• Saturday, November 21, 2009
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House of Representatives Votes to Extend Law Shoring Up Student-Loan System

Washington — Citing continued turmoil in the U.S. financial markets, the House of Representatives voted overwhelmingly today to extend by one year a federal rescue plan for student-loan companies.

The 368-to-4 vote came only hours after the investment-banking firm Lehman Brothers announced that it had filed for bankruptcy. Supporters of the extension, including lenders and financial-aid officers, said the legislation would ensure that student loans remained widely available in the 2009-10 academic year.

If approved by the Senate and signed into law, the bill will allow the secretary of education to buy up loans, through July 1, 2010, that lenders have struggled to sell to investors. It will also give the secretary the continued authority to advance federal funds to guarantee agencies so those agencies could make loans, if necessary, under a collegewide “lender of last resort” system.

Congress passed the original rescue bill last spring, amid a credit crunch that threatened to disrupt access to federal student loans. While there are few signs that students have been unable to obtain federal loans this year, lenders have warned that problems could appear once the law expires.

In a letter sent last Friday, a group of lenders said that it was “critical” that Congress extend the bill to give families “the stability and certainty” they need as they begin to make decisions about financial aid.

“As you well know, since the passage of [the law,] in May, the credit markets have continued to present tremendous challenges to our ability to attract affordable sources of capital to finance student lending,” the lenders wrote.

A spokeswoman for the Senate education committee said the panel hoped to take up the bill soon. —Kelly Field