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11/06/2008

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What about MEFA (Massachusetts Education Finance Authority) - 40,000 loans (est. $400 million?) last year and no funding for this year. Mohela (Missouri) is another that comes to mind. These are one small organizations in each state, but the problem is national. I think your estimates are very low.

The other factor is approval rates. Even banks who have money are lending to a much smaller percentage of applicants - focusing on quality. FICO requirements are much stricter and the approved school lists have shrunk. My estimates are that 50% of people who got a loan last year won't have access to private loan funding this year.

Thanks for your comment and for pointing out this issue. I chose not to include state agencies that make private loans of which MEFA is one of the largest. At $350 Million, NJCLASS is another large state program which was able to get funding recently. The 2007 College Board Trends in Student Aid indicates that state sponsored federal loans accounted for $1.4 billion, which is about 7.6% of all private loans. Assuming that 2/3 of the volume in this category goes away would increase my estimate by another $1 Billion of lost private loan volume. Thanks again for your comment.

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