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Student loan provider suspends loans to first-time borrowers




The Kentucky Higher Education Student Loan Corporation (also known as The Student Loan People) will suspend making loans to first-time borrowers beginning May 1. It will continue to make loans for serial (or previous) borrowers. This decision is a result of the capital market crisis.

The Student Loan People, along with other FFELP providers across the country, have traditionally issued bonds, taxable and tax-exempt, in the form of auction rate securities to finance student loans. Now the credit crisis has essentially closed the auction rate securities market, leaving The Student Loan People and other lenders searching for a new student loan financing method.

The Student Loan People has requested that the Federal Financing Bank provide liquidity and capital for new student loans as a temporary measure until confidence is restored in the market. The Student Loan People’s bonds are AAA rated.

KHEAA will pay the 1 percent default fee on students’ loans beginning May 1 to encourage lenders to continue to make loans available in Kentucky. In the event funding cannot be secured, KHEAA will assist borrowers in securing loans from other lenders.

Nearly all Kentucky postsecondary schools participate in FFELP, and The Student Loan People provides a significant percentage of FFELP Stafford and PLUS Loans made in the Commonwealth.

The Student Loan People was created by the state legislature in 1978 with to make higher education more accessible for Kentuckians by making, financing and purchasing student loans.


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