Student Loan Issues Some Lenders Discontinuing Student Loan Program

FFEL and Direct Loan Programs FFEL (Federal Family Education Loan) Program – Federal Financial Aid loans taken through a private lender – This is where many of the problems are currently Direct Loan Program – Federal Financial Aid loans taken directly through Department of Education Minnesota State University Moorhead Bemidji State University

FFEL – How It Works Student qualifies for financial aid Chooses a lender from the institutions list The lender then supplies the loan, with guarantees and subsidies from Department of Education Lender can then sell student’s portfolio on private market Makes a profit and then offers more loans.

What’s the Problem? College Cost Reduction and Access Act – The bill reduces student loan subsidies by $20.9 billion and reinvests most of the savings into student aid and other areas of higher education. – Reduces the amount of money that the government reimburses most lenders for loans that go into default. – Ends the practice of rewarding lenders designated as "exceptional performers“. Economic Downturn – It is becoming less profitable for lenders to sell your portfolios in the private market

Facts 2,000 FFEL Lenders – ~40 Left the Program Private School Loans also affected – Though many are still available.

What Is Being Done? Department of Education “Lender of Last Resort” – Help students who have been denied loans by at least two private lenders that participate in the bank-based program. – Private lenders would be guaranteed 100% repayment of default loans. Direct Loan Program prepared to take double volume