ARLINGTON, Va., March 10 /PRNewswire-USNewswire/ -- The following is an
open letter by Joe Belew, president, CBA, to Financial Aid Administrators:
Dear Financial Aid Administrator,
There have been numerous reports of lenders throughout the country
announcing that they will no longer be making Federal Family Education
Loans or that they will be reducing or stopping the lending of private
education loans. We are writing to let you know that despite a series of
negative developments that have increased their costs and reduced their
margins, banks plan to continue making both FFELP and private loans in
academic year 2008-2009.
The Congress in 2007 enacted legislation, the College Cost Reduction
and Access Act, that dramatically cut the allowable yield for-profit
lenders are permitted to make on FFELP loans while at the same time
doubling lender-paid origination fees and risk sharing. This was done at a
time when historically favorable conditions prevailed in the financial
markets so that lenders' cost of funds was extremely low. Since then,
problems in the financial markets have made it impossible for some non-bank
lenders to continue and made it far more expensive for others to raise the
funds they need to make loans. Banks have so far not faced the same level
of difficulty because they have access to capital through deposits, but
banks nevertheless are very concerned about the effects on student lending
of the situation in the financial markets.
Banks that have made a commitment to student lending have invested in
their loan programs, which they consider an important part of their service
to their customers. They have a decades-long commitment to the student loan
business. Bank lenders are hoping that the financial markets improve and
funds become more readily available for all lending community participants.
In the meantime, some banks plan to expand their lending in the upcoming
academic year to ensure that students have the funds they need.
However, the cuts to for-profit lenders imposed last year raise
longer-term concerns about the capacity of banks to continue to expand
lending to students, given other demands on their capital. For that reason,
we are also asking Congress to reconsider some of the cuts passed in 2007
-- although we are not calling for cuts to student aid
Joe Belew, President
SOURCE Consumer Bankers Association
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Related links:
http://www.cbanet.org
CONTACT:
Gwyn Walcoff, +1-202-289-3900,
gwalcoff@wpllc.net, for the Consumer Bankers Association
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