Although loans are getting harder to come by, college students in Utah seeking help with rising costs can still safely get money from the state that will be backed by the federal government.
Thursday, members of the Utah Higher Education Assistance Authority board of directors authorized implementation of the U.S. Department of Education's Liquidity Plan for Student Loans, which allows states with money to offer loans and then turn the liability over to the government through the next year.
"This plan allows us to put our loans to the secretary of education while making loans with our own funds," said Steve Feitz, UHEAA's executive director.
The option, which comes in reaction to continuing turmoil in the credit markets, is beneficial to students in Utah as UHEAA still has the funds to offer. Feitz believes applications, totalling anywhere from $50 million to $200 million, will start pouring into his office now that they've announced the option for assistance.
The Department of Education has opted to purchase loans made in participating states using the Federal Family and Education Loan program, which then allows states to again free up the money used for the student loans.
The loans are limited by federal maximums, but UHEAA can give out $121 million over the upcoming academic year.
"We're fortunate here in Utah that we've got the funding to meet the growing demands of students trying to pay for school," Feitz said Friday. He said if students are unable to find a cooperative lender, UHEAA will be able to write a loan directly to the student.
The news, he said, is good given that other states are having to shut down their UHEAA equivalents due to the lack of available monies and the current state of the financial aid market.
The U.S. Department of Education's Liquidity Plan is only authorized for one year of use and comes with an added urgency to encourage Congress to stabilize the student-lending system for future lending options to remain available.
"It's not a permanent solution," Feitz said. "More definitely needs to be done."
UHEAA board members also put a cap on issuing consolidation loans to free up more money for students in school now. Students currently repaying past loans continue to have consolidation options through the federal program.
With banks having few incentives left to loan money to students, Feitz said fewer institutions are even offering student assistance. The process remains the same through UHEAA's program."Business is as usual, we're employing all the same methods to obtain a loan," he said. The participation in the Department of Education's emergency plan allows UHEAA to continue having access to capital for the issuance of student loans.