Monday, October 6, 2008

Citibank pulls CitiAssist student loans

Here's a snippet of a note from MIT Sloan leadership informing us that CitiAssist loans have been pulled (I deleted the administrative stuff). I'm alright as they are honoring loans through '09, but this is bad news for a few reasons:

1) It's the main loan students from abroad use to fund studies in the US, at least in our program. It is going to be seriously hard to finance an education in the US from abroad next year, I suspect.

2) It makes me even more worried about the financial health of Citi.

3) The government has increased Federal Perkins loan limits - that's actually good for me. The Perkins loan is the best of the student loans at 5% - but that's more money out of the federal governments pocket.

4) I'd be especially worried for people looking at schools who aren't as well off in terms of endowment, or as well run versus MIT. However, endowments have taken massive hits - the extent of the bloodbath is yet unknown, but many endowments were deep in alternatives. As a former consultant on the asset administration side for some of these endowments, I am truly scared for some of them.

5) How schools react and deal with this will impact the perception of whether schools should retain their tax-exempt status.

6) Earlier this year, I had my MEFA loan (Massachusetts Education Finance Authority) pulled before I switched to CitiAssist. So this isn't the first time this has happen.

Here's the letter from the MIT Sloan administration:

Dear Sloan MBA student,

As a result of the nationwide credit crisis we regret that we must now notify all Sloan Master’s Students that late last week MIT was notified that Citibank has exercised its 30 day option to cancel the CitiAssist custom student loan program with MIT Sloan, effective November 2, 2008.

Outlined below are the key elements of information, as we understand them at this time. There will be more to communicate in the days and weeks ahead. We have been working to assess availability of other options as a School and Institute, on behalf of our current students and potential applicants. These efforts proceed based on a fundamental principle of the School: namely that we place great value on the economic and geographic diversity of our community and both of these had been materially supported through the CitiAssist program.

For the current 2008-2009 academic year, Citibank will honor all MIT Sloan loans already processed and approved, meaning both Fall 2008 and Spring 2009 disbursements will be honored.

MIT Student Financial Services (SFS) staff are working with the MBA Program to:

· provide counseling regarding additional short term loan options for the current academic year

· sponsor lunchtime sessions for our students (tentatively scheduled to take place next week at Sloan) to communicate what we are learning and to answer questions

We will be working with our Institute colleagues to address student funding issues during this challenging time. The MBA division leadership and I will be engaged with both the leadership of the MBA student community and its broad membership as well as we move ahead.

We will meet this challenge as we have in the past – as a strong, engaged community committed to all its members.

Yours,

Dave Schmittlein

John C Head, III Dean

3 comments:

Anonymous said...

kaboom!

Ted Chan said...

LOL, well said.

sloan guy said...

another one bites the dust...