Congress moves to calm student loan turmoil
The House of Representatives overwhelmingly approved a bill to direct federal financial institutions, including the Treasury Department's Federal Financing Bank, to ensure enough money is available to provide student loans.
The student loan business is in disarray because of fallout from the subprime mortgage crisis, as well as deep cuts in federal subsidies paid to federally guaranteed student loan providers that were approved last year by Congress.
The House bill would also let the Education Department buy federal student loans from lenders unable to sell them on the largely paralyzed secondary market, and funnel loan capital to colleges through state guaranty agencies.
...Underscoring the urgency, Bank of America Corp said on Thursday it would no longer offer private student loans in the coming academic year.
And the chief executive of Sallie Mae, the largest student lender, said the system was in for "something of a train wreck" by mid-2008 if the federal government did not move quickly with a stabilization plan.
Dozens of lenders have exited the federal loan program altogether since the cuts in subsidies, prompting some analysts to predict a shakeout of smaller competitors and growth for larger players.
LOANS CRUCIAL FOR COLLEGE
The American higher education system is the world's costliest. Most students, facing soaring costs for tuition, books and living expenses, get some financial aid. As grants and scholarships have dwindled, loans have become common.
Under the biggest loan program, students take out federally guaranteed loans from lenders such as Sallie Mae, Bank of America, JPMorgan Chase & Co and others.
And my favourite part:
...the credit crunch meant most of Sallie Mae's new student loans would lose money. Loan demand was running at $3 billion a month, while it has only been able to access funding of about $1 billion a month -- and at record-setting costs, he said.
Wow. The whole house of cards is tumbling down, isn't it?
No wonder my largely US-based internet sales have largely dried up over the past year. I have a feeling these people aren't going to be spending anything on anything besides food, shelter, and mandatory minimum payments for the foreseeable future.
It remains to be seen how far Canada's going to be following them down the rabbit hole, but if