Magazine article American Banker

Regions, First Marblehead Sign Student Lending Pact

Magazine article American Banker

Regions, First Marblehead Sign Student Lending Pact

Article excerpt

Regions Financial Corp. has joined the list of banking companies in the fast-growing private student loan market.

On Monday the Birmingham, Ala., banking company said that it will start offering products originated and serviced by First Marblehead Corp. of Boston in mid-March.

Bruce E. Austin, the executive vice president of student loans at Regions Bank, said in an interview that the $84.8 billion-asset parent company would eventually start originating such loans. The renewable three-year contract with First Marblehead lets Regions create and market its own private student loans, he said.

"We are working on an in-house model," but Regions would not be ready to offer its owns loans until next year at the earliest as it ensures that its systems can handle such loans, he said. "We needed a product to fill this gap for students today."

For now the loans will be marketed largely to Regions' customers within its 16-state market, Mr. Austin said, though there is the possibility that Regions will start advertising the products more widely in the future.

First Marblehead will pay Regions a fee for loan referrals; Mr. Austin would not say how big that fee would be.

Demand for private student loans has risen steadily as tuition has risen more quickly than household income, he said.

During the 2004-05 school year the volume of private loans rose 32% from a year earlier, to $13.8 billion, according to the College Board, a New York nonprofit that offers college admissions, guidance, assessment, and financial aid services. Such loans grew faster than any other form of student aid.

Private loans also grew because the government had not increased federal loan limits for more than 10 years until last year, when legislators increased the limits by a third, to $3,500, for first-year students and by 28. …

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