From In These Times
By James H. Ewert Jr.

Kelly Lynch, a former Columbia College Chicago film and video major, is paying educational loan lender Sallie Mae $600 a month, about 1 percent of his total student loan debt of $60,000. Though Lynch, 21, never received his degree from Columbia and barely survives with freelance film and video work, he considers himself lucky.

Lynch consolidated his loans through Sallie Mae a few months before the nation’s largest student loan lender suspended its student loan consolidation program in April. The policy shift left many other young borrowers with inflated interest rates.

“To leave college and enter the real world with such grave debt is a setup for failure,” says Lynch. “What good are well-educated kids who, right out of the cradle, have major financial obligations before most own a house, a car or know where the nearest grocery store is?”

Sallie Mae’s decision came in the midst of what many in the student loan industry call a crisis. From August 2007 to May 2008, at least 103 lenders stopped or suspended writing student loans, according to Finaid.org, a student-loan resource website. The companies that have stopped include Nelnet, the College Loan Corporation and CIT Group — among the nation’s largest lenders.

In May, the Wall Street Journal reported that the private student loan market grew by as much as 25 percent a year for a decade. That momentum has evaporated. For the first time in 40 years, no bonds backed by student loans were purchased in the first quarter of 2008, according to Forbes.

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