SPOKANE, Wash. — Pointing to changes in new federal rate-cutting rules and lowering of the guarantee, the $1 billion Spokane Teachers Credit Union is getting out of the student loan business effective this fall.
"I can't say for sure how many there are but any number of banks and credit unions in Washington State and elsewhere are doing the same" in exiting the market, said Steven Dahlstrom, president/CEO.
He said the government has been ballyhooing the credit crunch and home mortgage mess as factors behind the pullout but in reality, said Dahlstrom, current conditions are the result of continued moves by the U.S. Department of Education to fund more student loans while at the same driving out lenders.
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STCU, one of the largest student lenders in the state and with a portfolio of $9.2 million last year down from $13.6 in 2005, has already notified area colleges of the decision, and they have begun looking for other lenders. College officials in eastern Washington have called the STCU action unfortunate and would be soliciting other financial instructions, noting also students' ability to obtain loans would not be greatly impacted this year.
Dahlstrom noted that rates on two major loan programs will be ratcheted down to 3.4% by 2011 with the current rate at 6.8%. He said also the former 100% guarantee has already been lowered to 98% and will be reset again at 95%, all of which are factors negating STCU loan participation.
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