As three more large student-loan providers pull out of the government-subsidized loan program, the National Association of Student Financial Aid Administrators is urging the Department of Education to institute three critical “safety nets” to ensure “all federal loans remain accessible to all eligible students.”
A letter from Dr. Philip Day, NASFAA president, this week to U.S. Education Secretary Margaret Spellings comes on the heels of a request by 31 members of Congress for the Federal Reserve to intervene in what analysts are calling a student loans crisis.
The increasing volatility of financial markets could disrupt access for an estimated 6.7 million students expected to apply for Federal Family Education Loan programs in the fall. Already, the Pennsylvania Higher Education Assistance Agency, which aids 500,000 students, shelved its Federal Family Education Loan program.
House members from both parties petitioned the Federal Reserve to intervene and steady the precarious student loan market. The request came Monday, a day after the central bank pledged a $30 billion line of credit to back up the assets of Bear Stearns & Co., the investment firm that was acquired by JP Morgan Chase & Co. Neither the Federal Reserve nor the Treasury Department has yet responded to the student loan intervention request.
Rep. Paul Kanjorski, D-Pa., chairman of the House Financial Services Committee’s capital markets, insurance and government sponsored enterprises subcommittee, and 30 other representatives released a letter urging Federal Reserve Chairman
Ben Bernanke to restore stability in the student loan marketplace to ensure continued access to student loans.
“In our letter, we asked the Federal Reserve to use its emergency authority to provide access to the Federal Reserve for student loan originators issuing highly rated securities backed by student loans,” Kanjorski said. “We also asked the Federal Reserve to allow originators to use student loans asset-backed securities as collateral at the security lending facility announce last week.”
