April 16, 2008 — The Massachusetts Educational Financing Authority, a nonprofit self-financing state authority that helps students pursue higher education in Massachusetts, yesterday announced it will suspend all Federal education loans, effective July 1, due to financial market turmoil. The action follows last week's bankruptcy filing by The Education Resources Institute.

The Massachusetts Educational Financing Authority , known as MEFA, said the halt will affect Stafford Loans for undergraduate and graduate students, PLUS, and Graduate PLUS.

Additionally, effective immediately, MEFA said it will not accept any new Federal Consolidation applications.

On April 7, The Education Resources Institute, a nonprofit founded in 1985 that guaranteed student loans, filed for bankruptcy.

The unprecedented disruption in the capital markets coupled with federal changes has prevented MEFA from securing funds for its federal education loan programs, the said MEFA Executive Director Thomas M. Graf.

MEFA said it is making this announcement now so that parents and students who were planning to borrow a federal education loan from MEFA have the time to make alternative plans for the fall 2008 semester.

MEFA said its customer service representatives are available to assist Massachusetts students and families with identifying and evaluating Federal Family Education Loans from other education loan providers.

“Rest assured that MEFA remains hopeful and diligent in its efforts to raise the necessary capital to provide private education loans in 2008-2009. MEFA's decision to suspend federal education loans for the 2008-2009 academic year is not related to the availability of MEFA's 2008-2009 private education loans,” Graf said.

He added, “MEFA is working diligently to provide families with its flagship fixed interest rate education loan. In an economy where prices of everyday goods and services are increasing, an education loan that offers a stable, fixed interest rate, allows families to count on the same monthly payment regardless of changes in the global credit and liquidity markets. For nearly thirty years, MEFA has served the students and families of Massachusetts by providing just such a fixed interest rate education loan. MEFA will announce the availability of its 2008-2009 private education loans as soon as possible.”

Since its founding, MEFA has issued more than $2.3 billion in bonds and has assisted hundreds of thousands of families in financing a college education.