The House Education Committee on Wednesday approved a bill that would allow the Department of Education to buy federally guaranteed student loans from private lenders unable to sell them. This would ensure lenders have access to capital to provide additional loans.
“We have taken critical steps today toward ensuring that the credit crisis in the financial markets does not jeopardize our federal student loan programs,” said U.S. Rep. Rubén Hinojosa, the chair of the House subcommittee on higher education, lifelong learning, and competitiveness. “This legislation signals that federal government is prepared to use all the tools at its disposal to make certain that the subprime mortgage crisis does not trigger a college access crisis.”
The Ensuring Continued Access to Student Loan Act would also:
- Reduce borrowers’ reliance on costlier private college loans by increasing the annual loan limits on federal college loans by $2,000 for all students, and by increasing the aggregate (the total loan limit over the course of a student’s education) loan limits to $31,000 for dependent undergraduates and $57,500 for independent undergraduates;
- Give parent borrowers more time to begin paying off their federal PLUS loans by providing them with the option to defer repayment until up to six months after their children leave school, which would give families more flexibility in hard economic times.
- Help struggling homeowners pay for college by making sure that short-term delinquencies in mortgage payments don’t prohibit otherwise eligible parents from being able to borrow parent PLUS loans.
Clarify that existing law gives the U.S. education secretary the authority to advance federal funds to guaranty agencies in the event that they do not have sufficient capital to originate new loans, and allow guaranty agencies to carry out the functions of lender of last resort on a school-wide basis.
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