The Associated Press

Tue, May 20, 2008 (12:27 p.m.)

The student loan industry is pressing the Bush administration to boost its bottom line.

Lenders, including industry leader Sallie Mae, say they need some more federal help if they're going to continue serving college students under the federal student loan program.

A meeting between Bush administration officials and leading lenders was set for Tuesday evening.

Congress sets the interest rates borrowers pay and the subsidy levels lenders receive under the federal student loan program. Last year, lawmakers cut billions in subsidies to lenders to pay for increases in student aid.

That cut into lenders' profit margins as did the credit crunch in the financial markets, which has made it expensive for lenders to get the capital they need to offer loans to students.

Congress recently passed a law aimed at ensuring students keep getting their loans. The issue is critical now, because students are soon expected to start putting together their financing for the fall semester.

A key part of the law gives the Education Department the authority to buy up loans from student lenders to ensure they have access to capital and can keep issuing loans. How that would occur was expected to be discussed Tuesday.

Dozens of lenders have recently stopped making loans in the federal program. However, where that has happened so far, other lenders have stepped in or students have received support through a smaller program in which the Education Department lends money directly to students.

Harrison Wadsworth, a lobbyist for the Consumer Bankers Association, said banks would like to continue servicing the loans even if the loans are sold to the Education Department. He said the banks want to retain relationships with their customers.

In addition to investing in student loans outright, lenders also want the government to make capital available to lenders at a rate that is lower than they can currently get.

"The cuts made to the lenders last year were too severe, and they are making it impossible for many lenders to continue," Wadsworth said.

Sallie Mae executives have scheduled a conference call with colleges for Wednesday to discuss the federal student lending program.