Yesterday Senate Education Committee Chairman Edward Kennedy (D-MA) introduced the Strengthening Student Aid for All Act of 2008 to prevent potential disruptions in federal student loans caused by volatility in the marketplace. Later in the day House Education Committee Chairmen George Miller (D-CA) and Ruben Hinojosa (D-TX) also introduced legislation to counter the instability in the credit markets that could disrupt students' access to federal student loans.

The House bill is similar to Kennedy's as it would increase federal loan limits and authorize the Secretary to act as a pseudo-secondary market of last resort for lenders that cannot find active secondary markets to purchase their loans. The House bill also includes provisions to help parent PLUS borrowers by offering them a six month grace period after their children leave college before having to begin repayment.

According to Miller's press release, his legislation would:

• Reduce borrowers' reliance on costlier private college loans by increasing the loan limits on federal college loans by $2,000 per year for all students;

• Give parent borrowers a six month grace period after their children leave college before having to begin repayment.

• Clarify that existing law gives the U.S. Education Secretary the authority to advance federal funds to guaranty agencies in the event that they do not have sufficient capital to originate new loans.

• Give the U.S. Education Secretary the temporary authority to purchase loans from lenders in the federal guaranteed loan program. The Education Department would then service the loans through its Direct Loan program.

"Already, the crisis in the financial markets has badly hurt American homeowners and working people - we can't let it also stop students from pursuing their educational goals," Miller said. "Students and families can't afford any ambiguity or snafus to undermine their ability to attend college. I am confident that if we act quickly and decisively, then students will have the financial support necessary to begin or continue their higher education."

"The millions of students and families who rely on federal college loans deserve every assurance that they will continue to be able to access the federal aid they need, despite the turmoil in the nation's credit market," said Hinojosa.

By Justin Draeger
NASFAA Assistant Director for Communications

Posted 04/04/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.