AUGUSTA – Despite turmoil in the nation’s credit markets, Maine students’ ability to obtain education loans should not be significantly affected.

Officials from the Finance Authority of Maine and Maine Education Services who administer and monitor much of the state’s student loans said they don’t anticipate a shortage of lenders for Maine students.

“If a (student’s) credit is decent, we’ve seen no indication that funds won’t be available,” said Elizabeth Bordowitz, FAME’s acting chief executive officer.

FAME is a state agency that provides funding for federal student loans.

Other states, such as Pennsylvania and Michigan, have had their agencies stop funding federal loans for students and encouraged them to seek alternate lenders. The agencies have had trouble acquiring market-based credit due to fallout after the subprime mortgage crisis last year.

Federal loans have interest rates set by the government, currently 6.8 percent, and students generally have no trouble finding lenders willing to back those loans.

However, because the market where lenders buy credit is tightening up, the price of credit is up and some national lenders are dropping out of the industry.

Bordowitz said FAME is in a good position to keep making federal loans to Maine students because it issued bonds last June, when the market was more forgiving.

Maine students in need of private loans to supplement their federal aid are expected to feel the credit crunch the most.

“The private loan market is tightening up much more quickly than the federal loan market,” Bordowitz said. “If you have poor credit you might have a harder time getting a private loan this year than you would have last year.”

Ultimately, students who need private loans should be able to find them, but the rates will not be as good as in the past, she said.

“A year ago, any student in Maine would have had three solicitations (for private loans) in their mailbox and their e-mail box,” Bordowitz said. “That’s not going to be happening to the same extent.”

Darren Hurlburt, president of Maine Education Services, said the student loan industry is complicated and the situation right now is “unique.”

“We’re in very interesting and challenging times right now in the student loan industry on a national level and I think we’re certainly going to see some impacts in Maine,” he said.

“But I am hopeful that those impacts are not going to be as harmful as what we are seeing in other parts of the country.”

The state’s prominent private loan lender is the Maine Education Loan Authority.

Hurlburt said if the cost of credit goes up because of turmoil in the markets, then borrowers are forced to absorb some of those costs.

“Right now, we haven’t been impacted by those costs on MELA’s side, so we haven’t had to pass on any additional costs,” he said. “MELA offers one of the best private loan programs in the country, so I think Maine residents and students are fairly lucky in that regard.”

Copy the Story Link