College Loan Corporation (CLC) has been notifying financial aid administrators that they will no longer be making alternative loans. An SLA analysis of private lender lists at over 700 schools found that CLC appeared on 10% of the lists (SLA will be providing a summary of the results of this analysis next week). CLC indicated that loans currently in the pipeline will be canceled. CLC is hoping to receive funding "sometime within the next 2-3 weeks to 2 months" which will not do much to help students with their fall semester bills.
When I went to the College Loan Corporation site and applied for a private loan, I got this message. CLC customer service representatives contacted this afternoon indicated that "our systems are down" and that they could not provide any additional information about private loans. I will provide further updates as they become available.
Wall Street Journal broke the story about 7 hours after the original post. Here is an excerpt from their story: "In a letter addressed to college financial aid officers, College Loan Corp.'s chief executive, Cary Katz, says the company will "cease all private loan disbursements effective immediately" because it lost its funding."
Background on College Loan Corporation
- 7th largest FFEL lender for FY2007 with $1.493 billion in new guarantees
- Stopped making federal loans on March 1, 2008
- Laid off 70% of staff earlier this year, according to San Diego Business Journal
- Announced in January 2008 that they would no longer lend to Corinthian College. Strength in lending to proprietary schools.
- Released its Private Loan Principles in press release in March 2008
- Shut down subsidiary, Student Capital Corporation, which was established in 2005 to focus on providing private loans
- Announced in July 2008 a plan to repurchase auction rate securities
- Completed $1.5 billion securitization of FFEL loans in November 2007. Did not appear to securitize private loans.
Update 3: WSJ reported today in their print version two new pieces of information regarding the CLC decision to stop disbursing private loans. First, a spokesperson indicated that about 9,000 students would be affected by their actions (at least 1,000 of them hit our website yesterday looking for information on other private loan options. Second, this spokesperson indicated that Citibank was the NY bank that had canceled CLC's financing. Based on SLA estimates, Citibank was the second largest private lender in 2007 with originations of $1.8 billion.
(Update 2 provides background on College Loan Corporation with Update 1 including information regarding calls to the customer service representatives)