University Daily Kansan / Thursday, April 21, 1988
Lenders question GSL policy
Change in subsidy could cause banks to abandon program
By David Sodamann
Kansan staff writer
The Guaranteed Student Loan program at the University of Kansas is not likely to end soon, lending experts say, but there may be changes on the way.
According to a recent article in the Wall Street Journal, a survey of bankers revealed that banks lending the most money to students would get out of the business if the spread they earn on loans is cut.
The spread, or special allowance, is the difference between the rate the federal government pays to subsidize student loans and the lesser amount banks charge students.
Susan Pool, a vice president in charge of student loans at Bank IV in Wichita, didn't see much news in the Journal.
"It's sort of a forgone conclusion." she said.
However, Pool said it was unlikely the spread would be cut soon, if at all. It is fixed by law, well in advance, and it will be a while before any changes Congress may want to make can take effect, she said.
Pool said the federal government paid lenders 3.25 percent over the 91-day treasury bill rate to make loans to students. Right now, the rate is around 9.4 percent. Pool said. While students are in school and not making any payments on their loans, the federal government pays all the interest for students. That way, students can
borrow at the best possible rate and lenders can still make a profit, she said.
Jeff Weinberg, associate director of financial aid, said the Higher Education Loan Program of Kansas was a lender of last resort for KU students who couldn't get loans through banks. However, Weinberg, if all banks dropped their student loan programs he doubted that HELP, a non-profit corporation associated with the federal Higher Education Assistance Foundation, could absorb the demand.
"This program must be kept profitable for the banks," Weinberg said. "If it isn't, the banks better get out of it. Banks are commercial entities. They have to make a profit. If they don't, the FDIC closes them down."
Alden Shields, help of HELP and vice president of HEAF, both in Overland Park, said there was a great deal of concern nationally about student loan default rates. Elected representatives and government officials wanted the cost to reduce the default rate, and thereby cut the cost of the program to the federal government, he said.
Shields also said reducing the yield rates or interest rate paid by the government, would discourage banks
Shields said private lenders were keeping the student loan program afloat. Without them, the federal government would have to pay the entire bill, he said.
8 students to get grant to do summer research
By Brenda Finnell
Kansan staff writer
While many students are working at summer jobs or internships, some will come to the University of Kansas to work on scientific research made possible through grants from the National Science Foundation.
A $35,000 grant will allow eight students to study chemistry, and medicinal and pharmaceutical ministry for 10 weeks this summer.
The three-year grant also will give KU $35,000 for the summer of 1989 and another $35,000 for the summer of 1990.
Students will work with faculty members on research projects in such areas as organic, inorganic, analytical and physical chemistry. Students will also research enzymes, superconducting materials, laser spectroscopy and
organic synthesis, which is the formation of new compounds.
Barbara Schowen, associate professor of chemistry, said students might also do bioanalysis, which involves detecting extremely small quantities of chemicals in biological fluids.
Schowen said the program attempted to attract students from small colleges to come to a large research institution such as KU. Program coordinators also prefer to enroll in the college their junior year of college. About 75 students applied this year for the eight positions.
Siegfried Lindenbaum, professor of pharmaceutical chemistry, said the summer program allowed students to explore career alternatives and to consider the benefits of graduate school.
"It's an important recruiting device." Lindenbaum said.
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