Should Nonprofit Lenders Also Get a Government Bailout?

On Friday, September 19, 2008, the Chronicle of Higher Education reported that nonprofit student loan lenders are asking Congress for a bail-out based on terms similar to what Congress did for Fannie Mae and Freddie Mac.  Here is an excerpt from the article:

At a hearing of the House Financial Services Committee on the auction-rate securities market on Thursday, the president of Pennsylvania’s nonprofit lender {, James Preston, president of the Pennsylvania Higher Education Assistance Agency,] urged lawmakers to give the U.S. secretary of the treasury the authority to purchase securities backed by student loans.

. . .

The plea from Mr. Preston came a day after the U.S. Senate approved a one-year extension of the original rescue plan for student-loan companies, sending it to the president for a signature. . . .

But nonprofit lenders, for the most part, have not benefited from the program, because they have been unable to obtain the “bridge funding” they need to originate loans in the first place. Simply put, they don’t have the cash to make the loans that they could then sell to the department to generate the money to make more loans.

For the entire article, see “Nonprofit Lender Asks Congress for More Help to Stay Afloat” in the September 19, 2008, issue of the Chronicle of higher Education.

DAB