NASFAA continues to update its list of lenders modifying student loan practices and encourages members to send additions and corrections to web@nasfaa.org.
M&T Bank, HSBC Bank USA and TCF Financial announced they were suspending FFELP loans. The Three Banks are among the 50 largest providers of FFELP loans providing more than $560 million of the $119.2 billion in loans made during the 2006 fiscal year.
NASFAA President and CEO Dr. Philip Day told The Wall Street Journal that this was a "major concern" that raises new worries about what may lie ahead for the fall.
"These are larger banks, they have more volume, more engagement," he told the Journal. "We are starting to get into the big leagues now."
M&T Bank sent a letter to colleges announcing that it will suspend participation in the FFEL program, effective April 1. M&:T Bank noted that any loan that has already been processed, guaranteed and scheduled for disbursement will be fully originated and it will continue to provide private education loans.
Additionally, HSBC announced that it will discontinue its FFEL program, effective May 31. HSBC's change in policy applies to new originations after May 31. Existing loans are not impacted.
Meanwhile, the New York State Higher Education Services Corp. (HESC) issued a letter to New York colleges to reassure them that FFELP student loans will continue to be available through HESC lending partners. HESC president James Ross also assured schools that "students who require additional loans through the federal parent (PLUS) or private (alternative) programs should also have their needs met."
In its letter to colleges, M&T said the decision to suspend FFELP loans was "an extremely difficult decision."
"Recent legislative and capital markets developments dramatically reduced the profitability while increasing the risk profile of these loans," the letter states. "We will not be processing or originating loans for this upcoming academic year."
M&T also acknowledged that colleges would need time to modify processes and update information and it would provide lists of current borrowers so colleges can notify the company how it can assist efforts to help these students secure new sources of FFEL funds.
Media Coverage
By Haley Chitty
NASFAA Assistant Director of Communications
Posted 03/20/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
