Trying to get a loan? It could get harder

Some student-loan lenders are cutting back or have stopped offering federal loans to students, but members of the U.S. Congress have recently stepped in to try to help.

Major reasons the student-loan industry is suffering include market pressure on lenders and cuts in subsidies from Congress.

A recent letter from members of Congress to the U.S. Secretaries of Education and the Treasury asked them to help stabilize the student-loan market and make sure that students have access to federal loans in light of economic problems facing lenders.

"We urge you to work without delay within your organizations and with appropriate federal financial institutions and overseers to address this problem before it significantly decreases access to higher-education opportunities for students and their families," the letter stated.

One reason lenders are having difficulty providing federal loans to students is because the companies are suffering from a credit crunch.

That credit crunch is largely the result of a sub-prime mortgage crisis that has occurred over the past year as banks gave out mortgages with low interest rates to borrowers with poor credit ratings.

Partially as a result, said Bob Murray, a spokesman for USA Funds, a company that guarantees student loans, lenders are more reluctant to give out loans.

A second cause for problems in the student-loan industry has been cuts in the subsidies Congress provides to lenders. This past fall, Congress cut about $20 billion in subsidies over five years for creditors and loan guarantors, Murray said.

The interest rates students pay on federal loans are lower than the market rates, so in the past Congress has provided lenders with money to fill the gap.

But according to the letter from Congress members, these subsidies "have become uneconomical in the current environment." Murray said students should be OK for the remainder of the academic year but it could be harder to get loans for the next school year.

Wharton sophomore Greg Dabrowski said he supports Congress's decision to try to increase access to loans because "it would really benefit students who need them to go to school."

Education Department spokeswoman Casey Ruberg said the department has received the letter and is currently in the process of reviewing it.

Neither the Education nor the Treasury department has issued a response yet to the letter, though Ruberg said the Education Department will respond. The Treasury Department did not respond to a request for comment.

The student loan companies College Loan Corporation and Sallie Mae, both of which have reduced their loan offerings, did not return requests for comment.

Please note All comments are eligible for publication in The Daily Pennsylvanian.