Student loan stocks mixed amid broader rally

Shares of student loan lenders and originators were mixed Friday even after a government plan to rescue the banking sector sent the broader markets surging on confidence that the credit markets will open up, allowing lenders to boost business.

The rescue plan would see the government buy, probably at auction, all of the bad mortgage loans that are clogging banks' balance sheets and spooking lenders from doing business with virtually any party because there is little transparency on which companies are affected and to what extent.

Partners LP Michael Taiano also noted that last night, the Senate voted in favor of the House bill voted on earlier this week to extend a government credit facility and put option for new Federal Family Education Loan Program (FFELP) loan originations by one year, effectively providing financing for FFELP loans originated for the 2009/2010 academic year.

SLM Corp., better known as Sallie Mae, surged 29 percent to $15.90, moving well above its 12-month low of $10 that it touched Thursday. It remains 70 percent off its high in the past year. Student Loan Corp. rose $9.50, or 10 percent, to $104.33.

First Marblehead Corp. initially gained in early trading, but gave up 6 percent to $3.52 by afternoon. While the stock has rebounded since the credit crisis almost forced the company it out of business last year, but shares are still down more than 80 percent this year.

First Marblehead, for example, had trouble selling packages of student loans that it initiated because investors were leery of buying any debt. That took away a large part of the company's business. It differs from Sallie Mae because it does not lend money itself and instead collects fees for processing loans.

Nelnet Inc. also rose sharply at the market open was has since retreated 15 cents to $15.10.

Getting a student loan, Is more challenging

Rising tuition fees, coupled with the weak economy, makes it tough for anyone to afford college.

According to the College Board, the average annual bill to live and attend school full time at a four year private institution was more than $32,000 last year. That is $13,000 more than it was just ten years ago.

Nationally, 8.9 million students filed for aid during the first half of 2008. That is a 16.3 percent increase from last year.

The chaos in the financial markets has driven many lenders out of the student loan business altogether, leaving students looking for help wherever they can get it.

College life comes at a cost. Student, Koedy Brant told Action News, "I don't have enough money to pay for my college. I got thousands of dollars in scholarships and Cal grants and federal aid, but it was still not even close to being enough." That is why many college students apply for loans. But these days getting a loan is getting tougher.

"I'm in the process now. It's a long process to get the loan," said student Aileen Carroll. Some institutions have had trouble finding an on-going source of funding for student loans. "That market is the same market that funds our home mortgages and the other sources that have had some difficulty in the last few months," said Cal Poly Director of Financial Aid Lois Kelly.

Those same issues are having an adverse effect on student loan programs. Kelly adds, "What they are finding is that some of the lenders they might have used in the past no longer have the funding source, and so they can't lend to the students."

The student can choose to get a loan from another lender, but that creates another problem. Kelly goes on to say, "Now they have the potential complication of owing two different lenders, needing to be certain that they consolidate the loans so that in the future they won't have to make two separate repayments."

Financial advisors at Cal Poly told Action News there are loans available. Students just need to come in and speak with someone about what is best for them. Advisors encourage any student who needs help paying their tuition to stop by the Financial Aid department. Most everyone qualifies for a student loan.

Corrections Officer Pleads Guilty In Student Loan Scam

A Warren County corrections officer admitted to her role Tuesday in a student loan scam.

Linda Abshear, of Lebanon, pleaded guilty to grand theft, forgery and telecommunications fraud, and a judge sentenced her to two years in prison.

Prosecutors said Abshear played an instrumental role in obtaining more than $100,000 in student loans from Sinclair College for herself and two other people.
Amanda Johnson, 25, of Lebanon, and Charles Caudill, 21, of Waynesville, were indicted with Abshear in June on a variety of charges.

Prosecutors said the three never attended the school, but instead spent the student loan funds on a new car and other items.