2008 Woodie Awards
Loans are on hold for students
Cassie Stone
Issue date: 8/27/08 Section: News
The credit crisis has trickled down to student lending.
The Student Loan People, Kentucky's largest private, non-profit student loan provider, was originally going to run out of funds to supply students with loans, its president announced Aug. 14.
The company notified colleges and universities last week that they would not be disbursing funds until the week of Aug. 25, according to an e-mail sent by the University.
Students who rely on these loans to pay their tuition will not be penalized for late payment and will receive a book voucher.
However, Kentucky Gov. Steven Beshear announced Aug. 15 that the Commonwealth will be purchasing $50 million to bail out the corporation.
"This is a very innovative approach, and an innovative solution to a difficult problem," Beshear said, according to the Associated Press. "It's a solution that many other states have not found."
The corporation will distribute the money to 110,000 students around Kentucky.
"It's a problem to which we did not contribute, but it is a problem to which we are a victim," Cunningham said. "This $50 million in financing will enable The Student Loan People to meet the needs of all Kentucky students and their families."
According to the Continued Access to Student Loans Act of 2008, lenders must first secure short-term funding before the U.S. Department of Education will reimburse them for federal loans.
Lenders like The Student Loan People maintained lines of credit with banks who loaned them capital to fund federal student loans. The loans were then re-sold and packaged as securities for investors.
Lenders used the funds from the sale of the loans to pay down their credit lines with banks..
The Associated Press contributed to this story.
The Student Loan People, Kentucky's largest private, non-profit student loan provider, was originally going to run out of funds to supply students with loans, its president announced Aug. 14.
The company notified colleges and universities last week that they would not be disbursing funds until the week of Aug. 25, according to an e-mail sent by the University.
Students who rely on these loans to pay their tuition will not be penalized for late payment and will receive a book voucher.
However, Kentucky Gov. Steven Beshear announced Aug. 15 that the Commonwealth will be purchasing $50 million to bail out the corporation.
"This is a very innovative approach, and an innovative solution to a difficult problem," Beshear said, according to the Associated Press. "It's a solution that many other states have not found."
The corporation will distribute the money to 110,000 students around Kentucky.
"It's a problem to which we did not contribute, but it is a problem to which we are a victim," Cunningham said. "This $50 million in financing will enable The Student Loan People to meet the needs of all Kentucky students and their families."
According to the Continued Access to Student Loans Act of 2008, lenders must first secure short-term funding before the U.S. Department of Education will reimburse them for federal loans.
Lenders like The Student Loan People maintained lines of credit with banks who loaned them capital to fund federal student loans. The loans were then re-sold and packaged as securities for investors.
Lenders used the funds from the sale of the loans to pay down their credit lines with banks..
The Associated Press contributed to this story.
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