For too long, bankers have gotten a free ride from the U.S. Department of Education.

Nearly half of all students who graduated last year from a California college or university owe money on student loans, and their debt burden averages $17,795.

That’s according to new data from the Institute for College Access & Success’ Project on Student Debt.

California’s average student debt is lower than the national average of $23,200, the annual report says. The national figure is up from $18,650 in 2004.

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A weakened economy that has prompted some lenders to drop out of the student loan market has resulted in the U.S. Senate considering a bill that would change some of the loan programs frequently used by students, said Financial Aid Client Services Specialist Linette McMurtrey.

An unstable economy and unreliable student loans market prompted Congress to pass the Ensuring Continued Access to Student Loans Act (ECASLA) on April 30, 2008. The bill allowed the Department of Education to purchase student loans from lenders.

The theory was the purchases would relieve the pressure on the lenders. However, lenders were still dropping out of the market, according to reports from the U.S. Department of Education.

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(Fredericksburg.com) Patrick is making her student loan payments despite the brutal labor market.

The percentage of people who are at least 90 days late on their student loan payments is significantly higher than the percentage of people behind on their mortgage payments, though the latter has received far more media attention.

The student loan delinquency rate ranges from 5.8 percent to 14.5 percent for localities in the Fredericksburg area, according to data from the Federal Reserve Bank of New York. In each area locality, that rate is higher than the seriously delinquent mortgage rate, often two, three or even four times higher.

That higher delinquency rate is partly due to the fact that student loans are unsecured credit given to people with little income and no credit history, said Patricia Nash Christel, a spokeswoman for Sallie Mae, which is the country's largest student loan lender.

Christel said Sallie Mae helped 1.4 million customers resolve their past-due status in the 2008-09 academic year. The company offers online resources to help people estimate the cost of college and the income needed to repay various levels of debt. It offers financial counseling to students while they're still in school.

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Via the Wall Street Journal:

Shares of student lenders jumped Wednesday after an analyst suggested that the industry may not immediately be pushed out of the federal loan origination business, a prospect many had feared for months.

"Although still an uphill battle, the survival of the FFELP program, we believe, is a real possibility," FBR Capital Markets analyst Matt Snowling wrote in a note to investors, referring to the Federal Family Education Loan Program, which allows private lenders to originate government-backed loans for college students. The Obama administration had proposed a plan to bypass the lenders in favor of direct lending, allowing the companies only to service the loans but not originate them.

According to Snowling, the health-care debate has delayed congressional action on the lending legislation. Because schools and students need clarity by the time the new lending season gets under way this winter, the government could be forced to reauthorize the current rules and try again for an overhaul next year. Snowling said legislation to extend the current law could be introduced in both houses as early as Wednesday.

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(Yale Daily News) While the University has resisted government urging to convert its private bank-based student loan system to one that is federally funded, legislation set to pass the Senate as early as next month may force Yale to comply.

The Student Aid and Fiscal Responsibility Act, passed by the House of Representatives in September, would require all college students to borrow directly from the government’s Direct Loans program.

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(The Indianapolis Star)  Legislation passed recently by the U. S. House of Representatives to dismantle the student loan program is an example of an unnecessary government takeover. As a Sallie Mae employee, I have witnessed private/public sector cooperative efforts that have generated significant improvements. One of the improvements has been a drop in student loan default rates (from 22.4 percent in 1992 to today's 6.7 percent), saving taxpayers billions of dollars.

There are other advantages that Sallie Mae and other industry participants offer. Having worked in financial aid offices at a number of universities, I know the myriad mind-boggling laws and regulations that dictate how financial aid programs are to be administered. For decades, organizations such as Sallie Mae have helped college financial aid administrators make sense of these regulations. Without these learning opportunities, there is no doubt that the level of service that financial aid administrators offer to students and parents would be lacking.

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OMAHA, Neb. — U.S. Sen. Mike Johanns said Thursday that his concern for Nebraska families is what's driving his opposition to legislation that would turn control of student loans over to the government — not lobbying from private student loan provider Nelnet Inc. of Lincoln.

The Nebraska Republican took umbrage with U.S. Education Secretary Arne Duncan's recent warning to colleges and universities to be ready to offer direct loans to students by next school year.

Johanns said Duncan's call is presumptuous since the bill has not yet been taken up by the Senate. The student loan reform bill did pass the U.S. House in September.

"There is dissension on both sides of the aisle relative to this proposal," said Johanns, a U.S. Agriculture Secretary under the Bush administration. "A secretary should never be getting this far out in front of the policy choice being made by the Senate and the House."

Asked if his relationship with Nelnet, one of the nation's largest student loan companies, plays a part in his opposition, Johanns said he has "little contact with them."

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(Richmond Times-Dispatch) So I take it as good news that private student loans are declining fast. According to a new report from the College Board, the amount of nonfederal education loans in 2008-09 dropped by nearly 50 percent from the previous year and fell to 13 percent of the market from 25 percent a year earlier.

SLM Corp., commonly known as Sallie Mae, recently reported a significant drop in its private lending. In its third-quarter report, Sallie Mae, the nation's largest student-loan lender, said it had originated $893 million in private education loans, a decrease from $2.1 billion for the same quarter a year ago.

The reason for this trend is obvious. The recession has broken a long-standing trend toward private loans, which generally carry higher interest rates than federally subsidized or unsubsidized loans.

Additionally, borrowers don't get the same protections or perks. For example, the government pays the interest on subsidized Stafford and Perkins loans while a student is in school.

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Via ABC News:

Most coverage of student loans focuses on the nightmares that can occur when a graduate struggles to make his monthly student loan payments. As Langen has learned the hard way, pre-payment comes with its own set of hassles.

The first question is where to begin--if at all. If you're in a position to pay off debts early, it pays to attack your costliest obligations first. With many young graduates, that means reducing credit card debt first.

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