The student loan manufactures faces many challenges. Lately, Federal subsidies have been cut back. This means that fellowships offering Federal student loans are no longer looking a profit. Administering Federal student loans is no longer a viable selection for most banks and other institutions. If they can only lose money by offering Federal student loans, then why should they offer them?
Many banks and institutions complain not only of the lack of subsidy money from the government, but also about the credit crisis. Subprime mortgage lending has run many banks into the ground. Habitancy are defaulting more than ever on home mortgages and costing the banks an arm and a leg. The rates have been affected all around. credit is sometimes only being offered to only the best candidates and at a prime rate. Variable rates may be bound to skyrocket and many Habitancy will just be turned down.
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Federal student Loans Suspended?
Luckily, Congress just passed a bill to increase Federal student aid. This should increase the amount of money available to students, but it could be harder to find. The government subsidy money paid to financial institutions for administering Federal student loans has been significantly reduced. The subsidies had to be reduced in order for the government to have the money to lend, but the effect is that many institutions can no longer afford to administer Federal student loans. The subsidies have not been taken away all together, only reduced. This was done to eliminate the taxpayer funded inflated profit being made by the lending institutions.
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