U.S. House Approves Emergency Legislation to Ensure Student Loan Access

On a vote of 383 to 27, the U.S. House has passed the Ensuring Continued Access to Student Loans Act of 2008. The legislation is designed to prevent interruptions in the availability of federal student loans due to the credit crunch and to reduce reliance on private student loans.

To inject liquidity into the Federal Family Education Loan Program, the bill would permit lenders to sell FFELP loans to the U.S. secretary of education and use the proceeds to support new loan originations. An amendment approved on the House floor would permit the education secretary to contract with the selling lender to continue to service the loan.

“At a time when the turmoil in the nation’s credit markets has made it difficult for some lenders to access the capital they need to finance their student lending activity, this bipartisan bill will ensure that students and parents are able to continue to access the federal loans they need to pay for college,” said Rep. George Miller, D-Calif., who chairs the House Committee on Education and Labor.

In the event eligible students are unable to find a FFELP lender willing to make them a loan, the legislation clarifies that the education secretary can designate an entire school as eligible for lender of last resort loans made by or facilitated by a student loan guarantor.

To reduce reliance on private student loans, the legislation would raise annual unsubsidized Stafford loan limits by $2,000, and increase aggregate loan limits for dependent undergraduates to $31,000 and for independent undergraduates to $57,500. To make parent PLUS loans more attractive, the measure provides a six-month grace period before repayment begins. The bill also would permit parent-borrowers to qualify for a PLUS loan despite adverse credit, if they have a home mortgage delinquency or medical bills past due for up to 180 days.

A companion bill, introduced in the U.S. Senate by Sen. Edward Kennedy, D-Mass., is expected to be attached to other legislation moving through the Senate to ensure swift action.

Additional legislation introduced in the House and Senate would tap other federal authority to restore liquidity to the loan program.