Federal

House Backs Bill to Steady Student-Lending Market

By Alyson Klein — April 18, 2008 4 min read
  • Save to favorites
  • Print

Includes updates and/or revisions.

The House of Representatives this week approved a bill aimed at making sure student loans remain available, despite a shaky credit market.

The measure, sponsored by Rep. George Miller, D-Calif., the chairman of the House Education and Labor Committee, would raise borrowing limits on some federally backed loans so that students wouldn’t have to turn to private lenders, some of whom have tightened their requirements for borrowers recently. And it would make sure a system of safeguards for the federal student-loan program would operate smoothly, in the event it was needed.

The House approved the bill by a vote of 383-27 on April 17.

As of this week, at least 60 private lenders had suspended participation in all or parts of federal student-loan programs, according to FinAid.org, a Web site offering financial-aid information. But many dropped programs allowing college graduates to consolidate their student loans, which has less of an impact on access to loans for college-going students.

About 24 percent of all student loans are issued by private lenders under their own terms and without government backing. Some of these lenders have recently become more stringent in their requirements, particularly for students with poor credit who attend high-cost institutions with low graduation rates.

College Credit

The House approved a bill last week aimed at making sure students are able to access loans for college, despite the credit crunch. The bill would:

• Raise limits on student loans not subsidized by the federal government, allowing dependent undergraduate students to borrow up to $31,000 over the course of their educations. Right now, such students can borrow up to $23,000.

• Permit parents to defer repayment of PLUS loans until up to six months after their children leave school.

• Temporarily classify delinquent mortgages as “extenuating circumstances” to help some parents qualify for PLUS loans.

SOURCE: House Education and Labor Committee

The House bill would help students borrow more money in federally backed loans so that they wouldn’t have to turn to private loans. Under current law, undergraduate students who are dependents of their parents may borrow $3,500 in unsubsidized federal loans during their first year of college, $4,500 during their second year, and up to $5,500 in subsequent years. And over the course of their undergraduate careers, students can borrow up to $23,000 in total federal loans.

Under the bill, students could borrow an additional $2,000 each year. Dependent undergraduates would be able to borrow up to $31,000 total, while independent undergraduates could take out as much as $57,500 over the course of their educations.

The measure would also make it easier for parents to repay PLUS loans, which are federally backed loans designed to help them cover their children’s college costs.

Direct-Lending Option

The measure would also clarify a stop-gap measure in current law that designates federally backed guarantee agencies as the “lenders of last resort,” which are charged with providing a safety net in case students have trouble getting federal loans. If those lenders of last resort have difficulty securing the necessary capital, the Department of Education can ask the Department of the Treasury to advance federal funds to the guarantee agencies so that they can make the loans.

The legislation would make certain that the funds could be advanced for all federally backed loans, not just subsidized ones on which the government pays interest. And the bill would also make it clear that the money for the advancement would be considered mandatory spending, meaning that Congress wouldn’t need to make a special appropriation.

Sen. Edward M. Kennedy, D-Mass., the chairman of the Senate Health, Education, Labor, and Pensions Committee, has introduced a similar bill that would also raise limits on federal loans for students by $1,000 per year, allowing dependent undergraduates to borrow up to $29,500. Sen. Kennedy’s legislation would also make an extra $750 in Pell Grant money available annually to students from some of the neediest families.

Sen. Kennedy this month sent a letter to David Ward, the president of the American Council on Education, a Washington-based association that represents about 1,800 colleges and universities, to encourage colleges to sign up for the federal direct-lending program. That program allows students to borrow from the U.S. Treasury.

The other main federal student-loan program, the Federal Family Education Loan program, subsidizes private lenders who are more likely to be vulnerable to problems in the credit market.

Right now, it’s unclear whether the credit crunch and the problems in the private loan market will have a serious impact on student access to higher education.

Brittny McCarthy, the director of federal relations for the American Association of State Colleges and Universities, said that so far, none of the 430 colleges in her organization has had trouble with getting loans for its students. And if that situation changes, Ms. McCarthy noted, the Education Department has said the direct-lending program was prepared to handle an influx in loan volume, even without federal legislation.

“We’re probably fine in terms of loan access without any additional legislation, but it’s reasonable to make sure and certain that the advances will be there if they’re needed,” said Robert M. Shireman, the executive director of the Project on Student Debt, a Berkeley, Calif.-based research and advocacy organization.

A version of this article appeared in the April 23, 2008 edition of Education Week as House Backs Bill to Steady Student-Lending Market

Events

This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Reading & Literacy Webinar
Your Questions on the Science of Reading, Answered
Dive into the Science of Reading with K-12 leaders. Discover strategies, policy insights, and more in our webinar.
Content provided by Otus
Mathematics Live Online Discussion A Seat at the Table: Breaking the Cycle: How Districts are Turning around Dismal Math Scores
Math myth: Students just aren't good at it? Join us & learn how districts are boosting math scores.
This content is provided by our sponsor. It is not written by and does not necessarily reflect the views of Education Week's editorial staff.
Sponsor
Student Achievement Webinar
How To Tackle The Biggest Hurdles To Effective Tutoring
Learn how districts overcome the three biggest challenges to implementing high-impact tutoring with fidelity: time, talent, and funding.
Content provided by Saga Education

EdWeek Top School Jobs

Teacher Jobs
Search over ten thousand teaching jobs nationwide — elementary, middle, high school and more.
View Jobs
Principal Jobs
Find hundreds of jobs for principals, assistant principals, and other school leadership roles.
View Jobs
Administrator Jobs
Over a thousand district-level jobs: superintendents, directors, more.
View Jobs
Support Staff Jobs
Search thousands of jobs, from paraprofessionals to counselors and more.
View Jobs

Read Next

Federal Opinion 'Jargon' and 'Fads': Departing IES Chief on State of Ed. Research
Better writing, timelier publication, and more focused research centers can help improve the field, Mark Schneider says.
7 min read
Image shows a multi-tailed arrow hitting the bullseye of a target.
DigitalVision Vectors/Getty
Federal Electric School Buses Get a Boost From New State and Federal Policies
New federal standards for emissions could accelerate the push to produce buses that run on clean energy.
3 min read
Stockton Unified School District's new electric bus fleet reduces over 120,000 pounds of carbon emissions and leverages The Mobility House's smart charging and energy management system.
A new rule from the Environmental Protection Agency sets higher fuel efficiency standards for heavy-duty vehicles. By 2032, it projects, 40 percent of new medium heavy-duty vehicles, including school buses, will be electric.
Business Wire via AP
Federal What Would Happen to K-12 in a 2nd Trump Term? A Detailed Policy Agenda Offers Clues
A conservative policy agenda could offer the clearest view yet of K-12 education in a second Trump term.
8 min read
Republican presidential candidate and former President Donald Trump speaks at a campaign rally, March 9, 2024, in Rome Ga.
Former President Donald Trump speaks at a campaign rally, March 9, 2024, in Rome, Ga. Allies of the former president have assembled a detailed policy agenda for every corner of the federal government with the idea that it would be ready for a conservative president to use at the start of a new term next year.
Mike Stewart/AP
Federal Opinion Student Literacy Rates Are Concerning. How Can We Turn This Around?
The ranking Republican senator on the education committee wants to hear from educators and families about making improvements.
6 min read
Image shows a multi-tailed arrow hitting the bullseye of a target.
DigitalVision Vectors/Getty