The College Loan Corporation, the eighth largest originator of federally guaranteed student loans, announced today that it would halt making loans in the federal program on March 1.
In a letter explaining the decision, Cary Katz, the company’s chief executive officer, said that recently enacted cuts in the subsidies the government pays on such loans, coupled with disruptions in the credit markets, were “making it impossible for midsized companies like College Loan Corporation to participate in the federal-loan marketplace.”
The College Loan Corporation is the largest lender to leave the guaranteed-loan program since Congress passed legislation in September that slashed the subsidy rate for for-profit lenders by 0.55 of a percentage point. Lenders and other critics had warned that the cuts would drive some companies out of the federal student-loan program or force them to eliminate borrower benefits.
Several smaller lenders have since announced that they will halt making federally backed loans, and even Sallie Mae, the nation’s largest student lender, has become more selective about the education loans it will make.
Mr. Katz said the College Loan Corporation would continue to make private student loans and manage its existing federal-loan portfolio. —Kelly Field