Are there any other factors contributing to loan companies exiting the federal loan program?
Until recently, most federal borrowers had interest rates on their loans that would adjust each year. In 2002 to 2005, interest rates were at historic lows, and federal rules allowed borrowers to lock in those rates by taking out a federal consolidation loan. (The government still pays the lender the higher rate as interest rates in the economy increase). A number of student loan companies were created or grew quickly in those years to take advantage of the billions of dollars of consolidations that were occurring because of the low rates. However, since July 1, 2006, rates on new federal loans have been fixed, so the market for consolidation loans is drying up. In addition, federal subsidies to lenders making consolidation loans were reduced last fall (subsidies on other federal loans were also reduced, but not by as much). Some of the lenders that have announced they will end or reduce their participation in the federal student loan program had a major focus in the consolidation mark
Related Questions
- I am planning to attend a college that participates in the Federal Direct Loan Program. Do I have to borrow a Federal Direct Loan , or can I borrow a FFELP loan through a local lender?
- Are there any other factors contributing to loan companies exiting the federal loan program?
- When does the Federal Direct Loan Program begin for Keystone College?
