since been unable to securitize any loan. Soon after, the effects of the credit crunch and troubled housing market started to trickle into the student loan market. Then, lenders began refusing to buy variable rate bonds at low rates, which is where the funding comes from for many student loans. Take these three major financial problems occurring all at once and you have the perfect recipe for the student loan crisis we may soon be experiencing. Fortunately, it may not occur at all with the government and Education Department working diligently on the issue.
While a student loan crisis is still a very real possibility this year or in coming years, the government is taking preventative measures to make sure everyone has access to student loans. The government has asked Congress for permission to buy billions of dollars in student loans, which it could then use to provide lenders with the capital to make new loans. There’s also talk of a “lender of last resort” program, which could allow students to get their loans from state agencies or non profit companies. So although a student crisis remains completely possible, the federal government seems to be doing everything in its power to make sure it doesn’t happen any time soon.
