House backs bill to boost student aid

WASHINGTON — In a bid to keep the global credit crunch from cutting into financial aid for college students, the House overwhelmingly approved a bill Thursday to expand access to federally backed loans.

The measure would give the Education Department temporary authority to buy existing student loans at a discount to give lenders more cash for new loans. It would also allow the Education secretary to send federal money to certain guarantee agencies, allowing them to act as “lenders of last resort” to make new federally backed loans.

The bill, sponsored by Rep. George Miller (D-Martinez), passed 383 to 27. Sen. Edward M. Kennedy (D-Mass.) has introduced a companion bill in the Senate.

“We’re not waiting for a problem to develop,” said Miller, chairman of the House Education and Labor Committee. “The unprecedented nature of the season in the credit markets has spilled over, to some extent, into the student loan market, as institutions have tried to recapitalize their ability to make future loans. And in today’s loan-dependent education environment, it turns out that time is money.”

The bill also increases the aggregate loan limits for students. Students who are dependents of their parents would be able to borrow up to $31,000, an increase from $23,000, and the independent-student limit would rise from $46,000 to $57,500.

Some education officials, however, worry that increased limits could cost students more in the long run. “We believe an increase to the aggregate loan limit at this time is a misguided policy that will have long-term negative, unintended consequences,” Constantine W. Curris, president of the American Assn. of State Colleges and Universities, wrote to Kennedy in a letter. “While undoubtedly born from good intent, this proposal would in fact facilitate major tuition increases and result in even greater student debt.”

The legislation would also allow parents to defer repayment of federally guaranteed loans for up to six months after their children leave school, as well as increase the circumstances in which parents with an adverse credit history are eligible to receive loans.

John Remondi, chief financial officer of Sallie Mae, the nation’s largest student lender, testified at a Senate hearing Tuesday that the U.S. was “facing a scenario where demand for student loans will significantly outstrip supply.” He added that without government help, the industry would have a “material shortfall” in student loan access this year.

At the hearing, Sen. Christopher J. Dodd (D-Conn.) suggested immediate steps to address the potential crisis. He called on the government to instruct the Treasury Department’s Federal Financing Bank to give banks more money for student loans.

Dodd said it would be “almost miraculous” for the current legislation to be cleared in time to make a difference for students who plan to attend college in September.

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