US President George W. Bush pressed Congress to pass legislation to ease a credit crunch in the $85 billion student loan market that could make it harder for students to go to college.
Dozens of lenders have left the federally guaranteed student loan program and remaining lenders have had trouble selling securitized student loan debt on the secondary market - the main way many of them raise capital for new loans.
The US House of Representatives has already passed a White House-backed bill that would offer temporary authority to the Department of Education to buy federally guaranteed loans that would likely offer some stability to the market.
It would also allow the agency to funnel loan capital to colleges through state guaranty agencies. A similar bill is pending in the Senate, but it does not give as much authority to Education Secretary Margaret Spellings and Bush urged quick action on the House measure.
“A delay of even a week or two may make it impossible for this legislation to help students going to school this fall,” Bush said in his weekly radio address. “The authority the bill grants is temporary and would be used only if it became apparent there was a shortage of loans available to students.”
A spokesman for Senate Majority Leader Harry Reid, a Nevada Democrat, said senators were trying to determine how quickly they could pass a bill to address the issue.
The legislation comes as the US economy slows in part from a widening credit crunch that has already hit the housing market hard. Academic leaders have said they see few signs that students are having trouble getting loans as yet.
“A slowdown in the economy shouldn't mean a downturn in educational opportunities,” Bush said. “So we're taking decisive action now to ensure that college is accessible and affordable for students around the country.”
Already the Education Department is working to offer loans for students who cannot get them from traditional lenders. Bush said the government was poised to step in to help fund those loans if necessary.
The student loan industry also is still reeling from cuts made last year in subsidies paid to federally guaranteed lenders, which came after months of scandal involving conflicts of interest and kickbacks among lenders and college officials.
The credit crunch has also emerged as an issue on the 2008 presidential campaign trail, with the Democratic candidates pushing for additional measures to expand education opportunities. (Reuters)