Student loan upheaval prompts Congress action
April 9th, 2008 | by admin |By Kevin Drawbaugh
WASHINGTON (Reuters) - The $85 billion student loan business is in turmoil and with millions of U.S. students locking in funding for the coming school year, Congress is scrambling to make sure enough money is available.
In another case of fallout from the mortgage crisis, some student lenders are having trouble bundling and selling off their loans due to a general paralysis in securitized debt markets, prompting lawmakers to take action.
A congressional committee is expected on Wednesday to approve bipartisan legislation to let the U.S. Department of Education buy federally guaranteed student loans from lenders unable to sell the loans on the secondary market.
The bill, coming before the House of Representatives education committee, would also let the Education Department funnel capital to state guaranty agencies that could then provide the loan money to colleges in need.
Other provisions in the legislation would try to get more federal loan money to students and ease some payment terms.
“The turmoil in our nation’s financial markets has spread to the federal student loan program,” said Rep. Howard McKeon, senior Republican on the committee and backer of the bill along with committee Chairman George Miller, a Democrat.
“This bill will begin to restore investor confidence, address liquidity shortages, and most importantly, provide assistance to students and parent borrowers,” McKeon said in a statement. Both he and Miller are from California.
A similar bill, which would also boost student grants, has been introduced by Massachusetts Democratic Sen. Edward Kennedy, chairman of the Senate education committee.
