Congress holds hearing on student lending industry

  • 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.
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