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Zions Bank, one of the nations' biggest lenders of federally backed students loans, told state colleges and universities that it would make no more federally backed student loans after March 31.

The announcement came as lenders across the United States have stopped or suspended participation in Stafford and PLUS (Parent Loans for Undergraduate Students) loan programs.

The reason: The new federal College Cost Reduction and Access Act, effective Oct. 1, cut the yield on student loans for lenders by 0.55 percent. After that came the credit crunch, fueled by subprime mortgage loans, making it tougher for lenders to continue such loans.
Zions typically would lend about $70 million in federal student loans a year.

Zions, meanwhile, is continuing work on a private student lending program, and expects to roll it out in the next 30 to 60 days, said Rob Brough, bank executive vice president of marketing and communications.

"We're unsure what the financing will look like," Brough said Friday. "They will be marketed as student loans programs, but alternative programs to the federal programs."