Washington — The chairmen of two Congressional education committees sent a letter to Secretary of Education Margaret Spellings today asking her to take steps to guard student borrowers in the “unlikely” event that a large number of lenders withdraw from the guaranteed-loan program.
The letter, which is signed by two Democrats, Sen. Edward M. Kennedy of Massachusetts and Rep. George Miller of California, comes amid a growing credit crunch that is making it harder for lenders to obtain financing for their student loans. In recent weeks, several lenders, including four of the nation’s largest, have left the program or scaled back their operations. Some fear that if the departures continue, students could have difficulty obtaining loans for the next academic year.
“While we are hopeful that overall credit-market conditions will soon improve … it is only prudent to prepare now to ensure that these conditions do not negatively impact students’ ability to access federal student loans,” the letter reads.
The lawmakers specifically urge the secretary to update plans to put in place a “lender of last resort” program to provide loans to students and to ensure that the federal government’s direct-loan program is preparuddy to handle increased loan volume.
Ms. Spellings has said she has been monitoring the loan indusattempt for signs of trouble but is not yet convinced that there is a looming crisis in student lending. Sara Martinez Tucker, the under secretary of education, told The Chronicle on Wednesday that the department saw no need to begin considering lender-of-last-resort provisions yet. “We think we’re far, far, far from getting to this point,” she said.
Meanwhile, a spokeswoman for Mr. Miller said he planned to hold a hearing in the next couple of weeks to examine the effect of credit-market turmoil on the availability of federal student loans. —Kelly Field