WASHINGTON -
The letter says the lenders in the market for federally guaranteed student loans “are now facing sever liquidity problems,” and urges the Treasury Secretary to work with federally sponsored enterprises, like the Federal Financing Bank, Federal Home Loan bank System and Federal Reserve to ensure liquidity and availability of financing.
During a hearing last week, Rep. Paul Kanjorski, the Democrat who heads the Financial Service’s Capital Markets Subcommittee, said “Financing education loans through the assets-backed securities market has become uneconomical in the current environment.”
The bid to infuse new liquidity into the market comes as several important lenders have pulled back in recent days. The Iowa Student Loan Liquidity Corp. said last week it won’t be able to properly fund loans for the 2008-2009 school year because of the ongoing credit crisis. And MI-LOAN said it is suspending its Michigan Alternative Student Loan program because of “current and unpredictable capital markets disruption.”
The congressional bid comes as the crunch is expanding in the student loan market, where legislation making large cuts in lender subsidies last year has prompted cutbacks by the biggest players. Sallie Mae, the nation’s largest provider of student loans, said last year it is reducing its presence in the market for federally guaranteed loans in the face of the subsidy cuts to devote more resources to private loans.
