Apr 16, 2008 8:18 am US/Eastern
MEFA Suspends Federal Student Loan Program
BOSTON (WBZ) ―
The nonprofit agency that provides college loans to thousands of Massachusetts students is suspending all federally guaranteed student loans effective July 1.
The Massachusetts Educational Financing Authority (MEFA) says the mortgage crisis and a series of federal changes have made it difficult for them to secure funds for its federal education loan programs. "The unprecedented disruption in the capital markets, coupled with federal changes has prevented MEFA from securing funds for its federal education loan programs."
MEFA made federal loans available to 1,500 students in the current school year.
Executive Director Tom Graf says MEFA will not accept any new Federal Consolidation applications, urging parents and students to make alternative plans for the fall 2008 semester.
Graf says private lenders are expected to take up the federal loans, which accounted for 20 percent of loans worth $500 million provided to students in Massachusetts this year.
Judy Keys, financial advisor at UMass Boston says there are other options. "My advice would be to contact the financial aid office of the school they're attending to find out what's your other alternatives are. There are many, many lenders – over 2,500 lenders that I'm aware of – that are still participating in the program. So there should be other options for students and families."
The financing crisis has led more than 50 student lenders to stop making federally guaranteed student loans nationwide, either temporarily or permanently. Congress is being pressed to help the distressed market.
State agencies in Iowa, Michigan, Montana and Pennsylvania have suspended college loan programs.
According to the Globe, MEFA has about $300 million in federal loans on its books, including Stafford and Plus loans, out of a total $1.5 billion.
The other $1.2 billion are private loans, which the company says they should be able to continue.
(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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