Despite a massive federal effort to aid banks and boost the economy, lending has plunged in the last year. Home-mortgage volume and bank loans to big companies are down dramatically.
But the government’s response is expanding credit in at least one sector: higher education. Although the recession is weighing on colleges in many ways, the ability of students to get federal loans to pay tuition isn’t one of them.
As of Nov. 28, the federal government had guaranteed or made $65.2 billion in student loans for the 2008-09 school year, up 18.6% from the same time a year earlier. In contrast, lending for home mortgages was down nearly 38% through the end of November, according to Inside Mortgage Finance, a trade publication. A recent Harvard Business School study found a similar decline in loans to big corporations.