Congress Passes Emergency Student Loan Access Legislation

The U.S. Congress has approved legislation designed to address the impact of the credit crunch on the Federal Family Education Loan Program, to ensure student and parent access to student loans through lenders of last resort, and to increase loan limits on Federal Stafford loans and make Federal PLUS loans more attractive to borrowers.

The White House has indicated that President Bush will sign the bill into law. The Ensuring Continued Access to Student Loans Act of 2008 includes the following provisions:

• To provide capital for private lenders to make new FFELP loans, the measure provides temporary authority, until July 1, 2009, for the U.S. secretary of education to purchase FFELP loans issued since Oct. 1, 2003. The terms of these purchase agreements will be published in a Federal Register notice. The selling lender may be able to continue to service the loans under certain conditions.
• As a backstop for eligible students and parents who can’t find FFELP lenders willing to issue loans to them, the legislation would permit the education secretary to designate individual schools as eligible for lender of last resort loans and confirms the secretary’s authority to advance federal funds to student loan guarantors to support lender of last resort loans.
• The measure also increases annual unsubsidized Stafford loan limits for undergraduates by $2,000 and hikes aggregate loan limits for dependent undergraduate students to $31,000, up from $23,000, and for independent undergraduate students to $57,500, up from $46,000. The increases are effective for loans first disbursed on or after July 1, 2008.
• The legislation makes parent PLUS loans more attractive as an alternative to private loans by providing a six-month grace period on parent PLUS loans and permitting PLUS borrowers with adverse credit to qualify for a PLUS loan as an extenuating circumstance if their mortgage payments or medical payments are 180 days or less past due or their other debt payments are less than 90 days past due. These new extenuating circumstances would be effective through Dec. 31, 2009.

Sen. Edward Kennedy, D-Mass., who sponsored similar legislation in the Senate, said the bill ensures students will not be denied access to funds for college. “What started as a crisis in the housing market has spread to the banks and beyond,” Kennedy said. “But we must draw the line there and not let the crisis in the credit markets become a crisis for students struggling to pay for college and access to the American Dream.”