House Committee on Education and Labor
U.S. House of Representatives

The House is scheduled to vote today on the Ensuring Continued Access to Student Loans Act of 2008 (H.R. 5715), a bipartisan bill designed to protect students and families by ensuring the disruptions in the financial markets do not prevent students from pursuing their higher education goals. The bill was approved by the House on April 17, 2008 by a vote of 383-27; it was approved unanimously in the Senate on April 30; and following House passage today it will be sent to the President for his signature.

What it does

The Ensuring Continued Access to Student Loans Act of 2008 contains reforms developed on a bipartisan basis to respond to student loan market instability.  Those include:

• Efforts to inject liquidity and restore investor confidence in the marketplace by 1) authorizing the Department of Education to purchase student loans or commit to purchasing them in the future so that loan providers can continue to fulfill the needs of borrowers, and 2) urging federal financial institutions, including the Federal Financing Bank and Federal Home Loan Banks, to exercise their authority to assist lenders in maintaining student loan availability in the coming academic year and beyond;
• New flexibility for parents provided through a new, optional grace period that permits parents to defer PLUS loan payments until after their children graduate, as well as efforts to ensure parents struggling with the difficulties in the mortgage market are not automatically denied the chance to help pay for their children’s education through PLUS loans;
• Expanded loan availability through higher unsubsidized Stafford loan limits, allowing students to receive more federal funding, which in turn should help reduce reliance on higher cost private loans;
• Additional clarity and consumer protections for the Lender of Last Resort program, particularly with respect to easing participation for students and schools and ensuring funds will be available should they become necessary; and
• Expanded access to grant aid for high-achieving, low-income students through the Academic Competitiveness Grants and Science and Mathematics Access to Retain Talent (SMART) Grants programs.  The changes included in the bill reaffirm the role of states and communities – not the federal government – in establishing academic curricula, which will ensure that more low-income students are able to take advantage of these grant programs.

Why it will help

• The purpose of this bill is to prevent a student loan crisis before it occurs.
• H.R. 5715 is a pro-taxpayer solution that protects students and families without increasing federal spending.
• By permitting the Secretary of Education to purchase loans, the bill creates a temporary backstop in a time of unprecedented market turmoil.
  • This authority is in place for just one year, making clear that the long-term function of the loan programs will not change.
  • This authority is voluntary for both lenders and the Secretary.  No lender is required to sell loans, and the Secretary is not required to purchase them.
  • This authority is cost neutral, requiring that the Secretary can only purchase loans if the result is no net cost to the U.S. government.
  • This authority is flexible, recognizing that the best response is one that allows the Department of Education to be nimble in response to students’ and families’ changing needs.
  • This authority permits continuity for consumers by allowing the Secretary to maintain current servicing, creating a seamless transition for borrowers.
• H.R. 5715 is a first step, but it is certainly not the only step.  Congress should continue to urge the Secretary of Treasury to utilize his available authorities to provide more solutions to the liquidity crisis in a manner that is efficient and would cause the least amount of disruption to students and families.
• This bill will help restore confidence to an irrational marketplace.  It sends a powerful signal to investors that the federal government stands ready to protect the long-term strength and integrity of the program, something that will go a long way toward stabilizing a marketplace that has been shaken by the troubles that began in the subprime mortgage market.
• H.R. 5715 is not a taxpayer bailout.  Lenders did not make bad loans or unwise decisions about providing funds to people that couldn’t pay them back.  The impact on the student loan markets is simply a side effect of the housing credit crunch. These loans are still great investments in millions of students’ futures.

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