President George W. Bush exhorted the U.S. congress on Saturday to pass legislation that would give the government greater authority to buy federal student loans to ensure that students continue to have access to tuition assistance.
Bush said that through these measures the government will guarantee the continued participation of banks or lenders in the federally insured student loan program which over 50 lenders have deserted in the midst of a credit crisis.
A slowdown in the economy shouldn't mean a downturn in educational opportunities, Bush said. So we're taking decisive action now to ensure that college is accessible and affordable for students around the country.
The President noted that the House of Representatives has passed the Ensuring Continued Access to Student Loans Act, a bill that would safeguard student loans without permanently expanding the government's role in their financing. The bill would allow the agencies involved to guide loan capital to colleges through state guaranty agencies
The authority granted by the bill is temporary and would be used only if it became apparent there was a shortage of loans available to students, Bush said.
The federal student loan market, which is valued in $47.5 billion, has become unprofitable for many companies which wonder about the quantity of loans they can continue to finance.
The shrinking of the student loan market began last fall when Congress reduced the subsidy given to banks. The rate had been based on the commercial paper rate plus 2.34 percent but the margin was cut to 1.79 percent, reducing profit on the loans by 0.7 percent.
On Wednesday the Department of Education gave its support to the idea of allowing the government to buy loans at cost but considered adding provisions that would make the action beneficial for banks.
Bush said many students may approach the coming year uncertain of whether they will get their loans and urged the Congress to submit the bill to him as soon as possible..
The legislation should be on the president's desk by June 1, according to Lawrence Warder, the acting chief operating officer of federal student aid, Bloomberg said.