According to articles on Michigan Newslog and Young Money, major sources of funding for student loans are backing out of the business, particularly banks like the TCF Financial Corporation, HSBC Bank USA and the M&T Bank Corporation. With three of the fifty largest lenders out of the game, $560 million dollars worth in student loans is now unaccessible to the students who need them. While the need for an education becomes more and more important, tuition rates are soaring to new heights.
Unfortunately, those three banks are not the only ones pulling their support out of student loan funding. According to FinAid! publisher Mark Kantrowitz, entire or partial support from 37 loan lenders has been discontinued. This is happening because these businesses just aren’t getting the investors they once were. Thus, they can no longer afford to support student loan programs. Besides those 37 lenders, 11 other lenders have withdrawn their support from private student loan funds.
The US has recently passed legislation on an act that affects the student loan process severely. Currently, interest on federal student loans is fixed at 6.8%. The goal of The College Student Relief Act of 2007 (also known as HR-5) is to reduce the interest to 3.4% for undergraduate students. Yes, this is great but this interest drop only lowers gradually over a period of five years and this only affects subsidized loans. Unsubsidized loans won’t be affected at all by this Act. Plus, after those five years, the interest rate will go back up to 6.8%.
Say, isn’t that about the time that a lot of students would be just getting out of university and starting to pay on their student loans?