Department to issue additional details to financial aid administrators in the near future
In a letter to college presidents, Education Department Secretary Margaret Spellings explains actions the Department has taken to ensure access to federal students loans and provides an update on the recent student loan situation.
The letter highlights the recently enacted "Ensuring Continued Access to Student Loans Act" (ECASLA) (Pub.L. No. 110-227), which gives the Department new authority to provide liquidity to student loan providers.
Spellings notes that while 64 of the nearly 2,000 FFELP loan providers have indicated they will not originate loans this year, "this trend appears to be slowing."
"In fact, two lenders that had announced their nonparticipation have now indicated that they will continue to make loans," Spellings writes. "In addition, other lenders have announced their intention to continue broad and open participation in the FFEL Program."
Spellings also reiterates the Department's four-point plan to ensure continued loan access. The plan includes:
- An offer to purchase FFEL Program loans from lenders for the 2008-09
academic year and to offer lenders access to short-term liquidity;
- A pledge to work with the student lending community on forward-looking
solutions to ensure the FFEL Program and other student lending programs
serve the best interests of students and taxpayers for years to come;
- An enhanced lender-of-last-resort program designed to provide access to
FFEL Program loans for those students who face difficulty obtaining
conventional loans; and
- A more efficient Direct Loan Program with increased capacity.
Spellings notes that the Department will soon provide more detailed information about the plan and the other
provisions of ECASLA to financial aid officers at postsecondary educational institutions.
"We continue to refine the details of our plan, but the general response by the lending
community has been positive," Spellings writes. "Schools may still face some hurdles in securing loans for
their borrowers, but I am confident that federal loans will be available for this coming
academic year to all eligible borrowers."
The letter states that those with concerns that their students
will not be able to obtain student loans or with questions about the Department's plans to ensure access to
student loans should contact Robert Moran at robert.moran@ed.gov
or by phone at (202) 260-1103.
The text of the letter is included below.
June 18, 2008
Dear President:
With increased attention on our economy and clear implications for students and families,
I am writing to provide you with an update on recent student lending activity and the
actions that the Department has taken to ensure access to federal student loans for all
eligible students and their parents.
For the upcoming academic year, an estimated 8.5 million borrowers at colleges,
universities, and other postsecondary educational institutions will receive approximately
$72 billion in federal student loans. In response to concerns regarding the availability of
student loans for the upcoming school year, Congress passed and the President signed the
"Ensuring Continued Access to Student Loans Act of 2008" (Pub.L. No. 110-227)
(ECASLA). The legislation provides the Department of Education with new authority to
address concerns about student loan liquidity. As a result, and since my last letter to you
in late February, we have seen a number of lenders announce plans regarding their
participation in the Federal Family Education Loan (FFEL) Program. Of the nearly 2,000
participating lenders, 64 have indicated they will not originate loans for the coming year.
This trend appears to be slowing, and, in fact, two lenders that had announced their
nonparticipation have now indicated that they will continue to make loans. In addition,
other lenders have announced their intention to continue broad and open participation in
the FFEL Program.
Based on this legislation, the Department has designed programs that support the current
FFEL Program as a successful public/private partnership. Since enactment of the Higher
Education Act of 1965, non-federal lenders have provided the majority of the capital
necessary to make student loans.
On May 21, 2008, I provided FFEL Program lenders with information about our
comprehensive plan that ensures borrowers have access to federal student loans and
encourages private lenders to continue to participate in the FFEL Program for the
upcoming academic year. That plan includes four key components:
- An offer to purchase FFEL Program loans from lenders for the 2008-09
academic year and to offer lenders access to short-term liquidity;
- A pledge to work with the student lending community on forward-looking
solutions to ensure the FFEL Program and other student lending programs
serve the best interests of students and taxpayers for years to come;
- An enhanced lender-of-last-resort program designed to provide access to
FFEL Program loans for those students who face difficulty obtaining
conventional loans; and
- A more efficient Direct Loan Program with increased capacity.
Shortly, we will provide more detailed information about this plan and the other
provisions of ECASLA to financial aid officers at postsecondary educational institutions.
We continue to refine the details of our plan, but the general response by the lending
community has been positive. Schools may still face some hurdles in securing loans for
their borrowers, but I am confident that federal loans will be available for this coming
academic year to all eligible borrowers. Should you have concerns about your students'
ability to obtain student loans or have questions concerning our plans to ensure access to
student loans, please contact Robert Moran of my staff by e-mail at robert.moran@ed.gov
or by phone at (202) 260-1103.
Sincerely,
/s/
Margaret Spellings
Posted 06/19/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
