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House and Senate education committees have held hearings in recent weeks to monitor issues relating to student loan availability in light of current woes affecting the banking industry. Citing the mortgage foreclosure crisis, observers of the student loan industry are on the lookout for instability that might affect loan access for students.

There are concerns over cuts to lender subsidies in the recently enacted College Cost Reduction Act, as well as concerns about the tightening of the credit market in general.

Also garnering attention is the question of the stability of the private student loan market, those lenders that operate outside the federal programs (and the ones receiving considerable scrutiny for marketing high interest loans to some of the neediest borrowers).

Some participants in the federal loan programs have said they are scaling back or pulling out of the student loan programs, including notable entities such as the Pennsylvania Higher Education Authority.

During testimony, both the administration and experts from the National Consumer Law Center’s Student Loan Borrower Assistance Project reassured Congress that there is no student loan crisis at this time.

Witnesses told Congress that two key federal provisions should ensure that students will get federally backed loans. The Direct Student Loan Program, in which the federal government is the lender rather than banks or other lending institutions, and a second federal program, known as “lender of last resort,” which enables a student to seek loans from a federally designated lender of last resort if other sources fail, should protect student borrowers, they said.

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15-Apr-08


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