Sallie Mae cuts student loans On Jan. 29, student loan provider Sallie Mae announced it would no longer provide loans to students with sub-prime credit scores.

Sallie Mae is the leading company providing student loans, so the cut is projected to affect many students across the nation.

"As a result of the impact of the College Cost Reduction and Access Act and the deterioration of the credit markets, Sallie Mae is discontinuing certain non-standard private education loan programs," said Tom Joyce, senior vice president of Sallie Mae's corporate communications.

"We are also in the process of adjusting our underwriting criteria and pricing of our private education loans to reflect the current financing and market conditions."

This decision was made based on a combination of four factors, many of which have been affecting student loan companies nationwide.

The biggest factor for all loan companies has been the crisis in the housing market, which has forced companies to tighten their loaning standards and reducing the amount of loans given to customers with sub-prime credit scores.

"All financial service companies, including student loan providers, are experiencing tighter credit markets as a result of the sub-prime mortgage crisis," said C.E. Andrews, CEO of Sallie Mae, in a statement to the company's valued customers.

"The status of today's credit markets has limited the capacity not only of Sallie Mae, but also of all student lenders to fund both FFELP and private loans."

Last year, New York's Attorney General Andrew Como conducted an investigation of the relationship between student loan companies and the financial aid departments of colleges and universities to which the companies provided. The investigation exposed scandals linked to Sallie Mae as well as many other student loan companies.

On Sept. 27, President Bush signed the College Cost Reduction and Access Act, which increased the Federal Pell grant by $11 billion. This act simultaneously reduced federal subsidies to many lenders including Sallie Mae, forcing them to cut many of their loans.

The final factor involves Sallie Mae's individual financial problems. Last year, the company faced losses up to $1.6 billion and was forced to lay-off many employees.

Harris Miller, president of the Career Colleges Association, explained Sallie Mae's cut will primarily affect schools that attract a certain demographic of student that is usually depicted as low-income students with low credit scores.

"The simple reality is that schools like Virginia Tech have very few students who don't come from middle or upper socioeconomic situations," Miller said.

Though it is unlikely many students at Tech will be affected, many Virginia students who attend for-profit schools such as ECPI, Medical Careers Institute, and Advanced Technology Institute are in danger of being denied essential loans.

Students attending Virginia community colleges such as Northern Virginia Community College and Southwest Virginia Community College face similar problems.

For-profit schools and community colleges are now getting together to draft alternatives for students in need of Sallie Mae's now-cut loans. While some of the bigger schools, such as Corinthian Colleges, have announced they will provide students with loans, many of the smaller schools with low fund balances simply cannot afford to take the risk.

"The 70 to 80 percent of Virginia students who can't get into schools like Tech are at risk of receiving no form of higher education," Miller said.