April 22, 2009

More community banking companies are abandoning student lending.First Financial Bankshares Inc. in Abilene, Texas, stopped making the loans this month, as did Bremer Financial Corp. in St. Paul.They cited the same reasons as scores of others that have already quit the business: thin margins and an inability to sell the loans.Legislation that took effect in October 2007 reduced the subsidies to lenders on federally guaranteed student loans to the point where some say the business is barely profitable.

And the securitization market for student loans dried up last year and has yet to revive.Last quarter the $3.3 billion-asset First Financial sold off $73.7 million in student loans, or 87% of its total. It said this month it expects to sell the rest before the fourth quarter.Scott Dueser, First Financial's president and chief executive officer, said the business had been profitable and, if the securitization market for the loans were to return and margins improved, the company would ramp up lending again.