The problems that have been roiling mortgage, investment, and corporate markets are starting to trouble student loans. Last week, Delaware-based National Education, which had marketed hundreds of millions of dollars' worth of college loans around the country, stopped issuing any new federally subsidized student loans. Finansure, which made more than $600 million worth of educational loans in 2006, has also halted operations. And financial aid officers say they think other comparatively small lenders in the $24 billion market may also quit soon. Already, more lenders have cut back on borrower goodies such as on-time payment bonuses and are pickier about whom they'll lend to.
The good news for students, however, is that there are still hundreds of lenders out there, giving borrowers plenty of choice, and the government still caps the interest rates on Stafford, Perkins, and Plus loans.