U.S. approves first student loan funding conduit

NEW YORK, Jan 21 (Reuters) - The U.S. Department of Education this week approved a funding program with The Bank of New York Mellon for student loans, the first of its kind, to help boost student loan volume as the credit crunch lingers.

Under the program, the government agrees to be a buyer of last resort for asset-backed commercial paper funded "conduits" created to purchase student loans made under the Federal Family Education Loan Program, the department said in a statement.

The statement, which was dated Monday, was confirmed by a spokeswoman on Wednesday.

Lenders will be able to sell FFELP loans to the conduit and receive cash for new student lending, it said in an earlier statement. The government would step in "only in the event that the conduit has failed to refinance maturing commercial paper from other sources," it said.

SLM Corp (SLM.N), the largest student loan lender, on Wednesday said federal student loan originations grew 25 percent over the last quarter, and that funding for loans in 2009 would come from various federal liquidity programs. For brief, see: [ID:nWNAB2007].

The company also posted a narrower fourth-quarter loss. For story, see: [ID:nN21462364]. (Reporting by Al Yoon; Editing by Leslie Adler)