Quoted In: U.S. Said to Give $60 Billion Student-Loan Backing (Bloomberg)

The U.S. Treasury agreed to commit as much as $60 billion to shore up the market for student loans and help reduce the illiquid assets clogging banks’ balance sheets, according to three people familiar with the matter. The department will use its Federal Financing Bank to provide a backstop for an initiative put together by Citigroup Inc. and Morgan Stanley, the people said. The so-called conduit will purchase existing and new student loans from banks, and issue asset-backed commercial paper to finance itself.

The conduit will be an improvement over the temporary programs because those have only been available to lenders with cash on hand, said Justin Draeger, vice president of planning with the National Association of Student Financial Aid Administrators, which represents about 3,000 colleges and universities.

Because the conduit will buy old loans, “lenders who have been forced out of the market should be able to reenter it,” Draeger said. He said the program provides “vital” assurances for the type of loans that make up the largest part of most students’ financial-aid packages.

The full article was originally published in Bloomberg on January 29th.