CNN Money says lenders are dropping out of the federal student loan program and that by summer, when most students apply for loans, there will be a lot less money to be found. Despite the dropouts, the story says we are still a long way from a student loan funding crisis:
More than 55 lenders who originate 13% of college loans have stopped
making loans in recent months. Financial firms say they are leaving the
program because subsidy cuts enacted by Congress last year, combined
with the credit crunch that has made it costlier for them to sell the
loans to investors, have slashed the market's profitability.
The
departures come at a time when lenders are also tightening their
standards for private student loans, a smaller but growing segment of
the industry.
This doesn't mean funding has dried up, however.
The U.S. Department of Education has surveyed schools that could be
affected by the exodus and all have found alternative options for their
students. There are more than 2,000 lenders in the program, though the
10 largest provide the vast majority of funding.
"We're not
seeing a crisis yet," said Sarah Flanagan, vice president for policy
development, National Association of Independent Colleges and
Universities. "A lot of smaller banks are backing out, but the bigger
lenders are jumping in to fill the void."
