College Plans: A little harder to get a student loan?

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Sallie Mae (officially called SLM Corp) announced Thursday that it would begin offering fewer students loans and would be more selective in the loans it would give. The company offer both government-backed loans and private loans. The company says the College Cost Reduction and Access Act of 2007 will make it harder for Sallie Mae to make money on loans. Specifically, the new Federal Family Education Loan Program may not offer Sallie Mae a chance to make any money at all by originating those loans.

Simply put, while it's nice that it may become less expensive for students to access student loan money, that result can't happen unless lenders are willing to offer the loans. And if lenders can't make money, they're not going to offer the loans. And I don't blame them.

As with most things, the business of student loans is just that... a business. While the companies making the loans are helping students, their primary goal is to turn a profit. If they can't do so, they're going to stop offering as many loans, which may prevent some students from going to college. Is this another example of legislation with unintended, but wide-reaching negative consequences?

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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