With urban, low-income students most likely to face the fallout from the student loan credit crunch, House lawmakers say the Department of Education should prepare a contingency ‘lender of last resort’ program to assure continued access to loan capital.
“Students and families working hard to pay for college deserve every assurance that the department has plans in place that would safeguard access to all the federal college loans they are eligible to receive,” said Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee, at a committee hearing Friday. “It isn’t enough for the department to simply monitor this situation.”
Under the government’s lender-of-last resort program, the U.S. education secretary could designate 35 guaranty agencies to provide loan capital in an emergency.
“There are tools already built into federal law that would provide students seamless access to all the federal college loans they are eligible to receive,” he said.
Secretary of Education Margaret Spellings told Miller the department is tracking daily loan volume in both the Federal Family Education Loan program — which relies on banks — and the federal Direct Loan program, comparing new data with past years. The department has sent letters to college presidents and financial aid officers on the loan situation and provided a new brochure on financial aid.
The Direct Loan program also can step in to cover additional borrowing. “We will be fully prepared to meet any situation,” she said.
But several organizations presenting testimony to the committee said they feared that low-income students would bear the brunt of any uncertainty in the loan market.
