Student Loans

President Obama's proposal for direct government funding of student loans -- cutting out private industry -- sent shares of Sallie Mae, Student Loan Corp., Nelnet Inc. and other college loan companies plunging Thursday. For-profit vocational schools, such as Corinthian Colleges Inc., DeVry Inc. and ITT Educational Services Inc., also saw their stock prices drop. Their students often rely on government-backed loans from private lenders.

A $25-billion collapsed buyout offer and higher borrowing costs have prompted Sallie Mae, the nation's largest student lender, to lay off about 3% of its workforce nationwide. The embattled SLM Corp. said Friday that it would slash 350 jobs from a staff of 11,000 to help cut costs 20% by 2010. "The tightening credit markets have made our costs higher," spokesman Tom Joyce said. The company lost $344 million in its latest reported quarterly results and said additional layoffs were likely.

Shares of Corinthian Colleges Inc. plunged Tuesday after the operator of career training schools said Sallie Mae and two other lenders halted private loans for students with higher credit risks. High risk, or sub-prime, loans accounted for about 75% of Corinthian's student loan portfolio in the fiscal year ended June 30, the Santa Ana-based company said in a regulatory filing. Corinthian's stock suffered its biggest drop in more than three years on the news, falling $3.34, or almost 31%, to $7.

In a bid to keep the global credit crunch from cutting into financial aid for college students, the House overwhelmingly approved a bill Thursday to expand access to federally backed loans. The measure would give the Education Department temporary authority to buy existing student loans at a discount to give lenders more cash for new loans.

If you're facing years of student loan payments but aren't making much money because you're working in public service, the federal government has some good news for you. A law that takes effect Tuesday could allow you to have some of your college debt forgiven.

Going to college became more affordable this month for millions of lower-income students, thanks to changes to two major financial aid programs. The revisions, spurred by a federal law called the College Cost Reduction and Access Act, include higher maximum amounts for federal grants as well as lower interest rates on some newly written government-guaranteed loans. "This is a big, big improvement in the status of the lowest-income students," Rep.

Student advocacy groups are urging the Treasury Department to prevent a new $200-billion consumer-lending program from benefiting private student lenders, which they say are largely unregulated and prey on students with risky, high-interest loans. The program, announced this week and developed by the Treasury and Federal Reserve, is not aimed specifically at the student loan market.

Natalie Hickey left her small hometown in Ohio six years ago and aimed her beat-up Dodge Intrepid for the West Coast. Four years later, she realized a long-held dream and graduated with a bachelor's degree in photography from Brooks Institute in Santa Barbara. She also picked up $140,000 in student debt, some of it at interest rates as high as 18%. Her monthly payments are roughly $1,700, more than her rent and car payment combined.

With fanfare and substantial bipartisan support, the House delivered Wednesday on the fifth of six bills that Democrats had vowed to quickly pass, voting overwhelmingly to cut the interest rate on some college student loans. The bill, however, was much scaled back from House Speaker Nancy Pelosi's campaign promise to cut all student loans in half. Instead, the House measure, passed 356 to 71, applies to the 5.

New York Atty. Gen. Andrew Cuomo said Thursday that his office has expanded a probe of whether lenders are using payments and perks to encourage colleges to steer student borrowers their way. The office began a preliminary inquiry in November, requesting information from student lenders Nelnet Inc., Education Finance Partners, Educap and Sallie Mae, the largest provider of student loans in the United States.