Statement from U.S. Secretary of Education Margaret Spellings and U.S. Secretary of the Treasury Henry Paulson
As part of its continued commitment to make sure students have access to federal student loans in the coming academic year, the Administration today announced a four-part plan designed to improve the functioning of the student loan marketplace and provide liquidity and stability in the near term to ensure that all qualified students have access to federally insured loans for the coming school year.
The plan includes a loan purchase commitment under which the Department agrees to purchase new federal loans originated for the 2008-2009 academic year, as well as a facility for providing short-term liquidity to lenders lacking access to affordable capital due to disruptions in credit markets. In addition, the plan includes a commitment to continue working with the lending community to explore ways to reengage capital markets; a strengthened lender-of-last-resort program to help insure students against shifting market forces; and increased Direct Loan capacity should it be needed to serve as an extra cushion for students. These efforts further the Administration’s commitment to develop solutions that provide liquidity for student loans while supporting the current Federal Family Education Loan (FFEL) Program as a successful public/private partnership at no increased cost to taxpayers.
“Over the past several months, I have worked closely with Secretary Paulson and others in the Administration to closely monitor events in the federal student loan market and actively engage the student loan community on our mutual goal of ensuring continued access to federal student loans for students and families,” said Secretary Spellings.
“We want students to be able to concentrate on their studies rather than worry about disruptions in the student loan market and whether they will be able to obtain federal loans to help pay for school. We hope families will be reassured that the U.S. Departments of Education and Treasury are acting to ensure loans remain accessible,” said Secretary Spellings. “At the same time, while offering these short-term solutions, we can also consider this a teachable moment that speaks to broader, long-term flaws in our complex and outdated financial system. This system has been crying out for reform for years, and especially in light of the ever-increasing cost higher education, students and families are counting on us to provide it.”
“I am confident that the Department of Education has designed a program that will facilitate the origination of new FFEL loans for the upcoming school year,” said Secretary Paulson. “This program should ensure that the market works for students needing loans this school year, and we at Treasury are committed to continuing our work with our colleagues at Education and the FFEL lenders to find a longer term solution. I believe that the key here is getting the capital markets to restart and make funds available to FFEL lenders on terms that reflect the high quality nature of student loan assets.”
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