Yesterday the House passed an extension of the Ensuring Continued Access to Student Loans Act, HR 6889, by a vote of 368 to 4. The act which was signed in to law early this summer by President Bush, was a response to the impact the credit crisis has had in the past year on student loan companies and the fear it would effect the availability of student loans through the Federal Family Education Loan Programs (FFELP programs). The FFELP programs include Federal Stafford Loans (Subsidized and Unsubsidized), PLUS Loans and GRADPLUS loans. Since the beginning of the year 134 lenders have exited the FFELP program or suspended some or all of their FFELP programs.
ECASL Act was originally approved for one year in a effort to ensure that families seeking FFELP loans for the 2008-2009 academic year would be able to access these loans during the lending crisis caused by the sub-prime mortgage crisis. The extension is for one year and is an effort to assist families of high school students who are beginning to plan for the 2009-2010 academic year.
With continued announcements of lenders exiting the FFELP program, as well as, loan companies suspending or ending their private loan programs (CampusDoor being the most recently private loan program to end), the extension comes as good news.
This law gives the Secretary of Education the authority to implement the lender of last resort provisions, when a college finds that its students/parents are not able to find a lender to provide FFELP loans. It also allows the Secretary of Education to purchase student loans from lenders, which would result in lenders having the capital needed to offer FFLEP loans.