Baucus, Tester send 'wake up call' to protect student loans
Senators urge Bush Administration to 'steer us away' from future crisis
Montana U.S. Senators Max Baucus and Jon Tester have joined 18 of their colleagues to send a wake-up call to the Bush Administration, demanding a preemptive fix to protect student loans.
The bipartisan group of senators sent a letter to the Education and Treasury Secretaries, asking them to "make full and immediate use of your existing authorities to help steer us away from the impending crisis."
Most of Montana's student loans come from the Federal Family Education Loan Program (FFELP). These loans are financed by bonds traded on Wall Street. In a shaky economy investors are less likely to buy bonds, resulting in higher interest rates.
The Montana Higher Education Student Assistance Corp., which oversees student loans in Montana, relies on FFELP loans. Financing to be used for student loans for the upcoming academic year has already been secured, so the problem won't affect Montana this year. But Baucus and Tester say it's time for some long-range planning to avoid a collapse in the future.
The Senators want the Bush Administration to take action to make sure middle class families have access to student loans no matter what happens to the economy.
"We urge you to use the authority of your departments to provide a solution which will ensure access to student loans and help keep the cost of education finance as low as possible," the Senators wrote.
Both Baucus and Tester also noted the government's recent $30 billion bailout of troubled investment bank Bear Stearns.
"This is a wake-up call for the Bush Administration," Baucus said. "It's a fair request from a lot of folks on both sides of the aisle. They need to do what they can now so we can avoid an expensive fix in the future."
"We saw the government step in to protect a Wall Street bank," Tester said. "Working families need the Administration to step in to make sure Montana college students don't see their aspirations fall apart because of a lack of effort on the part of the government."
The Senators' letter to U.S. Treasury Secretary Henry Paulson and U.S. Education Secretary Margaret Spellings appears below.
Dear Secretary Paulson and Secretary Spellings:
In the past several weeks it has become clear that we are entering a period of urgency regarding access to student loans. American families have begun to feel the crunch of the higher education funding crisis which began with the sub-prime mortgage setbacks and subsequent capital market difficulties. The Federal Family Education Loan Program (FFELP), which initiates eighty-percent of our nation's student loans, relies heavily on this market and the severe liquidity problems therein have created a credit vacuum which directly impacts students in our states.
The U.S. Department of Education projects that nearly $60 billion in new FFELP loans will be needed for 6.7 million borrowers this academic year. American families rely heavily on this financing and we urge you to use the providence and authorities of your departments to provide a solution which will ensure access to student loans and to help keep the cost of education finance as low as possible, in a way that is the least disruptive to students or schools. We remain hopeful that you will make full and immediate use of your existing authorities to help steer us away from the impending crisis.
We stand prepared to assist in any capacity necessary and look forward to hearing what action you plan on taking to assure middle-class families that access to student loans will not be an obstacle to their children's educational aspirations.
B. Nelson, Burr, Bingaman, Enzi, Johnson, Alexander, Salazar, Roberts, Webb, Grassley, Tester, Isakson, Baucus, Thune, Lincoln, Hatch, Pryor, Sununu, Landrieu, Murkowski