Secretary of Education Margaret Spellings sent letters to college and university presidents last week to reassure them that federal financial aid - including loans through the FFEL and Direct Loan programs - will continue to be available to students and families. Spellings said that while some lenders have chosen to "reevaluate" their participation in the FFEL program, she expects other lenders to actively compete for their lost loan volume.
The Department will begin contacting financial aid administrators in the coming days to inquire about any lenders that plan to reduce or discontinue making loans.
"I want you to know that the United States Department of Education, in conjunction with other federal agencies, is closely monitoring the situation and continues to assess how broader market conditions may impact the student loan market," said Spellings.
Spellings' letter comes amid a flurry of other letters being exchanged between congressional leaders and federal agencies. Last week the House and Senate Education Committee chairmen sent a letter to Secretary Spellings urging her to "to take any steps necessary to ensure that these options are readily available so that recent activity in the credit markets does not adversely affect students' ability to secure federal student loans in a timely manner." Senator Edward Kennedy (D-MA) and Representative George Miller (D-CA) went on to urge Spellings to update its lender-of-last resort provisions and prepare the Direct Loan Program to absorb any possible increases from FFEL schools. The letter also asked Spellings to provide information to schools about the lender-of-last resort provisions and the Direct Loan Program.
Last week Congressman Paul E. Kanjorski (D-PA), the chairman of the House Financial Services Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee, sent a letter to House Education Chairman George Miller to "begin work now, as a precaution, to examine legislative options to ensure the vitality of the FFELP going forward."
On Feb. 15 Kanjorski joined 20 other legislators in sending a letter to both Spellings and Secretary of Treasury Paulson to urge them to address the problems in the student loan markets before they "significantly decrease access to higher education opportunities for students and their families."
But while some are urging immediate action, others are maintaining a more optimistic tone. Last week Representative Thomas Petri (R-WI) published an article in The Wall Street Journal telling students and families to "rest assured that federal student loans, such as Stafford Loans, will continue to be universally available" despite the "noise... made recently by the lending community about how unstable credit markets and cuts in federal subsidies may harm its ability to offer student loans."
Given current market conditions, it is possible that the FFEL program will experience additional turbulence in the coming weeks. NASFAA continues to monitor this situation closely and is in close contact with schools, the Department of Education, other higher education associations, and the lending community at-large to ensure that students and families experience no disruptions in federal student loans this next academic year. To date, NASFAA has not heard of any students who have not able to find an FFEL loan provider.
By Justin Draeger
NASFAA Assistant Director for Communications
Posted 03/05/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
