House Education Committee Approves Bill to Ensure Continued Access to Student Loans for American Families

Wednesday, April 9, 2008

WASHINGTON, DC -- The House Education and Labor Committee today approved bipartisan legislation to ensure that the 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.

The Ensuring Continued Access to Student Loans Act of 2008 (H.R. 5715) would provide new protections, in addition to those already under current law, to ensure that families continue to have timely, uninterrupted access to federal college loans in the event that stress in the credit markets leads a significant number of lenders in the federally guaranteed student loan programs to substantially reduce their lending activity.   

“We must not allow the larger problems with the U.S. economy to affect families’ ability to access the federal financial aid they depend on to pay for college,” said U.S. Rep. George Miller (D-CA), the chairman of the Committee. “It’s good news that, so far, the turmoil in the credit markets hasn’t kept any students from getting federal college aid, but we need to provide families with every assurance that this will continue to be the case heading into the fall. This legislation, along with the federal loan safeguards that already exist, will help ensure that students and families will continue to be able to access the low-cost loans they need for college, regardless of what’s happening in the credit markets.”

“Today Congress is sending a powerful signal that it remains committed to a strong and stable federally guaranteed student loan program that will provide uninterrupted access to low-cost loans for millions of students and families,” said U.S. Rep. Howard P. “Buck” McKeon (R-CA), the Committee’s Senior Republican.  “With this legislation, we will begin to restore confidence in the market through increased liquidity and new benefits and protections for borrowers.”

“We have taken critical steps today toward ensuring that the credit crisis in the financial markets does not jeopardize our federal student loan programs,” said U.S. Rep. Rubén Hinojosa, the chair of the House Subcommittee on Higher Education, Lifelong Learning, and Competitiveness. “This legislation signals that federal government is prepared to use all the tools at its disposal to make certain that the subprime mortgage crisis does not trigger a college access crisis.” 

 “We’re taking positive steps to make sure all students have access to low-interest student loans despite the recent turmoil in the financial markets,” said U.S. Rep. Ric Keller (R-FL), the Senior Republican on the higher education subcommittee.

Specifically, H.R. 5715 would:

• Reduce borrowers’ reliance on costlier private college loans by increasing the annual loan limits on federal college loans by $2,000 for all students, and by increasing the aggregate (the total loan limit over the course of a student’s education) loan limits to $31,000 for dependent undergraduates and $57,500 for independent undergraduates; 
• Give parent borrowers more time to begin paying off their federal PLUS loans by providing them with the option to defer repayment until up to six months after their children leave school – giving families more flexibility in hard economic times.  
• Help struggling homeowners pay for college by making sure that short-term delinquencies in mortgage payments don’t prohibit otherwise eligible parents from being able to borrow parent PLUS loans. Under current law, parents with an adverse credit history are ineligible to receive a parent PLUS loan, except under extenuating circumstances. The legislation would temporarily classify as an extenuating circumstance delinquencies on home mortgages of up to 180 days, therefore making it possible for parents who are being strained by the current housing market to secure loans for their children; 
• 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, and allow guaranty agencies to carry out the functions of lender of last resort on a school-wide basis. 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; 
• Give the U.S. Education Secretary the temporary authority to purchase loans from lenders in the federal guaranteed loan program, ensuring that lenders continue to have access to capital to originate new loans. The Education Department would be authorized to purchase loans only if doing so would not result in a net cost for the federal government; and 
• Include a Sense of Congress that calls on federal financial institutions, including the Federal Financing Bank, to consider using their current authorities to inject liquidity into the student loan marketplace at no cost to the taxpayer to ensure students and parents continue to have access to low-cost federal loans.

The House Education and Labor Committee has been closely monitoring the impact of the credit markets on the student loan industry. At a committee hearing last month, lawmakers urged U.S. Education Secretary Margaret Spellings 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.

 To see a fact sheet on the legislation, click here.

### 

FOR PRESS INQUIRIES
Contact: Aaron Albright / Rachel Racusen
2181 Rayburn House Office Building
Washington, DC 20515
202-226-0853