California Gov. Schwarzenegger’s idea of selling off the EdFund student loan operation was stopped by federal officials, stating that the federal government was going to end its contract with the state in October. Gov. Schwarzenegger had hoped to sell off the loan program for an estimated $1 billion in the hopes of closing up some of the budget for the state.

Schwarzenegger had introduced the plan three years ago and the administration anticipated the sales price to be half, but told state officials that everything was on track pending federal approval. The fed’s, however, decided to end their contract, instead. So, the student fund program won’t be able to be sold.

Fed’s Block EdFund Sell

While the government’s decision won’t affect student loans there could be other issues that pop up because of this decision. One of the biggest problems would be the disappearance of millions of dollars for the Cal Grant system.

A system created to help low-income students with financial loans.

The main reason for this is due to the Obama administrations move to take privately held banks out of the federal student loan program so that the federal government can lend to them independently without the need for a middle-man.