The credit crunch has a lot of people concerned that student loans will be difficult to come by. Companies including College Loan Corp., CIT Group Inc., NorthStar Education Finance Inc., HSBC Bank USA, M&T Bank and Zions Bancorp have recently stopped issuing federally guaranteed loans. In all, 50 lenders representing 12% of the market have stopped making these loans.
Sallie Mae has said it will no longer offer consolidation loans for federal loans.
State agencies in Iowa, Michigan, Montana and Pennsylvania have suspended their student loan programs.
It's an election year.
What does all this mean? Congressional hearings of course! At 10 AM EDT, a hearing on the state of the student lending industry convened, and lawmakers and several proposals aimed shoring up the market are floating through Congress.
I'm not so sure a little tightening in the industry is such a bad thing though. Student loans have become easy to get, allowing students to graduate from college with $50 thousand or more in debt, severely hurting their ability to get a good financial start in their adult lives.
Fewer student loans may encourage kids to pursue lower-cost options for education, and that will be good for them long-term.