KENNEDY ON HOUSE ACTION ON STUDENT LOAN BILL
Today, Senator Edward M. Kennedy, Chairman of the Senate Health, Education, Labor and Pensions Committee, released the following statement in response to the House of Representatives taking up legislation he and Congressman Miller introduced earlier this month.
Senator Kennedy's legislation would reduce students' and families' reliance on high-cost private loans by increasing federal aid and would take important steps to strengthen the student loan program. His legislation increases grant aid for students, strengthens an existing low cost loan program for parents, and takes steps to strengthen the Federal Family Education Loan ("FFEL") program to ensure that students can continue to access loans from private lenders through that program. The bill provides an alternative capital source for lenders who need it to continue making federal loans, at a minimal cost to taxpayers.
Senator Kennedy also has worked to ensure that students have an alternative source for loans through the Direct Loan program, which does not rely on capital from the volatile private market because funding for the loans comes directly from the federal government. Kennedy sent a letter yesterday, urging colleges and universities to protect their students by registering for the Direct Loan program in case the private loan program continues to experience problems caused by problems in the credit markets.
"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."
The Strengthening Student Aid for All Act of 2008 (S. 2815)
Senator Edward M. Kennedy
Reduces the need for students to depend on non-Federal, higher-interest private loans by
· Increasing annual limits on unsubsidized Federal student loans for dependent undergraduate students by $1,000 each year, with a new aggregate limit of $29,500 (up from $23,000).
· Increasing annual limits on unsubsidized Federal student loans for independent undergraduate students and dependent undergraduates whose parents can't obtain parent PLUS loans by $2,000 each year with a new aggregate limit of $57,500 (up from $46,000).
Improves federal Parent (PLUS) loans so they are more attractive than private educational loans and home equity lines of credit by
· Allowing for deferral of repayments on parent PLUS loans while the student for whom the loan was taken out remains in school (currently, parents are required to begin repayment of PLUS loans within 60 days of loan disbursement, even if the student for whom the loan is taken out is still in school).
Reduces low income students' dependency on student loan borrowing by
· Increasing Pell Grants for the lowest-income students by authorizing a "negative Expected Family Contribution," which would allow the maximum Pell Grant ($4731 for the 2008-09 academic year) to be increased by up to $750 for students whose expected family contribution is calculated under federal needs analysis to be a negative number, and for those students whose expected family contribution is automatically determined to be zero.
Ensures the availability of Federal student loans by
· Requiring the Secretary of Education to designate guaranty agencies to be a Lender of Last Resort (LLR) on a school-wide level at the institution's request. Currently, LLRs are provided to individual students who are unable to obtain a loan through the Federal Family Education Loan Program; and
· Clarifying the Secretary's authority to advance funds directly from the Treasury to LLRs, without needing a new appropriation by Congress.
Provides additional options for lenders to access capital to make new loans, should the credit market situation continue, by
· Allowing the Department of Education to serve as the secondary market of last resort for loans originated in the FFEL program. Under this provision, the Secretary of Education would be required to buy FFEL loans that lenders want to sell, and would pay a price equal to par (100% of the outstanding principal and any accrued, unpaid interest on the loans) plus a premium equivalent to the cost of originating such loans in the federal Direct Loan program. The terms and conditions on the loans would remain the same as they were when the borrower took out the loan, and the Secretary could contract with the same servicers who previously serviced the loans to ensure a seamless transition for borrowers.