Students lose MI-LOAN, have to look for other lenders

More than 300 MSU students soon will be looking for a new place to borrow money after the state suspended the Michigan Alternative Student Loan, or MI-LOAN, program indefinitely Friday because of insufficient funds.

The loan is used at Michigan colleges and universities in addition to federal loans that might not cover all tuition costs.

Currently, 316 MSU students have borrowed more than $3 million from the program. About $28 million was borrowed in private student loans in 2007, said Rick Shipman, director of MSU Office of Financial Aid.

Terry Stanton, a spokesman for the Michigan Department of Treasury, said the suspension will not affect those who currently have the loan, but no new loans will be accepted.

“It’s difficult to say when the program will be reinstated,” Stanton said. “Certainly once market conditions become favorable again and there’s capital to be raised, it would be reinstated.”

Shipman said the suspension means students with the MI-LOAN program will have to look to other lenders.

“It’s never good to have more than one lender,” he said, adding that it becomes increasingly difficult to deal with more than one company.

Shipman said the Office of Financial Aid works with several lenders, including Citibank and Sallie Mae, and can help students find other options.

The MI-LOAN is one of many private student loans that has had funding problems stemming from credit market struggles.

Economics professor Charles Ballard said some securities, or investments, that are backed by student loans were once considered a safe option in the stock market.

“Last August, when the sub-prime mortgage market fell, people figured these (securities) would be safe,” he said. “Some of these types of securities weren’t as solid an investment as they were supposed to be.”

Ballard said it could be tougher for students to get private student loans in the future if the trend continues.

“It relies on what the government does, if the mark for student loans continues to go up, it’s going to put political pressure on them to do something,” he said.