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| Mon, Oct. 13, 2008 |  |
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Federal loan program good for Arkansas, official says Thursday, May 22, 2008 By Aaron Sadler Stephens Washington Bureau WASHINGTON - The head of the Arkansas Student Loan Authority applauded on Wednesday a federal government plan that he said will stabilize the student loan market and keep financing available for Arkansas borrowers this year. The authority's executive director, Tony Williams, said the plan will ease the impact of a credit crisis that left many lenders unwilling to participate in the federal student loan program. U.S. Education Secretary Margaret Spellings, in a letter to lending companies, said the federal government will buy some loans for the coming school year. This gives lenders the capital to issue new loans. The federal plan also offers protection to lenders against losses on loans provided for the 2008-09 school year. It doubles the amount of money available for the Education Department to directly lend to borrowers. "We think this will provide some stability to the program overall and alleviate some concerns from students who think they may not be able to borrow money this year," Williams said in a telephone interview. The Arkansas Student Loan Authority last month received an $80 million line of credit from the state in order to secure enough financing for this year. The authority depends largely on the bond market for its funding, but the subprime mortgage crisis has investors skittish and the agency is having trouble closing deals for bonds. With more lending institutions refusing to participate in the student loan program, Williams said his agency needed the help. The state agency makes loans to students and also buys loans from other lenders. "We've seen more banks leave the program or scale back their loan participation," Williams said. "I think the $80 million is needed now more than ever." Banks are especially hard-hit, Williams said, because like his agency, banks have had trouble obtaining money in the bond market. They lose access to capital, as well, when secondary markets like his agency can't afford to buy up loans. |
