College Financing Entity Says Education Lending to Continue

By Beacon Staff

HELENA – Montana college students received $45 million in education loans from the Montana Higher Education Student Assistance Corp. and its lending partners this fall, and the corporation says tumult in the student-loan industry will not prevent additional lending.

MHESAC posted an operating loss of $8 million for the fiscal year that ended on June 30. Because of financial conditions nationally, MHESAC’s borrowing costs were $19.7 million higher for the fiscal year, according to its audited annual financial statement.

“Thanks to prudent business practices on the part of MHESAC, it has sufficient revenue and reserves to rely upon to help it weather such a storm,” said Jim Stipcich, president and chief executive of the affiliated Student Assistance Foundation.

“Even after this turbulent year, MHESAC has a $30 million fund balance for the future,” Stipcich said.

Montanans’ demand for student loans remains strong and MHESAC will have money available for 2009-2010 loans, Stipcich said.

“We feel fine about next year,” he said.

In January, MHESAC and its partners anticipate providing up to $50 million in loans through the Federal Family Education Loan program, the program through which the $45 million was disbursed this fall. Other Montana lenders who are not partners with MHESAC are on track to provide an additional $60 million in Federal Family Education Loan money for the current academic year, according to a MHESAC news release.

Stipcich said the student loan industry’s challenges date to October 2007 when Congress passed the College Cost Reduction and Access Act. Students benefited because it lowered their borrowing costs, increased federal programs to improve college access and implemented regulations to ensure that students had more choice in selecting lenders, he said. But lenders around the country re-evaluated the education financing they had offered and some withdrew from the industry.

Disruption in national financial markets, beginning in August 2007, eventually crippled the auction bond market and compounded challenges in the student-loan arena. MHESAC had used auction bond markets as its primary financing vehicle.

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