Though recent changes in the nation's largest student-loan company's lending policy will halt private loans for some students nationwide, most experts say the changes are unlikely to affect Penn students.
Sallie Mae, which has about 10 million customers enrolled in a variety of publicly and privately funded loan programs, announced on Jan. 28 that it would no longer extend private loans to schools with poor graduation rates and students with below-prime credit scores.
The company will continue to offer public loans - loans supported through federal subsidies - and standard private loans for students with credit scores in the normal range.
Sallie Mae spokeswoman Martha Holler said the decision was made "because the nonstandard loans . are defaulting at a higher rate" than other loans.
She added that the loans' elimination would not affect Penn students because the University has a high graduation rate and most students with private loans have parental co-signers.
Bill Schilling, Penn's director of student aid, said it's probable that some students at the University, likely graduate students, have taken out non-standard private loans.
However, Schilling said Penn would be largely unaffected by Sallie Mae's policy change.
"If a lender is going to make a decision not to offer their private product at a given school, it's not going to be schools like Penn," he said.
Tony Pals, spokesman for the National Association of Independent Colleges and Universities, agreed, saying that "because of Penn's generous student aid policies, it's much less likely to have an effect there."
Pals added that Sallie Mae's changes would be more likely to affect schools with higher percentages of low-income students, such as for-profit colleges.
Sallie Mae's announcement comes at a critical time in the student-loan industry. Sallie Mae lost $1.6 billion in the fourth quarter of 2007 and its stock fell 59 percent over the past year. Federal subsidies to student lenders were also cut by Congress last year, and ripples from the sub-prime mortgage bottom-out this past summer are still being felt throughout the economy.
Experts are split on what Sallie Mae's recent announcement means for the industry.
Sallie Mae's decision is "a sign that the system has realized that making loans to people who can't afford to repay them doesn't make sense," said Luke Swarthout, a higher-education lobbyist at the United States Public Interest Research Group.
He added that this decision is "driven by the realization that the subprime model . is very flawed," adding that the loans no longer being offered by Sallie Mae were often offered in a predatory way to vulnerable students.
Still, Pals said, "it's also very disappointing. These are loans that many students rely on to achieve their dream."
