For more than a decade, the capital markets have been the most efficient means of delivering student loans. T.H.E. has leveraged this to return more than $200 million in student savings. Unfortunately, the severe market disruptions have worsened in the last six months and continue to prevent our funding partners from being able to commit to us (and many other lenders using these markets) for funds needed for the 2008/2009 lending season. Consequently, we have no access to funding right now. Until we see signs of recovery, we regret to have to announce the following:
- Beginning April 1, 2008, T.H.E. will temporarily stop accepting new applications and suspend any processing of Stafford, Grad PLUS and PLUS loans.
- Any Stafford, Grad PLUS, PLUS, and/or Private (including Medical Residency and Relocation and Bar Prep) loan certified and approved, with all necessary information complete and received prior to 4/1/2008, will receive our zero origination fee and will disburse as scheduled.
- T.H.E. at this time will continue to accept new applications, process and fund Private loans including the Medical Residency and Relocation and Bar Prep loans.
The student loan industry is working with Congress, the U.S. Treasury, the Wall Street banks and others to try to find a solution for a problem that, for student loans, is simply a lack of investor confidence rather than any inherent credit problems or economic issues. We believe progress is being made as evidenced in a quote from a recent NASFAA update:
"If the credit crunch is prolonged, lasting into the summer and fall, there could be disruptions in FFELP. But given that ABS made up of FFELP loans are such a secure investment, it is believed that investors will once again begin bidding on them in the near future, allowing non-bank student loan providers to raise capital. Additionally, Federal Reserve Chairman Ben Bernanke said that the underlying quality of student-loan debt securities is strong when he testified before the Senate Banking Committee. If Bernanke is correct, then it is unlikely that lenders will continue to have trouble selling loans to raise capital to make more federal loans in the long term."
Even though our short-term ability to make loans is severely curtailed, T.H.E.'s low-cost operating model, exceptional customer service, practical borrower education and solid reputation leave us well positioned to recover quickly once confidence in the financial markets returns. We know you have to make short-term decisions now, but we ask for your patience and consideration for when these markets recover, we can return the next $200 million to your current and former students.
We're sorry that we can't give you better news right now, but we feel an obligation to inform you of this now rather than waiting for a change in the markets to occur. As always, we'll do our best to keep you informed.
Sincerely,
Taige Thornton
President and CEO, T.H.E. Loan Programs
Posted 04/04/08 to www.NASFAA.org. Posting of press releases is done as a service to Members and does not imply endorsement or support by NASFAA. NASFAA does not review this information for content or accuracy.
