MEFA suspends college loans, hundreds of families affected

Trying financial times just got worse for college students and their families as the Massachusetts Educational Financing Authority (MEFA) announced that it will not offer personal college loans for the fall semester due to a lack of federal funding.MEFA Executive Director Thomas Graf said in a statement that “disruptions in the capital market” have made the process of securing funding for the 2008-09 academic year more challenging, forcing the non-profit lending organization to pull the plug on loans for the upcoming semester.MEFA, the largest loan issuer in the state, issued 40,000 loans to college students and their families last year. In anticipation of a possible financial crunch, the organization suspended all loan applications in April to prevent burying families who were counting on funding for next year.Salem State College Director of Financial Aid Mary Benda has been handling damage control over the past few days, taking calls from concerned parents who are not sure where to turn for funding with school just a few weeks away.She is advising parents to look for other federal loans, specifically the federal Parent Plus Loan, or the federal unsubsidized Stafford Loan. In the wake of the MEFA announcement, Stafford agreed to raise their loan cap by an additional $2,000 per student.”We are getting a lot of calls asking us what to do, it is a lot of work for us,” she said. “This really does affect a number of our students.”Benda said MEFA issued over $2.5 million in loan payments to 316 families last year at SSC, and credited the organization with being one of the top, most reliable lenders that her office deals with.Because the company suspended new loans in April, which officially went into effect July 1, there are not any families who expected to get money this fall, but there are a few who waited to see if MEFA would lift the suspension.”MEFA is really a very good lender and I hope they are able to get capital funding in the future,” she said. “We did have parents who were waiting to see what MEFA would do. We are hoping that we can be in the program again in the spring semester.”Benda says families should look into federal loans first, because it is a capped industry and they will receive a fixed rate each year. She said the federal government has already promised that it would have enough funding to take care of student loans this year.Other alternatives do include private loans and student alternative loans, in which the student takes out the loan in his or her own name with a cosigner.Student alternative loans are becoming more difficult to get because lenders are more wary of borrowers with bad credit as the economy continues to tumble.MEFA is offering families a free telephone hotline to help with borrowing questions and Graf has vowed to work tirelessly to secure funding for future loans.”Though the unprecedented and continuing disruptions in the capital market are creating new and significant challenges for us, we continue to work tirelessly and diligently to raise the financing necessary to offer low-cost education loans,” Graf said. “As a pro-student, non-profit public authority, MEFA remains dedicated to making higher education more accessible and affordable through low-cost financing options, community education programs and college savings plans.”