A nonprofit lending authority that issued $510 million in loans last year to college-bound students in Massachusetts said Monday that turmoil in the capital markets had crushed its ability to provide any loans this fall.
If you were depending on a loan from the Massachusetts Educational Financing Authority to help pay for college this fall, you might want to find another lender fast.
The nonprofit lending authority, which issued $510 million in loans last year to college-bound students in Massachusetts, says that turmoil in the capital markets crushed its ability to provide any loans this year.
The announcement comes just weeks before fall tuition bills are due and could put a strain on thousands of students and families. The authority said it was notifying 40,000 recent borrowers that it has been unable to secure funding for its private, fixed-interest loans. It said it would continue to hunt for financing options.
“To ensure that you are able to pay your current semester costs on time, we encourage you to work with your college or university to understand all other available financing options,” Thomas G. Murphy, MEFA director of loan programs and operations, advised students in a letter Monday.
The authority in April broke the news that it was halting its federal loan programs for the year. It said it had worked unsuccessfully to secure funding in a market disrupted by a credit crunch and liquidity problems.
The wider student loan market has struggled in recent months in the wake of the subprime mortgage crisis of late last year.
Janet Gumbris, director of the financial aid office at Bridgewater State College, said the timing of MEFA’s announcement is unfortunate.
“It’s getting late, the bills are out, students need to come up with the financing to come back to school,” she said.
Bridgewater students have until Aug. 18 to pay for fall semester, about $7,500 for tuition, fees, room and board. Last school year, Gumbris said 400 students there applied for private loans through MEFA.
Gumbris called it a first in her 16 years as an administrator to watch a giant lending authority come up empty-handed. She said she expects a deluge of phone calls over the next few days and will encourage students to research other lenders the school works with, like Watchovia and SallieMae.
“It’s not like they don’t have other options here,” she said.
Over the past three decades, MEFA has lent $2.3 billion to hundreds of thousands of students and their parents in Massachusetts.
Among private lenders in Massachusetts, MEFA has a reputation for more favorable interest rates, though students gravitate toward federal loans like the Stafford Loan for even lower interest rates and generous grace periods.
“It usually has one of the more competitive rates,” Helena Skinner, head of North Quincy High School’s guidance department, said of MEFA.
Private loans accounted for 80 percent of the authority’s business last year.
Skinner said she expects students and parents will still be able to take advantage of the authority’s free financial services and seminars on how to navigate the world of student financial aid.
After its announcement Monday, the authority set up a free advice hot line for students and parents – 800-809-0571.
“In these challenging times, when college loans are less abundant and carry higher interest rates, it’s more important than ever for families to do their homework and compare the features and fine print of each loan they are considering,” MEFA’s executive director, Tom Graf, said in a written statement.
John P. Kelly may be reached at email@example.com.