tcf032108
On the homepage
Health care
Out There
Sunday's paper
Access Vikings
TCF halts its federal student loan business
Greater risks caused by the credit crisis, along with a law change that will lower profits, convince TCF to jettison program.
Print this story
E-mail this story
Save to del.icio.us
Share on Facebook
Share on Digg
Minnesota business by the numbers
See Minnesota's top earning companies, CEOs and non-profits
More from Business
After 20 years in the market, TCF Financial is leaving the college loan business, in the wake of financial market turmoil and a change in federal law that pecked away at profits.
A change in federal law last year reduced government subsidies to student lenders by $20 billion over the next few years. But TCF said a bigger challenge came when the bank no longer was able to resell student loans in financial markets.
Debt markets where primary lenders sell off bundles of loans to secondary lenders all but froze a few weeks ago with the spread of fears in financial markets. At the end of 2007, TCF was holding $156 million in education loans that it wanted to sell.
The combination of lower subsidies and greater debt kept on its own books led TCF to exit the business.
"That kind of reduces our yield and increases our risk," said Jason Korstange, a TCF spokesman.
Korstange said the bank revealed its decision this week to give students plenty of time to seek other lenders in advance of the next school year.
Two other banks also left the education loan market this week: HSBC Bank USA, a unit of London-based HSBC Holdings PLC, and M&T Bank Corp. of Buffalo, N.Y.
Together with TCF, they rank among the 50 largest providers of federal student loans, lending a combined total of more than $560 million of the $119.2 billion made in loans in the 2006 federal fiscal year, the last tally available.
Dow Jones News Service contributed to this report.
Recent Business stories
Holiday travelers waited longer to book this year, if they're traveling at all - March 20, 2008
Holiday travelers waited longer to book this year, if they're traveling at all - Holiday travelers waited a little longer to book their flights this year, likely holding out for better deals and waiting to see if they would still have a job. And some aren't going at all. More
Blog: Patent Pending
Lights out at U energy conference. Irony police notified.
Just as Lawrence Kazmerski, a top official at the National Renewable Energy Laboratory, was about to give the keynote address at the University of Minnesota's annual E3 conference at the RiverCentre in St. Paul, the lights went out, bathing the audience in darkness and a deep sense of irony.
Comment on this story | Read all 3 comments | Hide reader comments