The action is intended to address a crisis in the market that has forced Citigroup Inc.'s Student Loan Corp., SLM Corp. and about 50 other lenders to stop writing some forms of student loans. The companies cite increased borrowing costs, cuts in government subsidies for education loans and a lack of investor interest in securities backed by loans.
Without government action, demand for federally backed student loans would outstrip supply, industry officials said. About 7 million borrowers will need more than $68 billion in federal loans this academic year, according to Education Department estimates
They claim the issue is a lack of subsidies:
Congress passed and President George W. Bush signed into law in September legislation that cut federal subsidies to student lenders by $20.9 billion over five years