Student Consolidation: State fund to offer student loans

Student Consolidation

Saturday, May 24, 2008

State fund to offer student loans

Utah college students won't have to worry about the availability of student loans for the coming academic year.

As banks across the nation and in Utah have announced they will halt federally backed student loans, the Utah Higher Education Assistance Authority on Friday said it would use cash reserves to make sure students needing loans can get them.

"We've got money to make the student loans without disruption, whereas many states do not," said the authority's executive director, David Feitz. "Because of our financial reserves, we have staying power to make loans, even in the credit crisis."

The authority's board of directors approved the plan late last month, Feitz said. Regents heard about the plan Friday.

Last month, Zions Bank, one of the nations' biggest lenders of federally backed students loans, told state colleges and universities that it would make no more federally backed student loans after March 31.

The announcement came as lenders across the United States have stopped or suspended participation in Stafford and PLUS (Parent Loans for Undergraduate Students) loan programs.

The reason: The new federal College Cost Reduction and Access Act, effective Oct. 1, cut the yield on student loans for lenders by 0.55 percent. After that came the credit crunch, fueled by subprime mortgage loans, making it tougher for lenders to continue such loans.

Zions typically would lend about $70 million in federal student loans a year. The Utah Higher Education Assistance Authority lends about $350 million a year to Utah students, Feitz has said.

The authority, however, wants to keep students out of a financial lurch that could discourage them from seeking a college education. It plans to use its financial reserves "as a bridge to better times," Feitz said.

"Even if other lenders drop out, we're still planning to make those loans...until the credit markets turn around," he said.

There is about $200 million in those financial reserves, Feitz said, thanks to conservative management, low overhead and money set aside along the way.

Still, Feitz said, Congress must be encouraged to take action now. "We want them to help shore up these collapsed credit markets" so student loans are available in the coming years.

Zions, meanwhile, is continuing work on a private student lending program, and expects to roll it out in the next 30 to 60 days, said Rob Brough, bank executive vice president of marketing and communications.

"We're unsure what the financing will look like," Brough said Friday. "They will be marketed as student loans programs, but alternative programs to the federal programs."

posted by Irmansyah @ 3:46 PM

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