Ensuring Continued Access To Student Loans Act Of 2008
Madam Chairman, I rise today in support of H.R. 5715, the ``Ensuring Continued Access to Student Loans Act of 2008.'' This legislation will go a long way in helping to ensure the continued availability of Federal student loans. But it is…
Madam Chairman, I rise today in support of H.R. 5715, the ``Ensuring Continued Access to Student Loans Act of 2008.''
This legislation will go a long way in helping to ensure the continued availability of Federal student loans. But it is only a first step and more needs to be done so that any student anywhere in America can attend the college of his or her choice.
Today, 80 percent of all Federal student loans are made through the Federal Family Education Loan Program--commonly known as FFELP. According to the U.S. Department of Education, 6.8 million college students and their families will borrow nearly $60 billion from State, non-profit and private lenders who participate in the Federal student loan program.
Ninety-five percent of all student loans made in the Commonwealth of Pennsylvania and nearly all student loans made at schools in my district are made through the FFEL program. Unfortunately, earlier this year, the Pennsylvania Higher Education Assistance Agency--which was the second largest provider of Federal student loans in Pennsylvania last year--was forced to stop making Federal student loans. PHEAA's exit, along with others, from Pennsylvania's student loan market, means that nearly one-third of all borrowers in the Commonwealth must find new lenders for the upcoming academic year.
In responding to the student loan credit crunch, the Administration has said that there are 2,000 lenders. That was true, but over the past few weeks, 52 lenders, including 23 of the top 100 lenders have simply stopped making Federal student loans. This represents over 13 percent of all FFELP loans made last year.
Nineteen lenders have stopped making private education loans.
In just the days since the Education and Labor Committee approved this bill and sent it to the floor, five major participants in the FFEL program have either stopped making Federal student loans altogether or have announced plans to dramatically scale back their ability to offer Federal student loans.
In responding to the student loan credit crunch, some have said, we can make the State guaranty agencies ``Lenders of Last Resort,'' but this system has never been implemented, let alone tested.
Others have said that if lenders stop making loans, students and schools can switch to Direct Lending. Yet Secretary Spellings recently testified that Direct Lending can only accommodate about one-third of the FFELP loan volume. If that is true, what will happen to the 4.5 million students who may find themselves unable to get a Federal student loan?
And still others have said that no students have been denied college loans yet so there is no need to act.
I think most of my colleagues agree that the best time to prepare for a hurricane is before the storm hits.
That is why the stated purpose of H.R. 5715 is to ensure continued, uninterrupted access to Federal student loans. One of its provisions would authorize the Secretary of Education, in consultation with the Treasury, to purchase student loans if there is not enough loan capital to meet the needs of students and their families.
While I am pleased that the manager's amendment includes a provision that will provide borrowers with a continuity of loan servicers, and thereby keep default rates down, I am concerned that the provision authorizing the Secretary to purchase loans does not provide enough information or certainty to the marketplace to help increase access to college. Without this information, lenders may be financially unable to make new loans to new students this fall.
During the consideration of this legislation by the Rules Committee, I offered an amendment that, had it been approved, would have defined the terms under which the Secretary of Education could exercise her temporary authority to both purchase student loans and maintain a continuity of servicing in order to minimize any disruption for students and schools.
As this bill makes it way through the legislative process I hope that we will incorporate this language to define the terms under which the Secretary can exercise her temporary authority to purchase student loans more clearly than what is before us today.
Madam Chairman, I am supporting this important legislation today, but our work is not done. While we may not be in a student loan crisis today and we certainly do not want to be alarmist, the responsible thing for Congress to do is to give the Administration all of the tools necessary to head off a student loan crisis. If I am wrong about the direction of the student loan market, and we incorporate my amendment, we will have a very strong back-up plan for a rainy day. If I am right and we do nothing, millions of students could be unable to go to college.