April 29, 2008

Dear NASFAA Members:

Attached for your review is a copy of a NASFAA White Paper: The Student Loan Credit Crunch. This document was created to respond to the countless queries and requests for information we receive from our members, the media, and others with a vested interest in higher education. It was presented to the NASFAA Board of Directors yesterday, who found it insightful and useful.

The NASFAA Board of Directors discussed the ongoing student loan credit situation extensively during our meetings this week. While there were no formal votes on the matter, the Board and I examined several suggestions and action items that may be implemented by NASFAA on this and other federal student aid issues. A summary of those suggestions follows.

Reality of a Credit Crunch

The Board believes that the student loan credit crunch is real and deserves NASFAA’s continued attention and action. Even while schools participating in the Direct Student Loan program will not see any shortage in federal student loans, they are still concerned about shortages in the private student loan market, which more students seem to be relying on each year.

The Board is particularly concerned about community colleges and career schools in the FFEL program. Several lenders have indicated that they will not be lending to students at those institutions because they are deemed high credit risks. The actions of these lenders go against the spirit of the federal student aid programs. A lender that receives federal subsidies and reimbursements on defaulted loans should not strike entire student populations simply based on their institution.

As the NASFAA White Paper shows, we have been actively engaged in this situation and will continue to do so until we are sure that every student, no matter where they attend, has access to low cost federal student loans.

Partnership with Direct Loans

NASFAA has consistently indicated that the Direct Loan program as a viable option for schools that fear possible loan shortages in the fall. To that end, NASFAA is reaching out to the National Direct Student Loan Coalition (NDSLC) to help FFELP schools that are interested in transitioning into the Direct Loan program. NASFAA is also exploring the possibility of a Webinar or similar training that would be offered to address questions, issues, concerns, myths, and realities associated with the Direct Loan program.

Federal Student Aid Funding

The NASFAA Board is also concerned about the dwindling Perkins Loan funds availability. This vital program has not been adequately funded for several years and we are starting to see the negative effects on our campuses as fewer students are able to participate. NASFAA is working on an intervention strategy to more effectively advocate for appropriate funding for this program.

The cornerstone of any strategy to address the challenges related to the student loan credit crunch should necessarily focus on an expanded commitment to the Pell Grant Program. It is a proven tool that offers significant help to the students who need it most.

Unwavering Commitment

Our commitment to you and the students you serve doesn’t end at 5:00 pm every night. The NASFAA Board of Directors, and NASFAA staff, and I take our responsibility to serve you seriously and we will continue to work tirelessly to ensure your students have the means necessary to pursue and fulfill their postsecondary dreams.

Sincerely,

Dr. Philip R. Day, Jr.
President and CEO
National Association of Student Financial Aid Administrators

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National Association of Student Financial Aid Administrators (NASFAA)
1101 Connecticut Avenue, NW, Suite 1100, Washington, DC 20036
Phone: (202) 785-0453; Fax: (202) 785-1487; Web: www.NASFAA.org