September 15, 2008

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

Comments

1. What happened to laissez-faire? I thought God made the marketplace to fix all economic woes? I guess that only applies to people under a certain income level. What about students who are saddled with debt that is mostly interest and are being essentially enslaved by student loan collectors? And spare me the “blame the victim” response — most people get into the student debt system in good faith to raise up their quality of life. If Congress really wanted to do something of lasting value, it would nationalize the system and subsidize college attendance for qualified individuals. It does something very much like that (with little or no oversight) for the oil industry, the banking industry, the “defense” industry, and obviously the student loan industry. How is it ethical that profit-taking on student loans be subsidized by the taxpayers? If the taxpayers are going to subsidize something, the students should be the beneficiaries, not the profiteers.

   — Doug Harvey    Sep 16, 07:45 AM    #

2. M. Harvey you are quite correct in your assessment. However Congress has been largely bought by the lobbyists for these companies. And as a result students are of little or no concern to them. Nor is the economically detrimental effect of having our societies most intelligent, ambituous and creative populations in debtors bondage to these companies a concern to our representatives in Congress.
   Corporations who after all have done nothing but co-opt what had been a working governmental system. When the student loan system was largely privitized all we got was a system of corporate profiteers which magically becomes socialist when they themselves get into financial trouble. Of course no help for those students and families caught in their maw. Which includes such as 200% fee increases since 2001 and corporations which use abusive collections tactics to enhance their already massive profits. Which begs the question just exactly how did companies which are largely supported by government resources, have 200% fee increases since 2001 and in certain cases have posted 2000% increases in stock values…manage to drive themselves into the red. Could in be predatory practices to their own business or simply incompetence? Either way the taxpayer foots the bill.
   As such the student funding system in the US is a product of massive hypocrisy-a free market which is largely a socialist enclave for wealthy and powerful corporations. And a national liability and a disgrace

   — Atana    Sep 16, 10:05 AM    #

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