Chairmen Miller, Hinojosa Announce Legislation to Ensure Continued Access to Student Loans for American Families

Thursday, April 3, 2008

WASHINGTON, DC -- U.S. Reps. George Miller (D-CA) and Rubén Hinojosa (D-TX) today announced legislation to ensure that turmoil in the U.S. credit markets does not prevent any students or parents from accessing the financial aid they need to pay for college.

“Already, the crisis in the financial markets has badly hurt American homeowners and working people – we can’t let it also stop students from pursuing their educational goals,” said Miller, chairman of the House Education and Labor Committee. “Students and families can’t afford any ambiguity or snafus to undermine their ability to attend college. I am confident that if we act quickly and decisively, then students will have the financial support necessary to begin or continue their higher education.”

“The millions of students and families who rely on federal college loans deserve every assurance that they will continue to be able to access the federal aid they need, despite the turmoil in the nation’s credit market,” said Hinojosa, the chair of the House Subcommittee on Higher Education, Lifelong Learning, and Competitiveness. “This legislation will take the critical steps needed to ensure that our federal student loan programs can continue to help students earn a college degree.”

Specifically, the legislation would:

• Reduce borrowers’ reliance on costlier private college loans by increasing the loan limits on federal college loans by $2,000 per year for all students; 

• Give parent borrowers more time to begin paying off their federal PLUS college loans. Currently, parent borrowers must begin repayment 60 days after disbursement of the loan; under this legislation, parents would be able to defer repayment until six months after their children graduate from college. This would likely encourage more families to borrow PLUS loans rather than private college loans; 

• Clarify that existing law gives the U.S. Education Secretary the authority to advance federal funds to guaranty agencies in the event that they do not have sufficient capital to originate new loans. Under the Higher Education Act, these guaranty agencies are obligated to serve as a nationwide network of lenders of last resort if requested to do so by the Education Secretary; and  

• Give the U.S. Education Secretary the temporary authority to purchase loans from lenders in the federal guaranteed loan program.  The Education Department would then service the loans through its Direct Loan program. This proposal would ensure that lenders continue to have access to capital to originate new loans. The Education Department would be authorized to purchase only those loans that do not carry a net cost for the federal government. 

Last month Miller and Senator Edward M. Kennedy (D-MA), chairman of the Senate education committee, sent a letter to U.S. Education Secretary Margaret Spellings to urge her to put plans in place to ensure borrowers’ timely access to federal college loans in the event that a large number of lenders sharply curtailed their lending activities. The lawmakers urged Spellings to prepare the lender of last resort program, which designates the 35 guaranty agencies to serve as nationwide network of backstop lenders. They also urged her to ensure that the federal Direct Student Loan program, which is administered by the Department of Education, is prepared to handle any increase in demand. Because the Direct Loan program is not reliant on the financial markets to raise capital, it is not affected by the credit market crunch.

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FOR IMMEDIATE RELEASE
Contact: Tom Kiley / Rachel Racusen
2181 Rayburn House Office Building
Washington, DC 20515
202-226-0853