A bill aimed at safeguarding federal student loan access was passed by the House of Representatives April 17, with backers hailing it as a necessary step toward protecting the education economy amid the current credit crisis.
Rep. George Miller, D-Calif., chairman of the Committee on Education and Labor, sponsored the Ensuring Continued Access to Student Loans Act, HR 5715, which passed the House of Representatives in a resounding 383-27 vote.
“The purpose of the legislation is to ensure that students and parents can continue to have access to the federal student aid they rely on, regardless of what’s happening in the nation’s financial markets,” said Rachel Racusen, deputy communications director for the committee.
First, the bill would increase student loan limits by increasing the annual cap by $2,000, which would result in a new aggregate limit of $31,000 for dependent undergraduates and $57,500 for independent undergraduates.
Brittny McCarthy, director of federal relations for the American Association of State Colleges and Universities, said her organization believes the loan limit changes are unnecessary but the bill’s other provisions have merit.
“We do not support increases to the aggregate federal loan limit. There are other good precautionary measures in the bill that we do support, though,” she said.
Director of the UCLA Financial Aid Office Ronald Johnson said increasing the loan limits “would mean students would not be compelled to borrow from private loan sources.”
Johnson added that the increased limits would help nonresident students at the University of California, who have to pay a higher cost and may therefore need more flexibility in getting loans to fund their education.
The bill would also grant the U.S. Department of Education the ability to back up the federal loan market in the event that lenders cannot meet demand.
The federal loan market consists of two programs of distribution. The Direct Loan Program registers a school with the federal government to allow students to receive loans directly from the Department of Education. The Federal Family Education Loan Program sets up a system in which banks pay students taking loans but get backed up by the federal government in the case of a loan default.
Many UCLA students get loans from Federal Family Education Loan Program-approved banks and companies, said Nicholas Novello, a supervisor at UCLA Student Loan Services.
“The Direct Loan Program is currently only 20 percent of total student loan volume. The DOE is saying they can handle one-third of the (Federal Family Education Loan) volume,” which would accommodate an additional 3 million borrowers, McCarthy said.
McCarthy added that her organization would like to see such a provision activated “only if the economy is slow to return to a state of normalcy.”
Sen. Edward Kennedy, D-Mass., proposed companion legislation in the Senate. His bill, the Strengthening Student Aid for All Act, contains many comparable provisions for keeping federal loans stable in an unstable market.