In response to lenders in the Federal Family Education Loan Program that have stopped offering federal student loans to students based on the school they attend, Senators Patty Murray (D-WA) and Chris Dodd (D-CT) introduced the Preventing Student Loan Discrimination Act yesterday. The bill would prohibit lenders from denying FFELP loans to eligible students solely based on the institution where they attend, the length of their college program, or their income level.
"Lenders offering loans backed by taxpayer dollars shouldn't be able to discriminate against certain schools or students," said Murray in a press statement released yesterday.
"As millions of hardworking American families are being squeezed between rising energy and fuel prices and stagnant incomes, we cannot stand by and allow these discriminatory practices to continue," said Dodd. "No student should be denied their dream of a higher education simply due to the school they attend or their income."
The bill is already gaining some steam, even though many Senators have yet to review it. A spokesperson from Senator Edward Kennedy's office told The New York Times that Kennedy is planning on cosponsoring the legislation.
Several major lenders, including Chase and Citibank, have stopped offering federal loans to students who attend institutions with high default rates or low average loan balances. Several lenders who have stopped making loans to students based on the type of institution they attend say that making loans to students at those schools is neither profitable nor sustainable.
What effect this legislation could have on lenders is unknown. Some fear that a provision that requires lenders to lend to all students could have the unintended consequence of pushing them out of the FFEL program entirely.
"C.B.A. is anxious to review the details of the new legislation introduced by the senators," said Consumer Bankers Association President Joe Belew in a statement released yesterday. "We hope to work with them to craft legislation that achieves the goal of averting a loan access problem in a way consistent with the diverse business models and areas of service of financial institutions involved in the student loan program."
Other lenders - including Sallie Mae and Nelnet - have said they are planning to offer loans to all students at any school for the 2008-09 academic year based on preliminary steps taken by the Department to provide them with liquidity.
NASFAA President & CEO Dr. Phil Day, as well as many others in higher education, have asked lenders to continue to offer federal student loans without discriminating. In a letter to Secretary Spellings last month, Day asked the Department to urge lenders to continue offering loans to all eligible borrowers at any institution.
By Justin Draeger
NASFAA Associate Director for Communications
Posted 06/18/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
