Spokane Teachers CU Joins Exodus From Government Loan Program
SPOKANE, Wash. – Spokane Teachers CU said yesterday it is joining the growing number of lenders who are leaving the guaranteed student loan program, known formally as the Federal Family Education Loan Program.
So far at least 50 lenders have exited the federal program over the past few months, and several other credit unions are joining the exodus.
"It was a hard decision for us, and to be a teachers credit union, to make," said Steve Dahlstrom, president of the $1 billion credit union, which holds $10 million of the guaranteed loans. "If we can find a way back into this we will."
Dahlstrom cited the declining returns on the guaranteed loans–the 6.8% rate will be halved to 3.4% by 2010– and the lowered guarantees, 100% to become 95%.
But just as important, he said, is the increasing competition from the government’s own direct student loan program, which has prompted some local colleges to abandon all preferred lenders. "We’ve had a couple of colleges tell us out here in Spokane we’re going to go with just one lender, the U.S. government," he told The Credit Union Journal yesterday. "They (the federal government) set the rates; they set the rules, regardless of what our costs are."
"It’s the squeeze," said Dahlstrom, referring to the two conditions pressuring student lenders.
