National Education, an educational lending company, was unable to secure funding for loans promised to more than 180 GW students, leaving them searching for a new lender in the middle of the academic year, University officials said this week.
Dan Small, the executive director of financial assistance, said that out of about 4,000 lending companies in the country, around 200 - including National Education - have been unable to find financing because of a frozen credit market. The company, based in Wilmington, Del., notified the University's Office of Financial Aid on Friday that they had stopped processing Stafford loans this academic year "due to difficulty in obtaining financing from the capital market," according to an e-mail sent to affected students.
"They had been telling us since July that they had funding and we were under the understanding that they just needed a signature," Small said. "But we were told on Friday that the issues in the credit market prevented them from securing funding. It is a problem because some students depend on funding not only for tuition but for living expenses as well."
Students who were relying on National Education to pay for part of their tuition this semester will have to find another lender as soon as possible, the e-mail said.
Robert Chernak, senior vice president for Student and Academic Support Services, said students will not be penalized for missing Stafford loans and no late fees will be charged to those students. Student Accounts, which usually places registration holds on students owing more than $500, will make exceptions for students who had been relying on National Education.
"These students have been approved for their Stafford loans already," Chernak said. "So we know they will get them."
The possibility of the financing issues spreading to other lenders has prompted the University to begin an application for direct lending from the federal government, bypassing private lenders, administrators said.
"With way things are going, direct lending might be a good option," Chernak said. "There were times where there were advantages to dealing with private lenders, but they might not be there anymore."
He said the application would take a couple of months to prepare, between two and four months for the government to review, and even then, the University might choose to forgo the direct funding option.
"The process would be seamless for the student," Chernak said. "But the downside is more internal reconciliation work when dealing with government on our end."
All of the students affected by the financing problems encountered by National Education have received an e-mail, Small said. In addition, some financial aid counselors were encouraged to follow up with students they knew or had worked with before.
"Some of counselors, when they heard about the situation, wanted to follow up with personal contact," Small said. "We said, 'If you know people, give them a call and explain it.'"