Student loan field takes defense
Kevin Zelaya
Issue date: 3/5/08 Section: News
Munier described the housing crisis as a "cash shortage," and said it was brought on by banks who issued riskier loans and banks and home buyers who assumed housing prices would continue to increase.
Banks were confident prices would boom, so some became less demanding of 10 percent down payments and on-time payments because they assumed housing values would cover costs if a buyer was unable to keep paying for a house, Munier said.
That's exactly what's happening now, Munier said - people are walking away from their homes, but not because they can't afford them. But because decreasing house values have made homes worth less than the money loan buyers take out to pay for it.
Lincoln-based student lender, Nelnet, announced it would become more selective in its loan practices, suspend loan consolidation offerings and cut 300 jobs as a way to offset lower subsidy payments on loans from the government and the effects of the housing crisis.
Mike Dunlap, Nelnet's chief executive, said in a news release his company's diversified services and abundant cash reserves would give the company advantages over other lenders who are also riding out the loan crunch.
Dunlap did admit the housing crisis had caught him off guard.
"The ongoing turmoil in the credit markets is much worse than we anticipated and the duration of this disruption is unknown," he said.
Michael Dannenberg, director of the education policy program for the New America Foundation, a nonpartisan think tank investigating the student loan crunch, said the media had merged private student loans and federal student loans' susceptibility to the housing crisis, noting federal loan recipients won't be affected.
He scolded the press for creating a sense of fear.
"The bigger danger is that the fear, if not panic, could depress college access for students who think they can't get a loan," Dannenberg said.
Last month, Rep. George Miller of California and Sen. Edward Kennedy of Massachusetts coauthored a letter sent to Secretary of Education Margaret Spellings and urged the department to prepare for an unanticipated increase in demand for direct loans from the government.
kevinzelaya@dailynebraskan.com
Banks were confident prices would boom, so some became less demanding of 10 percent down payments and on-time payments because they assumed housing values would cover costs if a buyer was unable to keep paying for a house, Munier said.
That's exactly what's happening now, Munier said - people are walking away from their homes, but not because they can't afford them. But because decreasing house values have made homes worth less than the money loan buyers take out to pay for it.
Lincoln-based student lender, Nelnet, announced it would become more selective in its loan practices, suspend loan consolidation offerings and cut 300 jobs as a way to offset lower subsidy payments on loans from the government and the effects of the housing crisis.
Mike Dunlap, Nelnet's chief executive, said in a news release his company's diversified services and abundant cash reserves would give the company advantages over other lenders who are also riding out the loan crunch.
Dunlap did admit the housing crisis had caught him off guard.
"The ongoing turmoil in the credit markets is much worse than we anticipated and the duration of this disruption is unknown," he said.
Michael Dannenberg, director of the education policy program for the New America Foundation, a nonpartisan think tank investigating the student loan crunch, said the media had merged private student loans and federal student loans' susceptibility to the housing crisis, noting federal loan recipients won't be affected.
He scolded the press for creating a sense of fear.
"The bigger danger is that the fear, if not panic, could depress college access for students who think they can't get a loan," Dannenberg said.
Last month, Rep. George Miller of California and Sen. Edward Kennedy of Massachusetts coauthored a letter sent to Secretary of Education Margaret Spellings and urged the department to prepare for an unanticipated increase in demand for direct loans from the government.
kevinzelaya@dailynebraskan.com
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