Letter to Presidents of Massachusetts Colleges and Universities
KENNEDY SENDS LETTER URGING MASSACHUSETTS COLLEGES TO TAKE STEPS TO PROTECT STUDENT ACCESS TO LOANS
Today, Senator Edward M. Kennedy, Chairman of the Senate Health, Education, Labor and Pensions Committee, sent the following letter to the Presidents of nearly 100 Massachusetts colleges and universities, urging them to take steps to protect students' access to federal loans given volatility in the credit markets.
In the letter, Chairman Kennedy urged schools to enroll in the Direct Loan program which 45 Massachusetts schools already participate in as a backup for their students, even if they choose not to use the program now. The Direct Loan Program does not rely on capital from the volatile private markets, and is a stable, reliable option for schools to ensure that students can continue to access federally-backed loans regardless of the actions of private lenders.
Kennedy also urged schools to ensure that students and parents are taking full advantage of federal grants and loans before turning to higher-cost private loans. As more and more students turn to non-federal, private loans to help finance their degree, the Department of Education estimates that 40 to 60 percent of students who borrow non-federal private loans are not taking advantage of all the federal grants and low-cost loans for which they are eligible.
Kennedy's letter also detailed the steps he has taken to reduce students' reliance on high-cost private loans and to ensure continued access to federal loans. Specifically, Kennedy outlined legislation he introduced earlier this month - which is being considered by the House of Representatives today - that would increase federal loan limits for students and shore up the federal loan programs to ensure that students and families continue to have multiple options for financing college, whether they choose to borrow federal loans directly from the government or from private lenders through the Federal Family Education Loan Program. For example, Kennedy's legislation includes a provision to allow the Secretary of Education to purchase federal loans from cash-strapped lenders in exchange for capital to make new student loans for the fall.
"We can't allow the turmoil in the credit markets to become a barrier to college opportunity." Kennedy said. "Access to college should not be determined by corporate profit margins. The legislation I introduced last week and that is being considered by the House of Representatives today will ensure that students and families continue to have multiple options for securing the funds they need for college this fall, even if the situation takes a turn for the worse. I am hopeful that the Senate also will act swiftly to enact these provisions to reassure students and families."
Following are a copy of the letter Kennedy sent to the colleges and universities, a list of the recipients of the letter, and a summary of his legislation, the Strengthening Student Aid for All Act of 2008.
April 17, 2008
Dear College President,
As you know, families around the country have been affected on many fronts by the recent turbulence in the economy. Now some families are becoming concerned that the loans they rely on to afford college may be at risk. We have not yet heard of students having problems obtaining federal loans at this point, but we cannot allow problems in the credit markets to prevent students from going to college. We in Congress are doing all we can to strengthen the federal loan programs to make sure that students and families continue to have timely, uninterrupted access to student aid. I'm writing to thank you for all you are doing to help students and families at this challenging time and to recommend two additional steps that your institution may want to consider. I hope you will call on my office if we can be of any assistance to you or your students.
In recent weeks, I've been in contact with the Secretary of Education to urge her to take all steps within her authority to guarantee that the backstops in current law are in place and operational in order to protect students from current problems in the markets.
I've urged Secretary Spellings to make it as easy as possible for colleges and families to participate in the Direct Loan Program. I've also urged her to strengthen the FFEL program, by putting in place a plan to activate the "Lender-of-Last-Resort" program, which enables her to advance capital to designated lenders and guaranty agencies, to help students having trouble finding loans through other banks.
But there is more we can do. Recently, I was joined by five of my Senate colleagues in introducing legislation to provide additional protections and assistance for students and families. The Strengthening Student Aid for All Act (S. 2815) will reduce the need to rely on higher cost private loans by increasing grant aid for the neediest students, expanding federal loan limits, and making low cost federally-subsidized loans to parents more attractive. The bill also ensures that the federal government shores up the FFEL program so that it can continue to operate if the problems in the capital markets unexpectedly worsen. Chairman Miller has introduced similar legislation in the House. Attached is a summary of the legislation, we welcome any thoughts and suggestions you may have.
I also encourage you to register to participate in the Direct Loan Program if you are not already registered. Registration does not commit you to use the program. Even if your institution does decide to participate in the program, it does not preclude your participation in the FFEL program at the same time or at a later date. The Direct Loan Program provides a stable, reliable source of resources for students and families. It relies on funds from the U.S. Treasury and is completely insulated from the volatility in the credit markets. Currently, over 1,150 schools participate in the Direct Loan Program, and over 800 more have signed up so that they can choose to use the program if their students begin to have problems obtaining federal loans through private lenders. I've encouraged the Secretary of Education to develop an expedited process to assist institutions in enrolling in the program, and she's assured me that the Department has streamlined the process significantly. The Direct Loan Program can be an effective safety net for students, and assure stable access to federally-subsidized student loans.
For students who rely on more expensive private loans, I recommend that you urge students and parents to take full advantage of the assistance available to them under the federal grant and loan programs, before turning to higher-cost private loans. According to Department of Education estimates, as many as 40 to 60 percent of students who borrow private loans have not fully exhausted their eligibility for federal assistance. In addition, as parents begin to face difficulties in obtaining home equity lines of credit and other sources of financing that may have been available in a more stable economy, I hope you will remind them that they are eligible to borrow parent PLUS loans up to the cost of attendance, and that the federal government does not require them to fill out a Free Application for Federal Student Aid to do so. We are taking steps in the reauthorization of the Higher Education Act to ensure that private lenders act in good faith to make students aware of their federal options first, and hope you will do all you can to assist in these efforts.
I thank you and your institution for all you do to assist students and families in meeting the costs of college. In today's knowledge economy, few things are more important. I encourage you or those handling financial aid issues at your school to contact my office if students begin to have problems obtaining student loans, and I very much hope that you will share any suggestions you have about additional steps that Congress should take to protect students and families in today's uncertain economy.
With respect and appreciation,
Edward M. Kennedy
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