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Press Releases

For Immediate Release:
April 17, 2008
 

House Acts On Student Loans

Petri Amendment Approved
 

WASHINGTON - The House of Representatives Thursday approved the Ensuring Continued Access to Student Loans Act, H.R. 5715, legislation to make sure that contingency plans are in place to provide students and families with continued access to federal loans, regardless of what is happening in the credit markets.

The House also approved an amendment to the bill that was offered by Rep. Tom Petri (R-WI) to require the Secretary of Education to review and revise as necessary the regulations concerning prohibited guaranty agency inducements to ensure that such agencies do not engage in improper inducements as lenders of last resort.

Under existing law, Federal Family Education Loan (FFEL) Program guaranty agencies are obligated to serve as lenders of last resort to borrowers who have been denied a federal student loan by two lenders.  H.R. 5715 would expand the lender of last resort program by permitting an entire higher education institution, rather than just individuals, to participate in the lender of last resort program and also clarifies the Secretary of Education's authority to advance mandatory funds to guaranty agencies to serve as the lender of last resort.  Currently, guaranty agencies are provided flexibility from the general lender prohibitions regarding inducements and exempted from others when they act as lenders of last resort.

Petri noted that many of the inducement scandals exposed in the last year were a result of loopholes in the law.  His amendment is meant to make sure that the changes made to the lender of last resort program will not result in loopholes that give way to abuse.

The Ensuring Access to Student Loans Act was proposed in response to reports that turmoil in the U.S. credit markets has made it difficult for some lenders in the federally guaranteed student loan program to secure capital needed to finance college loans, leading some lenders to scale back their lending activity and leading others to raise the alarm that students may be denied loans unless action is taken.

The legislation would increase unsubsidized Stafford loan limits for all borrowers, make changes to stretch out the reimbursement for Parent PLUS Loans, clarify and expand the current lender of last resort program, and give the Secretary of Education the temporary authority to purchase loans from FFEL lenders.  

Petri, a senior member of the Education and Labor Committee, supported passage of the legislation but reminded his colleagues that, "To date, no student or college has reported any problems accessing federal student aid.  Currently, the disruption is best described as forcing some students to switch lenders."

He went on to stress that the federal government has another student loan program that is immune to effects of the credit market - the Direct Loan Program.

Currently, the Direct Loan program accounts for 20 percent of the student loan market.  However, the Secretary of Education has stated on multiple occasions that the Direct Loan Program could easily double the amount of new loans it makes to students.  Just this year, over a hundred schools have applied to participate in the Direct Loan Program.

 "It is just common sense that in times of market turmoil, instead of relying on untested fall back measures in the FFEL program, universities should also consider the Direct Loan Program."

"The message from Congress to students and families should be that they should not panic and should continue to pursue federal student aid in the upcoming school year.  There are measures in place, and in this bill we are strengthening those measures, to ensure that students will always have access to federal student loans."