First Congress asked Secretary of Treasury Henry Paulson to provide direct liquidity into the student loan market through the Federal Financing Bank (FFB). In less than a week Paulson - along with Secretary of Education Margaret Spellings and Director of the Office of Management and Budget Jim Nussle - said no because in their view the FFB does not have the authority to purchase, or otherwise participate in, loans to non-Federal borrowers.

Now, just a week letter, Congress is looking at a bill that would give the FFB explicit permission to purchase FFELP loans.

The Student Loan Access Act of 2008 (H.R. 5914) introduced by Rep. Paul Kanjorski (D-PA) allows the FFB to provide advances to eligible lenders to originate FFELP loans and invest in securities made up of FFELP loans as long as those purchases do not result in any net cost to the federal government. The FFB’s authority to provide liquidity to FFELP would expire on July 1, 2009 unless the Secretary of Treasury deems it necessary to extend that authority.

"If action is not taken soon to address the problems in the student loan marketplace, hundreds of thousands of students could find themselves this fall without the resources needed to pursue their higher education dreams," said Kanjorski in a press statement.

This is the second bill introduced by Kanjorski in the last month that seeks to provide capital to student loan providers. Earlier this month he introduced the Emergency Student Loan Market Liquidity Act (H.R. 5723) would give Federal Home Loan Banks emergency authority to provide student lenders access to capital by allowing Federal Home Loan Banks to purchase to invest in student loan-related securities.

Both of Kanjorski’s bills have been referred to the House Committee on Financial Services.

By Justin Draeger
NASFAA Assistant Director for Communications

Posted 05/02/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.