Specter, PA Delegation Call on Administration to Protect Student Loans
PHEAA Forced to Suspend Lending Activity Because of Credit Crunch
Effective today, the Pennsylvania Higher Education Assistance Agency (PHEAA) will temporarily suspend its activities as a Federal Family Education Loan Program (FFELP) lender because of recent instability in the financial markets. Concerned with possible disruptions to new student loans for fall 2008, Senator Specter has spearheaded a letter from members of the Pennsylvania delegation urging administration officials to take swift action to ensure the continued availability and affordability of student loans.
"Student loans are a vital cog in Pennsylvania's and the nation's economy," the members wrote. "It is for these reasons that we call upon you to work cooperatively and quickly to identify and implement a plan to provide access to capital sources for use in originating and purchasing FFEL Program loans."
The bipartisan letter, addressed to Treasury Secretary Henry Paulson, Education Secretary Margaret Spellings, and Federal Reserve Chairman Ben Bernanke, calls on the administration to work to provide short-term relief for those entities denied access to the credit markets or who cannot obtain financing at reasonable rates. In addition, the letter urges the development a long-term strategy so that future capital market disruptions will not in any way impede the access of students to the loans they need to finance their education.
Student loan agencies are being impacted by a tightening in the availability of credit and the weakened faith of investors in the capital markets. Similar student loan agencies in Michigan and Iowa have already announced their inability to provide new student loans this fall.
Pennsylvania Members signing on to the letter include: Senators Arlen Specter and Bob Casey; Representatives Phil English, Paul Kanjorski, Charles Dent, Joe Sestak, Joseph Pitts, Robert Brady, Bill Shuster, Mike Doyle, Jim Gerlach, Tim Holden, Tim Murphy, Allyson Schwartz, Todd Platts, Jason Altmire, Chaka Fattah, and Christopher Carney.
Full text of the letter follows:
March 6, 2008
The Honorable Secretary Henry Paulson
The Honorable Secretary Margaret Spellings
The Honorable Chairman Ben Bernanke
Dear Secretary Paulson, Secretary Spellings, and Chairman Bernanke:
Student loans are a vital cog in Pennsylvania's and the nation's economy. Increasingly students and their families rely on student loans to provide the resources needed to pay for postsecondary education and training. The future health of the nation's economy is intrinsically linked to the education and training received by its workforce.
For this reason, we, the Members of Congress and Senators representing the Commonwealth of Pennsylvania, are very concerned by recent media coverage and other reports we have received regarding instability in the financial markets that fund some student loans. It is our understanding that, in their current condition, these markets cannot be relied upon to provide the capital necessary to fund the nearly $60 billion in Federal Family Education Loan Program (FFELP) loans that students will need to fund their studies in the 2008-09 academic year, which begins this summer.
Specific to Pennsylvania, the Pennsylvania Higher Education Assistance Agency has announced that it has suspended its loan originations and purchase operations until the financial markets regain stability. According to that Agency, their cost of funding has increased precipitously in recent months and their access to the credit markets has been severely limited. The cost of credit has made the issuance or purchase of new loans uneconomic, even if enough such credit was available. Pennsylvania is not alone in experiencing this hardship or in taking these types of measures. Already, sister agencies have announced similar policies and it is expected that more will follow. A number of for-profit entities have also expressed similar concerns and some have ceased their student loan operations.
It is for these reasons that we call upon you to work cooperatively and quickly to identify and implement a plan to provide access to capital sources for use in originating and purchasing FFELP loans. This plan should provide short-term relief for those entities denied access to the credit markets or who cannot obtain financing at reasonable rates. In addition, we urge you to make certain that a long-term strategy is in place so that capital market disruptions will not in any way impede the access of students to the loans they need to finance their education.
If no action is taken, students, especially those whose families are low-income, single parent, or have credit problems could be negatively affected. Please report to us as soon as practical regarding the steps you plan to take to assure access to FFELP student loans. Thank you for your prompt attention to this matter.
U.S. Senator Arlen Specter
U.S. Senator Bob Casey
U.S. Representative Phil English
U.S. Representative Paul Kanjorski
U.S. Representative Charles Dent
U.S. Representative Joe Sestak
U.S. Representative Joseph Pitts
U.S. Representative Robert Brady
U.S. Representative Bill Shuster
U.S. Representative Mike Doyle
U.S. Representative Jim Gerlach
U.S. Representative Tim Holden
U.S. Representative Tim Murphy
U.S. Representative Allyson Schwartz
U.S. Representative Todd Platts
U.S. Representative Jason Altmire
U.S. Representative Chaka Fattah
U.S. Representative Christopher Carney