April 30, 2008
Statement

Floor Statement on Ensuring Access to Student Loans

MR. REED:  Mr. President, I strongly support passage of H.R. 5715, the Ensuring Continued Access to Student Loans Act.

As an original cosponsor of the Senate companion of this legislation, I am pleased that this bipartisan bill seeks to proactively address the impact of the credit crunch on the student loan market, and ensure that students attending college this fall have sustained, uninterrupted access to affordable Federal grant and loan aid.

In an effort to increase college access and affordability, last fall Congress passed the College Cost Reduction and Access Act, to provide over $20 billion in new student financial aid. I was glad to help write this law. It increased the maximum Pell Grant by nearly $500 this year and to $5,400 by 2012, providing Rhode Island students with $7.8 million in additional grant aid this year and nearly $85 million over the next 5 years. To help students and families borrowing for college, this law also cut the interest rate on federal loans in half for undergraduate students over 4 years; capped monthly payments on Federal student loans at 15 percent of a borrower's discretionary income; and encouraged public service by forgiving loan debt for those like nurses, teachers, and librarians after 10 years.

However, the current instability of the credit markets has raised concern in my home state of Rhode Island and across the country regarding the availability this spring of federal loans and how parents will be able to pay tuition for their sons and daughters to attend college in the fall. Although we have not heard of a single student or parent unable to receive a federal loan yet, the busy time of year for borrowing has only just begun as most student loan applications are not due until the beginning of May.  Additionally, we know that over 50 lenders nationwide have stopped offering federally subsidized loans.

As such, this bill takes important initial steps to ensuring that students and their families have the necessary financial means to attend and succeed in college. It provides additional grant aid opportunities for low-income students to reduce their reliance on student loans by directing savings generated by the bill into increased Academic Competitiveness and National SMART Grants.

These two grant programs provided nearly 2,100 Rhode Island students with over $2.2 million in additional grant aid in 2006-07.  It also reduces student reliance on costlier private loans by expanding the amount a student may borrow through a modest raise in the federal Stafford loan limits. 

The bill also improves the availability of lower-interest federally subsidized PLUS loans for parent borrowers by providing an option to defer repayment of these loans until after their child graduates college, and ensuring that parents recently impacted by the downturn in the housing market can continue to qualify for these loans.

The bill also takes a number of actions to provide an overall federal backstop so students do not have to borrow higher cost private loans. First, to ensure lenders have the necessary capital to make new federal loans, the bill gives temporary authority to the Department of Education to act as a secondary market for loans originated in the federally subsidized student loan market. It also eases the process by which a guaranty agency or institution may be deemed eligible as a lender of last resort, ensuring the further availability of federal student loans.  And the direct loan program is on stand-by for institutions concerned that their students may experience difficulty finding a federal loan this year. Direct loans are directly originated by the federal government and as such, not subject to credit market instability and fluctuation.

I thank Senators Kennedy and Enzi, and their staffs, for their work and leadership on this bill. I will continue to very closely monitor this situation and explore any additional necessary options in the coming weeks to ensure that the credit crunch does not prevent deserving students from attending college.

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