As Congress considers student loan reform legislation over the next several weeks, lenders continue to make decisions regarding their federal student loan business. U.S. Bank, the sixth largest FFELP lender with $2.3 billion in loan volume in 2008, contacted financial aid offices today to notify them that they would be suspending their FFELP operations beginning on September 25, 2009. In addition, it appears that the school channel sales organization at U.S. Bank has undergone a major restructuring.
Here are some additional details about the suspension date of September 25, 2009:
- Loans have to certified, guaranteed and ready to disburse by that date
- All disbursements that pertain to those loans must occur by 09/15/2010
Based on the information that I have, It would appear that by setting a suspension date after most fall disbursements have occurred, U.S. Bank hopes to capture 2009-10 volume while at the same time winding down their federal student loan operations. The Obama Administration's proposal would move all federal student loans to the Direct Lending origination and servicing platform in 2010. The question is whether schools will continue to keep U.S. Bank on their federal lender lists knowing about this incipient suspension of operations. In terms of student loan operations, U.S. Bank outsources servicing to ACS for the bulk of their federal loan servicing operations, based on an earlier SLA Blog post. As for other lenders, the SLA Blog posted earlier examples of smaller lenders who had recently suspended operations.
I will post the U.S. Bank announcement when it becomes available.
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