Kennedy Bill Seeks to Ensure Student Loan Access, Reduce Reliance on Private Loans

Sen. Edward Kennedy, D-Mass., said that the Strengthening Student Aid for All Act that he introduced April 3 is designed to ensure student loan dollars are available in the face of the shaky credit market, which has made it more difficult and more expensive for lenders to obtain the financing for student loans.

“We can’t allow problems in the credit market to prevent students from going to college,” said Kennedy, who chairs the Senate Committee on Health, Education, Labor, and Pensions.

The legislation includes the following provisions:

• Ensures that lenders can continue to make new federal student loans by allowing the secretary of education to serve as a temporary “secondary market of last resort.” The legislation would authorize the U.S. Department of Education to purchase Federal Family Education Loan Program loans from lenders for the amount of the outstanding principal and interest plus the cost of originating a comparable direct loan.
• Clarifies that lender of last resort eligibility, under which a student loan guarantor serves as or designates a lender for borrowers who cannot find FFELP lenders, could be sought by the school rather than on a student-by-student basis. The legislation also seeks to clarify a process for providing advances of federal funds for lender of last resort loans.
• Seeks to reduce reliance on private loans by raising annual and aggregate unsubsidized Stafford loan limits for undergraduates. The legislation also would increase the maximum Pell Grant award for the lowest-income students by $750, and it seeks to make parent PLUS loans more attractive by permitting payments to be deferred while the dependent undergraduate for whose benefit the loan was issued attends school.

Kennedy introduced the legislation as House and Senate conferees are working to hammer out compromise legislation to reauthorize the Higher Education Act.

Rep. George Miller, D-Calif., who chairs the U.S. House Committee on Education and Labor, and Rep. Rubén Hinojosa Hinojosa, D-Texas, plan to introduce companion legislation in the House.