Business Notes LOANS

Any business student knows that bad loans come in waves. The largest U.S. guarantor of student loans is learning that lesson the hard way. The Higher Education Assistance Foundation, a nonprofit group that has guaranteed $9.6 billion in student debt, acknowledged last week that a rising tide of defaults is threatening to push the agency into insolvency. HEAF's trouble was caused primarily by its heavy commitment to trade-school students, the group with the highest default rate. More than one-third of HEAF's loans were made to students attending for-profit institutions that promised careers in fields from hairdressing to truck driving.

The Education Department reimburses guarantors for most of their losses. Ted + Sanders, Under Secretary of Education, said the government hopes to bail out HEAF without using any taxpayer money, but in any case the rescue will cost no more than $100 million.