So, now I have something new to worry about over the weekend.  The collapse of the Student Loan Industry. 

 Bank of America has pulled out of the private student loan market this week. Citibank has also stated they will not place more loans to students unless backed by the government. Private means the student loans that are not backed by SallieMae and sold as bonds on the open market.  This take millions away from American students in college and post graduate studies.

The quote goes, that if the loans are not profitable, they cannot be bundles and sold as an investment. Therefore, they will not issue students the money.

 

SallieMae, has been losing millions on the shareholder books and also said that they will not issue more loans that are not good and marketable paper.   Think of it as Sallie and the lenders stepping up the FICO score, asset and income requirements to obtain student loans, just as the banks are doing  for mortgages.

 

I understand not wanting to give loans to people that will default, but to not issue loans because there is no longer a market for the investment vehicle! How do you explain it to the children that can no longer go for a higher education because they cannot get loans? What doors will this open up for the foreign students.  Will it make it easier for them to get into our schools, leaving less slots open for Americans?

 

Dale Siegel