Daily Aid 30: State of the student loan industry

Student Financial Aid News

From NASFAA and the Chronicle:

“This year’s growth in the Education Department’s direct-lending system could be replicated in 2009, possibly leaving the now-dominant bank-based system as the minority supplier of federal student-loan money by next fall, according to findings from a new survey of colleges,” The Chronicle of Higher Education reports. “The Web-based poll of 416 college financial-aid directors last week by Student Lending Analytics found that 6 percent of those currently using the bank-based system plan to switch to direct lending next academic year, and 29 percent are considering making that change. At the same time, the Education Department on Monday issued new statistical data detailing an increase in direct lending this year. Larry Zaglaniczny, vice president for governmental affairs at the National Association of Student Financial Aid Administrators, agreed that colleges will continue to flock to the direct-lending system if the Bush administration doesn’t quickly come through with additional aid for private student lenders.”

Commentary

The lending system is still not functioning anywhere close to optimal – a quick check of several major popular stocks in the student loan industry indicates that investors don’t believe the student loan industry has freed itself from the broader market dynamics. Here’s a chart of Sallie Mae (SLM), MRU Holdings (MRU), Nelnet (NNI), Student Loan Corp (STU), and First Marblehead (FMD):

The declines range from 81% for bellwether SLM to 96% for FMD. This is obviously not the picture of health for any industry, but especially financial services.

What does this mean for you? Come this December or January, when you’re applying for spring semester funding, federal student loans at your school such as the Stafford Loan may be through the Department of Education directly if your school changes over. This means that when you graduate, you’ll need to consider student loan consolidation to bring together multiple lenders into one payment later. The above stock chart also indicates that private student loans may still be difficult to obtain as well. Here at the Student Loan Network, we’ll do our best to help you, but be prepared for a general lack of availability of private student loans.

Be hunting for scholarships all the time, without exception. There are still plenty of scholarships out there and more opening up every day, like today’s featured scholarship. Be aggressive, be persistent, and be willing to work hard, and you’ll find the money you need for your education.

Scholarship Update

The MEFA 5th Annual Art Competition. Over $20,000 will be awarded via MEFA U.Fund College Investing Plans for winning students’ entries that best depict what they want to be when they graduate college.

In addition to the student contest winners, private, public and charter schools in Massachusetts will have an opportunity to win $500, $300 and $100 gift cards for school supplies. The winning schools will be selected based upon the highest percentage of eligible students who enter from each grade level.

Massachusetts students in grades 3, 4 and 5 have until 5:00 p.m. on November 21, 2008 to submit their artwork. First, second and third place prizes will be awarded in each grade level and winners will receive $5,000, $2,000 and $1,000 respectively.

Details at our free college scholarship search site.