Legislation to Further Safeguard Federal Student Loan Access Passes House

With Turbulent Economic Conditions Persisting, Bill Would Extend Protections at No Cost to Taxpayers

Monday, September 15, 2008

WASHINGTON, DC -- The U.S. House of Representatives today approved bipartisan legislation to further ensure that turmoil in the U.S. credit markets will not prevent students and families from accessing the financial aid they need to pay for college. The legislation extends for one year certain provisions of The Ensuring Continued Access to Student Loans Act of 2008, which were due to expire on July 1, 2009.

The House overwhelmingly passed the bill, H.R. 6889, by a vote of 368 to 4. Specifically, the legislation would extend provisions that provide the U.S. Secretary of Education with the additional tools needed to safeguard federal student loans by purchasing loans from lenders in the federal student loan programs in the event that those lenders were unable to access the capital needed to finance their lending activity. Like the original legislation, this bill carries no new cost for taxpayers.

“At a time when our rough economy is already dealing a huge blow to American families, we can’t allow trouble in the credit markets to further price students out of a college degree,” said U.S. Rep. George Miller (D-CA), the chairman of the House Education and Labor Committee. “With market turbulence showing no signs of letting up, it’s only prudent to make sure that students have every assurance that the federal student loans they need will be there next year.”

“Congress is continuing to monitor the credit markets closely, and remains committed to do what is necessary to ensure students and families have access to the funds they need to pay for college,” said U.S. Rep. Howard P. “Buck” McKeon (R-CA), the Education and Labor Committee’s senior Republican.  “This measure offers a degree of certainty for the coming school year, and will help stabilize the student loan marketplace as we continue to explore what other steps are needed to ensure long-term financial aid access.”

“Come spring, students and families will be making their plans for the next academic year.   It is critical that we extend the authority for the Secretary to purchase student loans to avoid any uncertainty about the access to this critical source of student financial aid,” said U.S. Rep. Rubén Hinojosa, chairman of the Subcommittee on Higher Education, Lifelong Learning and Competitiveness.  “It would be a tragedy for a student to decide to forgo or postpone college because of a fear of not being able to get a federal student loan.”

“Today’s legislation will ensure that millions of students and their families are able to count on student loan availability for the 2009-2010 academic year.  With so many students depending on this program to pay for college, Congress must act now to pass this critical extension,” said U.S. Rep. Ric Keller (R-FL), the senior Republican on the Higher Education, Lifelong Learning, and Competitiveness Subcommittee.

H.R. 6889 would extend, for one year:

• The temporary authority given to the U.S. Education Secretary to purchase loans from lenders in the federally guaranteed loan program, ensuring that lenders continue to have access to capital to originate new loans, if there was a determination that lenders were unable to meet demand for 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
• The authority to allow guaranty agencies to carry out the functions of lenders of last resort on a school-wide basis. Under existing law, these guaranty agencies are obligated to serve as lenders of last resort to prevent any possible problem in access to student loans.

Last spring, Congress first passed The Ensuring Continued Access to Student Loans Act of 2008, after turmoil in the nation’s credit markets 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.

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