Bush Backs Legislation to Safeguard Student Loans
STEVE INSKEEP, host:
You may not know yet how you're going to pay off the house but at least you can send the kids to school. The Senate passed a bill yesterday to safeguard student loans, and President Bush says he will sign it. The idea is to protect students and families from the credit crunch, as NPR's Larry Abramson reports.
LARRY ABRAMSON: The Senate legislation is similar to a bill passed earlier this month by the House. The Senate language would increase the amount of federally subsidized loans that's available to each student by another $2,000. That is meant to save some families from having to turn to private loans.
The legislation would also allow the Department of Education to buy up some student loans made under the Federal Family Education Loan program. That's supposed to free up some capital so lenders can make new loans. It may also help persuade some lenders to stay in the student loan business. Nearly 50 lenders have dropped out, citing tighter credit markets.
Last year Congress also reduced federal subsidies for federally-guaranteed student loans, and some lenders said that made the business uneconomical for them. The Senate bill would also give students additional grant aid. The money for the grants is supposed to come from savings made by the legislation.
Many colleges have announced they will replace loan programs with grants to help students avoid mounting debt from loans. There is little indication that any students are currently being denied loans, but some members of Congress say the legislation is needed to protect students from the same turmoil that has hit the housing industry.
Larry Abramson, NPR News, Washington.