Did the Financial Aid Podcast alter Fed policy?

Probably not, but it’s kind of funny to think so. On March 9, I blogged about how the Fed could use the Term Auction Facility (TAF) to add liquidity to student lending. This made it into the Higher Education Washington paper, HEWI, which is the journal of record for politicians, lobbyists, and education folks in DC on March 10. (hat tip to Maria Koklanaris for including it!)

Fed Chairman Ben Bernanke initially rejected proposals that the Fed add investment grade student loan securities to the TAF pool of eligible collateral on Friday.

This weekend, the story changed, according to BusinessWeek. The Fed will now accept investment grade student loan securities as collateral for lenders to borrow against.

Whether the Financial Aid Podcast altered Fed policy or not, this is good news for student lending - and at no additional taxpayer risk, since federal student loans are already guaranteed by the Department of Education anyway. Remember - this is not a bailout, NOT free money. The TAF is a loan program for lenders. Lenders borrow from the Fed and put up loans as collateral. At the end of 28 days, the lenders have to buy back their loans from the Fed. Of course, they can borrow again and pledge additional loans if need be.

If it turns out that the Financial Aid Podcast did alter Fed policy - well, cool.

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