First they were out, and then they were in. Now they're back out. In March, Brazos Higher Education Service Corporation, Inc., the fourth largest holder of guaranteed student loans and the largest nonprofit loan provider, announced that it would suspend making new FFELP loans. But after the president signed the Ensuring Continued Access to Student Loans Act (ECASLA) into law, the largest nonprofit federal loan provider announced they would in fact participate in the 2008-09 academic year.
Yesterday the company signaled another shift in policy by announcing that it would once again suspend participation in the federal loan programs.
"Time constraints caused by the short window between receiving final program documents and the deadlines to disburse loans have left us with no confidence that we can get money to students as soon as needed," said Murray Watson, president and CEO of Brazos in a press statement released yesterday. "We have simply run out of time to secure financing to disburse loans as soon as they are needed."
The Department came under considerable pressure from lawmakers and the higher education community - including NASFAA - to implement ECASLA provisions before the Memorial Day holiday. But terms and conditions on the Department's liquidity plan weren't released until July. Additional guidance on what lenders must do to sell their loans to the Department is ongoing.
Brazos was the largest municipal borrower in the auction-rate market and has been hit especially hard by the credit crunch, according to Bloomberg. The company has sold $7 billion of bonds through the Brazos Higher Education Authority and Brazos Student Finance Corp. In February the company fired 163 employees. At least 4,323 people have lost jobs in student loan industry since August, 2007, according to Finaid.org.
In another sign of instability in the loan markets, the Massachusetts Educational Financing Authority (MEFA) said yesterday that it will not be able to provide any students with loans this fall. MEFA will have a hotline set (800-809-0571) for those with questions about financing or need help finding federal or private loans.
Other Media Coverage
By Justin Draeger
NASFAA Associate Director for Communications
Posted 07/29/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
