A United States House of Representatives committee unanimously approved legislation Wednesday intended to ensure that student loans will continue to be available amid the increasing turmoil in the credit markets.
The legislation, approved by the House Education and Labor Committee, would, among other things, raise the annual limits on the amount of federal loans a student may borrow and designate guarantee agencies as “lenders of last resort” for colleges and universities. Although the committee’s news release acknowledges that no problems accessing student loans have been reported, the committee cast the bill as a precautionary measure to ensure that contingency plans are in place to ensure uninterrupted access to federal loans.
Yale Director of Student Financial Services Caesar Storlazzi called the bill a “positive step,” although he said its actual impact, if implemented, will be minimal for Yale College students, largely because Yale eliminated the need for student loans in January as part of its new financial-aid initiative.
The bill should reassure students and parents that student loans will not disappear, regardless of what happens in the credit market, Storlazzi said.
“It’s an indication to the public that student loan programs are still strong,” he said.
But Storlazzi warned that by increasing the loan limits for students by $2,000, the measure could lead some students further into debt. Congress should also consider increasing the levels of federal Pell Grants along with raising loan limits, he said.
Concurrent with the committee’s press release, Yale announced a new University-run loan program for international graduate and professional students that will replace the GATE Y-Loan program that previously supplied loans to these students.
The two institutions that offered these loans through the program, First Marblehead Corporation and Bank of America, backed out of the program last July, leaving international graduate and professional students without a lender past the 2007-’08 academic year, Storlazzi said. While some international students are eligible for private loans, many cannot meet the lenders’ requirements and therefore depended on the GATE Y-loan program, he said.
The University’s new loan program, which will begin in the 2008-’09 academic year, will offer loans with a fixed interest rate of 7.75 percent.