Released: August 28, 2007

Pressure mounts on student loans

Source: Kevin Drawbaugh, Reuters

The multibillion-dollar market for securitized student loan debt faces new stresses as Congress moves to reshape the troubled student loan industry.

With concern over the subprime crisis shaking up the credit markets, financial industry groups said Monday that several new student loan financings have been put on hold, and loan financing costs are up.

The groups pleaded for moderation as lawmakers begin talks, expected to start next week, on finalizing and sending a package of reforms to President Bush that follows months of scandals involving kickback schemes and conflicts of interest among lenders and college officials. The reforms’ biggest impact is likely to come from proposed cuts in subsidies paid by the government to lenders of federally guaranteed student loans, such as Wall Street titans JPMorgan Chase, Bank of America and Citigroup, as well as Sallie Mae.

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