40,000 students need new source for loans

State lender says economy has ruined its ability to provide money

 A state student lender announced yesterday it would not be able to provide private loans for thousands of students this fall.

The Massachusetts Educational Financing Authority, which reportedly provided $510 million worth of support for students and families last year, cited “disruptions in the capital markets” for its failure to raise the necessary funding to back 2008-09 academic year loans.

“While we continue to pursue every possible option, raising the necessary funds to offer fixed interest rate private education loans is taking longer than expected,” said MEFA Executive Director Tom Graf.

The nonprofit cut off applications for federally funded loans in April but kept alive enrollment for a private loan package through July 15, not long before several schools require tuition payments. 

An earlier announcement indicated that plan was still in play but Graf said yesterday “it remains unclear when MEFA will be able to resume its lending activities” and recommended the roughly 40,000 students and families the agency has backed in the past to make alternate arrangements, through federal plans, if possible.

MEFA is offering a free help line for families with issues and keeping alive U.Plan, a savings plan that helps to prepay tuition at 80 Massachusetts colleges and universities.

Student loans became an issue nationwide last year when the market was hit by the subprime mortgage crisis. Several agencies like MEFA have struggled to refinance old bonds that investors laid off during the crisis.