Loans Expert

The Federal Reserve Bank of New York announced in a Nov. 25 press release it will create a plan to help the security of student loans. But this may or may not be good news for University students.

Although the plan, known as the Term Asset-Backed Securities Loan Facility, had original intentions of helping people meet the household and small business credit needs, it will also play a hand in assuring private loans for students.

“With the economic hardships some student may face [it gives them ] all the more reason for them to use the Federal Direct Loans before ever venturing into the private non-federal education loan arena,” said James Mooney, associate director for the Office of Student Financial Aid.

According to the TALF document, the reserve will lend $200 billion to “financial institutions that hold securities backed by student loans, auto loans and credit-card debt.” The U.S. Treasury Department will give $20 billion in credit protection to the FRBNY.

Mooney thinks it is best that students apply via the Free Application for Federal Student Aid to obtain federal loan money first.

“Students and their families should always complete the… FAFSA so we can first award them the maximum Federal Direct Loans for which they qualify before they seek a private non-federal education loan through a private lender,” said Mooney in an e-mail.

Federal loans are always better for the students because of lower interest rates and re-payment deferment criteria, he said. But the University is willing to accept private non-federal loans from students should that becomes the case.

“Should a student choose to seek the less favorable private non-federal student loan through a participating lender and is approved, the lender then generally sends the loan funds to the Student Accounts office for disbursement to the student,” said Mooney.

Marlyncia Pierce, a sophomore from Atlanta, said it is a great idea of the FRBNY to help with student loans.

“I think it will help if it wants to secure [loans],” said Pierce. “I would be willing to [get a private loan] but the security part gets me. I’d hate to pay a loan that isn’t secure. Some students may take advantage of it.”

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Tags: Student Loans