Sallie Mae’s decision to cut loans to students at colleges with low graduation rates will affect only a small number of AU students, according to Martha Holler, managing director of corporate communications for the company.
“A small number of AU students with low credit scores and no cosigner may see a decline in their approval rates and may need to work with another lender to secure a private loan,” Holler said in an e-mail.
Sallie Mae’s decision to stop its nonstandard private program does not affect its offering of loans to AU students on an institution-wide basis. However, the company’s decision has resulted in a rewriting of criteria students will need to meet to receive a loan, Holler said.
Sallie Mae, the largest student loan provider in the United States announced the plan Jan. 23, one day after revealing it was planning to cut private loans to students with below-prime credit ratings. The company has recently faced a variety of financial hardships, including a depreciating stock value, The Chronicle of Higher Education reported.
Students at colleges with low graduation rates are “singly responsible” for more than 60 percent of Sallie Mae’s credit losses in 2007, Sallie Mae CEO Albert L. Lord said during a conference call with industry analysts, according to The Chronicle.
Throughout 2007, Sallie Mae’s “core earnings” net income was $560 million, compared to $1.3 billion for 2006.
While Sallie Mae’s new policies may not impact AU on a large scale, it could greatly affect for-profit colleges and private institutions that depend on lower-income students’ enrollment, The Chronicle reported. AU is a nonprofit institution.
Career Education Corp., Corinthian Colleges and ITT Technical Institute are all for-profit career colleges. However, the extent to which Sallie Mae’s cuts will affect any one institution is not yet known.
Sallie Mae’s decision is a sensible move from an economic perspective, according to Kirstin Schloss, a sophomore in the School of International Service.
“At first it seems unfair,” Schloss said. “If [Sallie Mae] is not going to be making a profit and they can kind of eliminate an area where they know there are losses, it just seems like a beneficial move for them.”
The loan cuts are unfair, said Katie Blaise, a sophomore in the College of Arts and Sciences.
“I can understand how Sallie Mae will doubt students [attending colleges] with low graduation rates, but I also think students need to be given the chance to try,” Blaise said. “It’s a big assumption if you just go by statistics.”
Sallie Mae’s cutting of loans will be more detrimental to students trying to get an education than to the loan company’s financial well-being, said Liza Meckler, a sophomore in SIS.
“Even though students may have bad credit, it will still end up hurting them more than Sallie Mae,” she said. “They should base it on each individual student, not what institution they go to.”