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

Thursday, April 17, 2008

WASHINGTON, DC -- The U.S. House of Representatives today overwhelmingly 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 legislation was passed by a vote of 383-27.

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. The bill carries no additional cost for taxpayers.

“At a time when too many Americans are facing severe economic uncertainty, students and families shouldn’t have to worry about whether or not the federal student aid they need to help pay for college is in jeopardy,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee, and one of the bill’s authors. “Today the House took an important step towards ensuring that, no matter what happens in our nation’s financial markets, students will continue to have access to federal student loans. With families in the middle of planning their finances for the coming school year, it is critical that we continue to act swiftly on this legislation, and I look forward to working with the Senate and the administration to help make that happen.”

“This bill is a first step to prevent a crisis in the student loan program, and its consideration has come not a minute too soon,” said U.S. Rep. Howard P. “Buck” McKeon (R-CA), the Senior Republican of the House Education and Labor Committee. “Peak lending season begins in July and we cannot, we must not, wait until a student is denied a loan to put mechanisms in place to deal with the turmoil in the student loan market.”

“Nothing is more important than reassuring students and families that there will be no disruption in the availability of federal student loans – regardless of what happens in our financial markets,” said U.S. Rep. Rubén Hinojosa (D-TX), the Chairman of the House Subcommittee on Higher Education, Lifelong Learning, and Competitiveness. “As of today, no student has been unable to find a lender for a federal student loan.  However, we are not going to wait until students and families are denied loans before putting safeguards in place.  This legislation assures every student that these federal dollars will continue to be available regardless of what happens in the U.S. economy.”

“The instability in the financial markets has created concern about students’ ability to secure loans for the upcoming school year,” said U.S. Rep. Ric Keller (R-FL), the Senior Republican on the House Subcommittee on Higher Education, Lifelong Learning, and Competitiveness. “This bill will provide a necessary backstop to ensure that all students have uninterrupted access to low cost federal loans.”

In recent months, the crisis in the nation’s credit markets has made it difficult for some lenders that participate in the federally guaranteed student loan program to secure the capital needed to finance their student lending activity. As a result, some lenders have announced plans to scale back their lending activity; while others have announced plans to increase their share of loans. To date, no students or parents have run into problems in getting the federal student aid they are eligible to receive.

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 families pay for college by ensuring that short-term delinquencies in mortgage payments and medical bills 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 and medical bills 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.

U.S. Senator Edward M. Kennedy (D-MA), the chairman of the Senate Health, Education, Labor, and Pensions Committee, has introduced similar legislation in the Senate.

The House Education and Labor Committee has been closely monitoring the impact of the credit markets on the student loan industry and has been urging U.S. Education Secretary Margaret Spellings to put plans in place that would safeguard borrowers’ access to federal college loans in the event that a large number of lenders withdrew from the federally guaranteed loan program.

For more information on H.R. 5715, click here.

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