April 3, 2008 / 6:39 AM / 9 years ago

NorthStar Education to suspend FFEL lending: report

NEW YORK (Reuters) - NorthStar Education Finance Inc, a government-backed lender of student loans, said it will suspend such lending immediately amid the broader credit crunch, the Wall Street Journal said on its Web site on Thursday.

The non-profit lender said in a letter to colleges that it would stop taking new Federal Family Education Loan (FFEL) applications, saying it could not access lending money amid the current turbulence in the market, the Journal reported.

The company also hinted that it might restart issuing such loans once the state of the financial markets improve, the report said.

With about 2,000 lenders still involved in the FFEL program, officials in the Department of Education said that new lenders would take over when one leaves the program, the Journal said.

Like mortgages, student loans are bundled and sold off as securities to investors. However, the global credit crunch has caused funding problems in the U.S. college student loan market and soured several pending mergers and financial agreements.

A NorthStar representative was not immediately available for comment.

Reporting by Aarthi Sivaraman, editing by Jacqueline Wong

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