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If you took out student loans to pay for law school during the past 25 years, there’s a good chance you went through Access Group Inc., a nonprofit company that has been the largest single provider of loans to law students since 1983. Now a change in federal student loan policy has forced Access Group to stop lending to new students and to shed most of its staff. “We are out of the lending business,” said Access Group President and Chief Executive Officer Christopher Chapman. The only exception, he said, is that the company will disburse loans for one final semester to a small group of international students. “We’ve been legislated out of the federal loan program.” In a letter to law school administrators on Oct. 20, Chapman said that the company’s board of directors decided last month to stop servicing its existing $8.5 billion in loans in-house and would hire a third party to perform that function. That will mean reducing Access Group’s staff of 260 to a mere 40, he said in an interview. Without the ability to issue new loans, it no longer makes financial sense to maintain a full staff, he said. Students with existing Access Group loans and graduates repaying them should notice no major changes. “The terms of their loans will remain exactly the same as they currently are,” Chapman said. “The length, the benefits, the interest-rate reductions and repayment options will stay the same. The biggest change they will see is a difference in where they send their payments.” New York Law School Dean Rick Matasar, chairman of Access Group’s board, said the changes should not hamper new law students’ ability to secure loans. They just won’t come through Access Group. The changes will roll out during the next four to six months, Chapman said. Access Group is hardly the only student loan lender reeling from changes made under the federal Health Education Reconciliation Act of 2010. That law made the U.S. Department of Education the sole provider of federally guaranteed student loans. Previously, those loans could be issued through outside loan servicers such as Access Group. Access Group had already faced challenges. Demand for private students loans fell steeply in 2006, when the government created Graduate PLUS loans, which allow students to borrow the full amount of the costs of their graduate education with federally guaranteed loans. Additionally, Access Group ended all private lending in 2008 after the credit crisis made money too difficult to secure, Chapman said. But the biggest blow has been the inability of Access Group to issue new federally guaranteed loans. The company started in 1983 as a subsidiary of the Law School Admission Council to help solve a problem: Banks did not want to offer loans to law students because they were deemed too risky, Chapman said. The company was devised as a way to ensure that law students had access to lower-priced loans. In its early days, it provided between 75 percent and 80 percent of law student loans. That percentage fell over time, and the company eventually was spun off from the council. In recent years, Access Group was lending as much as $850 million annually to 25,000 to 30,000 law students. Additional changes are afoot. The Budget Control Act of 2011 eliminated subsidized Stafford loans for graduate students starting next summer. That means those loans will accrue interest while the recipients are still in school, adding an extra $5,000 in debt for the typical law school borrower, Chapman said. It remains to be seen where Access Group goes from here. Its board needs to decide what to do with the company’s charitable programs, including scholarships and financial aid conferences, Chapman said. Should federal policy toward student loans shift, the company would be in a good position to once again provide loans, Chapman said. For instance, if the federal government ever caps federally guaranteed loans, the market for private loans could re-emerge, he said. “This was a very tough call, from a people standpoint,” he said. “We have people here who are very committed to what they’re doing. From a financial standpoint, it was a decision we waited as long as we could to make.” Contact Karen Sloan at [email protected].

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