Obamas Budget proposal includes subsidy cuts which have sent financial aid stock downward
Financial Aid firms stocks plunging!
WASHINGTON (Dow Jones)–The Obama administration would end fees paid to banks that provide loans to students, a move that would effectively end private sector student lending and save the taxpayer $47.5 billion over the next decade.
All student loans would be administered through the Education Department’s direct lending program, under the proposal included in the administration’s budget framework released Thursday.
Student loans themselves don’t generate significant earnings for banks because of the high level of defaults, so the fees paid by the government are the main incentive for lenders to take part in the program.
One of the largest players in the student loan market, SLM Corp. (SLM), saw its shares fall 25.9% as word of the proposed change filtered out Thursday morning. SLM was down $2.17 (30+%) to $5.82 a share in recent trading on the New York Stock Exchange. Nelnet (NNI) down over 50%
Based on Obama’s 2010 budget proposal, but I wonder if the student loan market can lobby out of this mess.
This is an over sell! The Govt. cant handle all of the servicing of these loans, they will need to use NNI & SLM in addition to ACS in order to handle the volume. Also, this is only a proposal, lets wait and see if it actually happens, and if it does, they may have a big opportunity in servicing.