SalemNews.com, Salem, MA

Business

Discussion

The Salem News has a real-name policy for commenting. Users may sign in using the Facebook Connect tool above the comments field. Once your first comment is posted by a moderator, all future comments will post automatically. If you prefer not to use Facebook, send an e-mail with your comments user name (which must be the same as your real name), city or town, street address and daytime phone number to comments@salemnews.com. A staff member will contact you directly to confirm your identity. It may take a day or two before you can post comments. Only your user name will be public. All users are required to follow our rules for commenting, which can be found here.

comments powered by Disqus
July 28, 2008

State agency can't provide private college loans

By Glen Johnson

BOSTON — A state lending authority that provided more than $500 million worth of college financing last year said Monday it won't be able to offer the bulk of its loans this year because of turmoil in the financial markets.

The Massachusetts Educational Financing Authority said it would not provide private loans, which accounted for 80 percent of MEFA's business last year.

The authority had said in April it couldn't support student applications for the federally backed Stafford Loan program. MEFA offered "borrower benefits" that made the loans less expensive than those obtained from private banks.

"As a result of our problems and the continued dislocation of the capital markets, we have been unable to raise funds for the coming academic year," Executive Director Thomas Graf said.

The agency is encouraging the 40,000 students and families it has worked with in the past to seek federal loans on their own and then private loans through banking institutions. The authority also is establishing a hot line to offer advice for students and the families.

Spokeswoman Jessica Belt said MEFA hoped to be able to provide some financing later this year, perhaps for second-semester tuition bills or in Spring 2009. Most institutions require first-term payments by Aug. 15.

The news is the latest blow to those trying to cope with record college costs. With many private schools now nearing $50,000 a year for room and board, families have been scrambling for scholarships and loan packages to meet their obligations.

The student-loan market began to face problems late last year, falling victim to the same subprime mortgage crisis that befell many homeowners. A lack of investor interest dried up demand for so-called auction-rate bonds, the kind of long-term debt many lenders used to underwrite student loans.

Since then, MEFA and other similar entities have had problems refinancing their old auction-rate bonds.

Graf said the authority had to reverse itself on private loans because the agency's bond insurer faced a possible downgrade in its credit rating. That, in turn, would have increased the cost of floating new debt.

MEFA, a nonprofit agency with about 50 employees, continues to run other educational programs, including the U.Plan, a college savings plan it manages jointly with Fidelity Investments, Belt said.

The U.Plan allows families to lock-in future tuition at current rates at 80 participating Massachusetts colleges and universities. About 36,000 families have enrolled in the U.Plan since 1995, with nearly $3 billion now invested.

In addition, MEFA has about $1.5 billion in past loans outstanding that it continues to service.

Text Only | Photo Reprints
Business

AP Video
Facebook Expands Campus As Stock Shrinks CEO Salaries Become Sore Issue in Labor Disputes Facebook Sued by Investors Over Disclosures HP to Cut 27,000 Jobs, Save Up to $3.5B Investors Slap Facebook 11 Percent Lower Yahoo to Reap $7.1B From Alibaba Stake Facebook Shares Close Up Just .23 at $38.23 Future Uncertain for Post-IPO Facebook Facebook Shares Spike 10% Higher at Open Mark Zuckerberg Rings Nasdaq Opening Bell Verizon to End Unlimited Data Plans Facebook IPO: What You Need to Know GM Says It Will Stop Paying for Ads on Facebook On Zuckerberg's Mind: People, Not Shareholders Dimon Survives Votes on Pay, Chairmanship Raw Video: Protesters Target JP Morgan Meeting Poll: Half of Americans Call Facebook a Fad Could JP Morgan Losses Have Been Prevented? Fuzzy Resumes: A Look at Leaders Undone More Questions After Yahoo Leadership Fiasco
NDN Video
Police: Seattle Cafe Gunman May Have Shot Self Fans Riot at Justin Bieber Concert Cows crash house party Kim K.'s New Gig as Love Guru Syria Massacre: US Student Killed Oprah's Aha! Moment with NPH & David Burtka Billionaire Zuckerberg no tipping waiters White House Regrets Death Camps 'Misstatement' Leaked Video of Madonna Performing Lady Gaga Sparks Feud Rumors Victim Identified in Fla. Face-chewing Attack DWTS Pros Caught Kissing Father Arrested for Chasing Son Onto Soccer Field During Game Ill. lawmaker goes on tirade over pension bill Raw video: Man falls from SMU crane after standoff Jessica Simpson Debuts Baby An OMFG 'ABDC' LMFAO Performance Tori Bares Baby Bump in Monokini Video reignites mystery around cruise ship death Letterman on Family Life Post-Scandal Al-Qaida Hid Messages in Porn
Comments Trcker