Credit crunch for student loans

Sallie boss warns of student loan ‘train wreck’


Experts said that, unless the government intervenes or market conditions rapidly improve, Sallie Mae could have no choice but to stop writing new federally backed loans.

House lawmakers on Thursday approved a measure to boost the availability of credit for Sallie Mae and other student lenders, and analysts believe the Treasury department could act as soon as next week.

Sallie Mae lost $104 million in the first quarter as it grappled with higher borrowing costs, restructuring charges and other factors, though Lord said in a conference call with analysts that the company would not lower its full-year earnings target.

Shares of the Reston, Va.-based company climbed almost 6 percent Thursday, but remained 70 percent from last summer.

Even though the majority of student loans are highly rated and carry a federal guarantee, investor demand for securities backed by these assets has plummeted — a sign of just how nervous investors are about securities backed by mortgages, student loans and other debt.

Bank of America Corp. said Thursday it would stop private student loans, but continue offering government-backed loans. On Wednesday, Citigroup Inc. said its Student Loan Corp. subsidiary will temporarily stop issuing loans to students at schools where profits have not been satisfactory.

Comments: Could be good for students ... avoid those loans (I have 1 kid who graduated with no-student loans. Another nearing an Associates with no student loans!).


  1. Could be wonderful for students--maybe with fewer loans to pump up budgets, colleges would realize that all those diversity programs and schools of "ethnic and gender studies" are not part of their core curriculum. Maybe kids could actually get an education instead of an indoctrination.

    Maybe I'm dreaming. :^)

  2. It is possible to graduate with no loans, you just have to realize that your time is worth more than what Starbucks pays.(no offense to those that may work there) I know my school was not as expensive as other schools, but I paid my way through school with little help from my parents. I believe it started at abou 13k/year and by my senior year was 16k/year. (I do want to say that it was all God that got me through though, and I praise him for that)

  3. I was also able to graduate with no student loans, but only by getting an Associate's first (on a half-tuition scholarship), then going to work...the company I worked for paid for me to finish my BA. I too consider myself very fortunate and blessed not to have experienced the 40-50k in debt so many do - it's hard for me to imagine that, really.


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