PHEAA Hosts Emergency Student Loan Funding Summit
Government, Higher Education and Finance Leaders Meet to Avert Crisis
Harrisburg, PA (February 21, 2008) - The Pennsylvania Higher Education Assistance Agency (PHEAA) convened an emergency Student Loan Funding Summit today, bringing together a diverse group of state and federal government, higher education and financial leaders to address a potentially devastating shortage of student loan funding for students and families.
This student loan funding crisis began with the recent subprime mortgage meltdown and subsequent turmoil in the capital markets. These far-reaching economic problems have now given rise to a new bond market crisis, which is further compounding the funding problem for many lenders.
As a result, lenders throughout the nation are exiting the $50 billion Federal Family Education Loan Program (FFELP) while others are being forced to curtail their activity, seriously jeopardizing the funding plans of millions of American students. In recent weeks:
- College Loan Corp, the nation’s eighth largest student lender, ended its participation in the FFELP program.
- Iowa Student Loan Liquidity Corp announced that it is unable to properly fund loans for the 2008-09 school year.
- Michigan suspended one of its college loan programs.
- Montana's student loan agency tried unsuccessfully to sell $583 million in bonds during the last ten days, which means it will be more difficult for the agency to make student loans.
- PHEAA, itself, experienced "failed auctions" in the troubled bond market for the first time in its history, substantially increasing its cost of borrowing and putting its ability to fund additional student loans at risk.
“As many Americans face foreclosure on their homes, millions of college students may now face foreclosure on their plans for a higher education,” said State Representative William F. Adolph, Chairman of the PHEAA Board of Directors. “We must act quickly and we must act now - before our students are caught in a painful student aid funding crunch that could put their college plans financially out of reach.”
Eighty-percent of today’s college students depend upon the low-cost FFELP to help them pay for school. Without access to sufficient funding, millions of students will not be able to pay for their college education. The result could be devastating for students and families, with additional consequences for the higher education community and the Commonwealth’s economy.
At the conclusion of the Summit, State Representative Adolph presented a unifying statement (26 KB PDF) calling for immediate action from the U.S. Secretary of the Treasury, the U.S. Secretary of Education, the Chairman of the Federal Reserve Board, and the President of the Federal Home Loan Bank of Pittsburgh to use “all means and authorities available to them to provide needed short- and long-term financial assistance to assure the availability of student loans to Pennsylvania’s students and families.“
“While our focus is first and foremost to protect the interests of Pennsylvania families, everyone must understand that this is a national problem that requires a national solution,” said State Senator Sean Logan, Vice Chairman of the PHEAA Board of Directors. “This is much bigger than the Commonwealth and without decisive federal intervention, the resulting financial stress placed on students and families could be disastrous.”
In addition to administering a variety of state-funded student aid programs, PHEAA is the designated federal student loan guarantor for Pennsylvania's families and schools. About 600,000 Pennsylvania students currently attend postsecondary schools in Pennsylvania with the assistance of a low-cost federal student loan. PHEAA has also provided about $1 billion from its business earnings to help fund student aid programs in Pennsylvania, such as grants, scholarships and low-cost student loans, over the last ten years.