WASHINGTON - Lawmakers renewed their efforts last week to get the Bush administration to pump liquidity into the student loan market, and major lenders are continuing their departure.
U.S. Rep. Paul Kanjorski (D-PA), chairman of the House Financial Services Subcommittee on Capital Markets, urged the Administration to use its financing tools to shore up the market, where tightening credit has eliminated several funding sources in recent weeks.
Kanjorski suggested the Bush administration could have the Federal Financing Bank purchase federally guaranteed loans; modify rules to allow the Federal Home Loan Banks to accept federally guaranteed student loans as collateral for advances from credit unions and banks; or allow guaranteed student lenders to access funding through the Federal Reserve’s discount window.
The renewed effort comes as the biggest student lender in Pennsylvania, the Pennsylvania Higher Education Assistance Agency, decided to suspend its participation in the guaranteed loan program.
The move will affect as many as 100 of the 300 Pennsylvania credit unions that participate in the program through the state loan agency.
“The current credit crunch is now deeply affecting the student loan industry,” said Kanjorski. “In light of PHEAA’s recent action, I renew my call on the Administration to work to resolve these matters. Without quick action by the Administration to shore up the student loan market, other providers may make similar decisions.”
Several other student lenders, including state agencies in Iowa, Michigan, and private lenders, like Sallie Mae, have announced cutbacks in their student loan programs, eliminating liquidity from both the originations and secondary market.
