FROM: Dr. Philip Day, President and CEO

DATE: May 9, 2008

RE: NASFAA's Commitment To Students During Loan Crunch

Dear NASFAA Members:

The turbulence in the credit markets in recent months threatened students’ access to low-cost federal student loans. That is why NASFAA considers it a major victory that President Bush signed the Ensuring Continued Access to Student Loans Act of 2008 (H.R. 5715) into law Wednesday. This law creates important backstops to ensure loan access even if credit market conditions continue to deteriorate. The law also increases the amounts students can borrow in the federal student loan programs, to help them avoid costlier private student loans.

NASFAA also supports efforts by the Direct Student Loan Coalition to help schools that want to transition into the Direct Loan program do so as smoothly as possible. However, some schools are unable to make the transition before the start of the 2008-09 academic year, and others are not interested in making a transition. For students attending these schools, the NASFAA Board of Directors and I are united in ensuring that students who depend on FFELP loans - and those who depend on private loans to augment their federal loans - continue to have access to them.

H.R. 5715 is an important first step, but other measures may be necessary in the future. Last week the Federal Reserve announced that it will allow financial institutions to use AAA asset-backed securities made up of FFELP student loans to be pledged as collateral when borrowing from the Fed’s Term Securities Lending Facility (TSLF). This is another step in the right direction.NASFAA also supports the continued consideration of other legislation that would allow the Federal Financing Bank (FFB) and the Federal Home Loan Banks emergency authority to provide lender’s with additional capital should it be needed.

I want to be clear that NASFAA’s efforts in this matter are to ensure federal student loan liquidity for students. Many students depend on a healthy FFEL program to access higher education. Students have become increasingly more reliant on federal and private student loans to finance their education and any disruptions could create a barrier to their enrolling in and completing a postsecondary education. The extent to which FFELP lenders are subsidized by the federal government and the amount they profit from student loans are important aspects of the program that should be openly debated and scrutinized. However, borrower access to student loans should take priority in the immediate future. Considering what happened in the sub-prime mortgage market, NASFAA is determined to ensure that a healthy and accessible loan program is a top priority.

NASFAA feels that lenders also have a moral responsibility to offer federal student loans to all students enrolled in an eligible program, regardless of the student’s situation. As we advocate for increased liquidity during this credit crunch, we also fully expect lenders not to deny students federal loans based on the school they attend or any other criteria. We will urge the Secretary to exercise whatever regulatory intervention she deems necessary to insure that no eligible student at any institution is denied access to loans. This is not about liquidity, this is about access and success for students!

Our commitment to students continues to be unwavering. Any disruptions in federal student loan availability this coming academic year will be unacceptable. NASFAA will continue to champion the needs of students on Capitol Hill and with the Department of Education to help ensure that students are not denied funds that have become a critical component of their financial aid package.