69–006 

110TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 110–583 

ENSURING CONTINUED ACCESS TO STUDENT LOANS ACT 

OF 2008 

APRIL 14, 2008.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. GEORGE MILLER of California, from the Committee on 

Education and Labor, submitted the following 

R E P O R T 

[To accompany H.R. 5715] 

The Committee on Education and Labor, to whom was referred 

the bill (H.R. 5715) to ensure continued availability of access to the 

Federal student loan program for students and families, having 

considered the same, report favorably thereon without amendment 

and recommend that the bill do pass. 

I. PURPOSE

The purpose of H.R. 5715, the Ensuring Continued Access to Student Loans Act of 2008, is to ensure continued availability of access 

to the Federal student loan program for students and families. 

II. COMMITTEE ACTION INCLUDING LEGISLATIVE HISTORY AND

VOTES IN COMMITTEE

110TH CONGRESS

Full Committee hearing on ‘‘Ensuring the Availability of Federal 

Student Loans’’ 

On Friday, March 14, 2008, the Committee on Education and 

Labor held a hearing in Washington, D.C., on ‘‘Ensuring the Availability of Federal Student Loans.’’ The purpose of the hearing was 

to highlight the options that exist through the Department of Education to prevent a shortage of student loan availability in the fall 

of 2008, and to underscore that credit market constraints may 

present a problem for some lenders’ access to capital, but such constraints do not present a problem for borrowers’ access to Federal 

student loans. Testifying before the full Committee were Hon. MarVerDate Aug 31 2005 06:11 Apr 15, 2008 Jkt 069006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR583.XXX HR583

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garet Spellings, U.S. Secretary of Education; Paul Wozniak, Director and Manager, Education Loan Group—UBS; Terry Muilenburg, 

Senior Vice President, USA Funds; Roberta Johnson, Director, Office of Student Financial Aid, Iowa State University; Charlie C. 

‘‘Chuck’’ Sanders, Jr., President and CEO, South Carolina Student 

Loan Corporation; Sarah Bauder, Director, Office of Financial Aid, 

University of Maryland. 

Introduction of the ‘‘Ensuring Continued Access to Student Loans 

Act of 2008’’

On Tuesday, April 8, 2008, Representatives George Miller (D– CA), Howard P. ‘‘Buck’’ McKeon (R–CA), Ruben Hinojosa (D–TX), 

Jason Altmire (D–PA), Carol Shea-Porter (D–NH), Phil Hare (D– IL), Rush D. Holt (D–NJ), Joe Courtney (D–CT), Raul M. Grijalva 

(D–AZ), John P. Sarbanes (D–MD), Robert C. ‘‘Bobby’’ Scott (D– VA), Lynn C. Woolsey (D–CA), Timothy H. Bishop (D–NY), Mazie 

K. Hirono (D–HI), David Loebsack (D–IA), David Wu (D–OR), and 

Joe Sestak (D–PA) introduced H.R. 5715, the Ensuring Continued 

Access to Student Loans Act of 2008, a bill to ensure continued 

availability of access to the Federal student loan program for students and families. 

Full Committee markup of H.R. 5715 

On Wednesday, April 9, 2008, the Committee on Education and 

Labor considered H.R. 5715 in legislative session, and reported the 

bill favorably to the House of Representatives. The Committee reported the bill by voice vote. The Committee rejected one amendment by roll-call vote. 

III. SUMMARY OF THE BILL

Increased unsubsidized loan limits for students: H.R. 5715 increases annual unsubsidized loan limits by $2,000 for undergraduates and graduate students. It also increases the aggregate loan 

limits to $31,000 for dependent undergraduates and to $57,500 for 

independent undergraduate students. 

Delayed repayment of parent PLUS loans: Currently PLUS loan 

borrowers—parents—go into repayment 60 days after disbursement 

of the loan. H.R. 5715 gives families an option of not entering repayment for up to 6 months after a student leaves school. 

PLUS loan eligibility for struggling homeowners: Under current 

law, parents with an adverse credit history are ineligible to receive 

a parent PLUS loan, except under extenuating circumstances. In 

light of the current housing market, H.R. 5715 temporarily qualifies up to 180 day delinquency on home mortgages as an extenuating circumstance, therefore making it more possible for parents 

struggling with the current housing market to secure loans for 

their children. 

Lender of last resort flexibility: H.R. 5715 makes clear in statute 

that the Secretary of Education has the authority to advance Federal funds to Guaranty Agencies in the case that they do not have 

sufficient capital, and also clarifies the existing authorization for 

the appropriations of funds to make such advances. Further, the 

bill allows a Guaranty Agency to designate a school (rather than 

an individual student) as a ‘‘lender of last resort school,’’ in accordance with guidelines set by the Secretary. 


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Authority for the Secretary of Education to purchase FFEL loan 

assets: H.R. 5715 gives the Secretary the temporary authority, 

upon a determination that there is inadequate availability of loan 

capital to meet demand for loans, to purchase loans from FFEL 

lenders. Such purchases could only be made in the case that loan 

purchases are revenue-neutral or beneficial to the Federal Government. 

Federal institutions’ participation: H.R. 5715 includes a section 

expressing the Sense of the Congress that the Federal Financial Institutions and entities (including the Federal Financing Bank, the 

Federal Home Loan Banks, and the Federal Reserve) should consider using, in consultation with the Secretaries of Education and 

the Treasury, available authorities, if needed, to assist in ensuring 

continued student loan access. 

IV. COMMITTEE VIEWS

In recent months, turmoil in the U.S. credit markets has made 

it difficult for some lenders in the federally guaranteed student 

loan program to secure the capital needed to finance college loans, 

leading some lenders to scale back their lending activity. While no 

student or college has reported any problems accessing Federal student aid to date, the Committee believes it is only prudent for the 

Federal Government to make sure that contingency plans are in 

place that would provide students and families with continued, uninterrupted access to Federal loans, regardless of what’s happening 

in the credit markets. The Ensuring Continued Access to Student 

Loans Act of 2008 would provide new protections, in addition to 

clarifying those in current law, to ensure that families can continue 

to access the loans they need to pay for college. 

Overview of current credit market conditions 

The U.S. capital market has been experiencing stress as a result 

of the sub-prime mortgage crisis and investor uncertainty about the 

condition of the economy. Mortgage default risk is spread widely 

across and intertwined throughout the nation’s economy. The unclear impact of this risk on financial institutions has caused lenders of all types to reduce lending activity or to make loans at higher interest rates. Similarly, the ability of private companies to obtain funds through the credit markets has been affected. The inability of consumers and businesses in all parts of the economy to 

easily borrow funds has driven central banks around the world to 

take action to encourage the lending of funds to worthy borrowers 

and to reinvigorate the credit markets. In addition, the sub-prime 

mortgage crisis has put downward pressure on economic growth, 

because fewer or more expensive loans decrease investment by 

businesses and consumer spending, which drive the economy. 

Current credit market conditions related to student loans 

Recently, some student loan lenders have encountered difficulties 

in accessing the capital market to finance their lending activity. 

Some lenders, including 4 of the top 20 originators, have announced that they are exiting the Federal Family Education Loan 

Program (FFELP) or curtailing their lending by not originating 

Federal student consolidation loans. In addition, some private student loan lenders have announced that they will be more selective 


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in making loans to students and/or be more selective in their relationships with certain types of schools or leave the private loan 

market altogether. The heightened concern about the difficulties 

facing certain student loan lenders and the potential of significantly diminished student access to education loans has led some 

to call for government intervention in the capital markets. Doing 

so, in some instances, may potentially help ensure that students 

and families can access Federal student loans. 

To address these challenges posed by current conditions in the 

credit markets, the Committee included specific provisions in H.R. 

5715 aimed at ensuring that turmoil in the U.S. credit markets 

does not prevent any students or parents from accessing the financial aid they need to pay for college. 

Lender of last resort 

Under existing law, FFELP guaranty agencies are obligated to 

serve as lenders-of-last resort to avert any possible problem in access to student loans, thereby providing a nationwide network of 

backstop lenders. As part of their contracts with the Secretary, 

guaranty agencies are required to develop rules and procedures for 

a lender-of-last resort (LLR) program. Under these programs, guaranty agencies themselves, or in conjunction with another FFELP 

lender, make LLR loans to borrowers who show that two lenders 

have denied providing a borrower with a Federal student loan. 

Guaranty agencies or other lenders who make LLR loans qualify 

for 100 percent insurance against borrower default, rather than the 

standard 97 percent insurance. Moreover, the law gives the Secretary the authority to advance federal funds to guaranty agencies, 

on appropriate terms and conditions, to be used to make LLR 

loans, if needed. 

Although a large scale LLR program has not been previously implemented for the FFELP, the Department had established and 

was ready to make operational a national LLR program in 1998, 

when some FFELP lenders were then indicating that they might 

withdraw from the FFELP. In addition, by preparing in advance, 

the Department had optimized an approach to minimize the burden 

on students. Rather than requiring individual students to document lenders’ refusals to make loans, the plan provided for an option for a school unable to locate a lender willing to provide loans 

to its students. Such a school could notify its state’s designated 

guaranty agency and certify that its students have been unable to 

obtain loans. Under the plan, the guaranty agency was then to review the school’s certification of need for LLR loans, and then (1) 

provide LLR loans itself, if necessary with federal advances, or (2) 

provide them under an agreement with a third-party lender, if necessary with federal advances. Because schools are already accustomed to working the guaranty agencies, the plan took advantage 

of preexisting relationships under the FFELP program without unduly complicating the process for schools and borrowers. 

H.R. 5715 aims to address the issues raised by Terry 

Muilenburg, Senior Vice President of USA Funds, at the March 

14th Committee on Education and Labor hearing to ensure that 

guaranty agencies can better carry out the LLR provisions by: 

• (providing specific authority to carry out the program on 

a school wide basis, as opposed to requiring individual students 


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to document that two lenders have denied making them a loan, 

in addition to being able to provide LLR loans to individual 

students; and, • clarifying that the Secretary has the authority to advance 

funds to guaranty agencies under the LLR program to fulfill 

the goal of ensuring students’ access to loans. 

In responding to a letter sent to the Secretary by Chairman 

George Miller, the Secretary confirmed her ability to provide funding advances to guaranty agencies, if needed. While such a clarification is appreciated, the Committee believes that permanent 

clarification is needed to ensure that there is no ambiguity concerning the Secretary’s authority in the future. 

Other options for institutions 

The Committee believes that the LLR provisions should be a priority for the Secretary to implement so that FFELP schools can 

continue to exist in the current program without disruption to their 

students. It is the strong belief of the Committee that it is up to 

each 4 individual college and university as to what program they 

participate in: either FFELP or the Direct Student Loan Program. 

Currently, Direct Loans account for about 20 percent of all federal 

college loan volume, but accounted for as much as 34 percent in 

years past. 

The Committee believes there are clear steps that institutions 

can take right now to be ready in the case that their students are 

unable to secure loans from independent lenders participating in 

the FFELP. The Committee believes that institutions can and 

should take steps to consider entering the Direct Loan Program for 

this fall, even if they choose to not utilize the program. This will 

allow institutions to have this option on standby. The school certification and system processes for the Direct Loan Program are very 

similar to processes institutions already use to offer Pell Grants. 

Further, the Secretary of Education should take steps to ensure 

that the Department is ready to help schools that meet established 

criteria to use the LLR option or help schools that so desire to utilize the DL program on either a temporary or permanent basis. 

Secretary’s temporary authority to purchase loans 

FFELP lenders fund the loans they make to students in a variety 

of ways. Depository banks and credit unions, for example, use 

funds deposited by consumers into their checking and savings accounts to make loans to students. Other lenders may borrow money 

by issuing bonds to investors who agree to lend money in exchange 

for receiving payments of interest and repayment of principal. 

Another way some student loan lenders fund the loans they 

make to students is through a process called ‘‘securitization.’’ This 

process involves lenders pooling their loans together and selling securities to investors, which may be bought and sold in ways similar 

to how shares of a company are traded on the stock market. These 

securities are generally known as ‘‘asset-backed securities’’ (ABS) 

because the student loans serve as collateral backing up the securities. Investors who buy these securities are compensated with payments of interest. These investors assume the risk that the loans, 

pledged as collateral backing up the security, are repaid and generate the cash flow necessary to pay the interest due on their secuVerDate Aug 31 2005 06:11 Apr 15, 2008 Jkt 069006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR583.XXX HR583

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rity investment. Lenders who sell these securities to investors use 

the proceeds, in turn, to make more loans to students. 

The interest rate the issuer of an ABS pays to investors who buy 

them can be determined in a variety of ways. In some cases, the 

ABS may carry a ‘‘floating rate.’’ Similar to an adjustable rate 

mortgage, the interest paid on a floating rate ABS is adjusted periodically according to a predetermined formula, usually pegged to 

an index rate such as the ‘‘prime rate’’ or the rate of interest paid 

on U.S. Treasury Bills. In other cases, the ABS may be an ‘‘auction-rate security,’’ where the interest paid on the ABS is a floating 

rate that is periodically reset through an auction process, usually 

conducted on a weekly or monthly basis. Investment banks, such 

as Goldman-Sachs, UBS, and others, conduct these auctions, serving as an intermediary between the lender issuing the securities 

and the investors interested in purchasing the securities. At these 

auctions, investors bid on the interest rate they will accept for the 

subsequent week or month until the next auction occurs. In addition, investors may buy or sell the securities to others. As recently 

reported in the media, some of these auctions have ‘‘failed,’’ meaning there have been no investors interested in buying the securities. When an auction fails, the securities are left in the hands of 

investors who already hold them, and the interest rate paid to the 

investors gets reset based on a formula written in the original offering documents when the securities were first sold. 

The Committee is concerned that in recent months, the failing of 

these auctions has left many lenders without a means of raising 

capital. This issue was raised by several witnesses at the March 

14th Committee on Education and Labor hearing, but in particular 

by Charlie C. ‘‘Chuck’’ Sanders, Jr., President and CEO, South 

Carolina Student Loan Corporation. To address this issue, H.R. 

5715 gives the Secretary the temporary authority, upon a determination that there is an inadequate availability of loan capital to 

meet the demand for loans, to purchase loans from FFELP lenders. 

Such purchases could only be made in the case that the purchases 

were revenue-neutral or beneficial to the Federal Government. 

H.R. 5715 also provides the Secretary the ability to let contracts for 

the servicing of purchased loans with entities that have extensive 

and relevant experience. In addition to helping ensure the continued existence of the FFELP, the bill requires lenders who choose 

to take advantage of this provision to reinvest the funds back into 

the FFEL program. 

Increasing loan limits 

The Committee is concerned about the ever increasing cost of college, especially given that college costs have been increasing more 

rapidly than available grant aid, federal loans, and families’ ability 

to pay. While loans are not the preferred method of paying for college, increasing costs and the failure of grant aid to keep pace with 

the increases have led many students to finance their higher education using the Federal student loan programs. According to the 

Department of Education, 33 percent of all undergraduates (including those attending part-time and full-time) borrowed from the 

Stafford loan programs in academic year 2003–2004. Further, 42 

percent of students at public 4-year institutions, and 53 percent at 

private not-for-profit 4-year institutions borrowed from the Stafford 


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loan programs in the same year. (Wei, C.C., and Berkner, L. 

(2008)). Trends in Undergraduate Borrowing II: Federal Student 

Loans in 1995–96, 1999–2000, and 2003–04 (NCES 2008–179rev). 

National Center for Education Statistics, Institute of Education 

Sciences, U.S. Department of Education. Washington, DC.). 

Further, students are relying more and more on private education loans to fund their college educations. Last year, private 

loans totaled nearly $20 billion, accounting for one out of every five 

dollars borrowed for college, according to the College Board. A decade ago, private loans accounted for only 4 cents of every loan dollar. The current market conditions have caused lenders to tighten 

borrowing standards on all consumer debt, including private student loans. While the Committee believes that students and families should only borrow the minimum amount needed to finance 

higher education, limited increase in the loan limits in the federal 

programs will help ensure uninterrupted access to higher education 

for those students who need to rely on costlier private loans. 

H.R. 5715 aims to help alleviate the challenges facing students 

in paying for college. In particular, the bill provides for increased 

annual and aggregate Federal student loan limits for undergraduates and graduates, thereby helping borrowers to finance a higher 

portion of their educational costs as well as helping to reduce their 

reliance on costlier private education loans. A chart provided in the 

section-by-section outlines current law for both dependent and 

independent students and the proposed changes in H.R. 5715. The 

Committee expects that these additional funds will be used by students to help pay for their education and not provide institutions 

with an invitation to increase their costs. 

PLUS loans provisions 

Financing higher education often falls not only on students, but 

on their families as well. Just as Federal student borrowing has increased in recent years, parents have taken out loans through the 

Federally-backed PLUS loan program at increasing rates. Currently PLUS loan borrowers—parents—go into repayment 60 days 

after disbursement of the loan. This bill would give families an option of not entering repayment for up to 6 months after a student 

leaves school, making it consistent with the way that students in 

the Stafford loan program enter into repayment. Introducing more 

flexible repayment options in this program will help to ensure that 

families already struggling in tough economic times will still be 

able to provide assistance to their children while they are in school. 

Additionally, under current law, parents with an adverse credit 

history are ineligible to receive a parent PLUS loan, except under 

extenuating circumstances. The Committee is concerned that many 

individuals who are struggling in the current credit markets are 

further strained in their efforts to afford college and qualify for 

loans. In light of the current housing market, the bill temporarily 

qualifies up to 180 day delinquency on home mortgages as an extenuating circumstance, therefore making it more possible for parents struggling with the current housing market to secure loans for 

their children’s postsecondary education. 


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Actions by other agencies—Sense of Congress 

Much has been discussed about other agencies and their abilities 

to assist in addressing the challenges faced by lenders participating 

in the federal student loan program. 

H.R. 5715 includes a Sense of the Congress that the Federal Financial Institutions and entities (including the Federal Financing 

Bank, the Federal Home Loan Banks, and the Federal Reserve) 

should consider using, in consultation with the Secretaries of Education and the Treasury, available authorities, if needed, to assist 

in ensuring continued student loan access. Further the Sense of 

Congress clarifies that such efforts should not deter the work within the Department of Education to ensure that the lender of last 

resort option is ready and operational in the unlikely event it is 

needed for students and families, nor should such efforts limit or 

delay the Secretary’s authority to purchase FFELP loans. In addition, the Committee believes that the efforts undertaken in this 

legislation should not slow down or stop efforts by the Department 

of Treasury or the Federal Reserve to take additional action 

through current authorities to provide additional liquidity into the 

market. 

V. SECTION-BY-SECTION ANALYSIS

Sec. 1. Short title 

This section cites the short title of H.R. 5715 as the ‘‘Ensuring 

Continued Access to Student Loans Act of 2008.’’

Sec. 2. Increasing unsubsidized Stafford loan limits for undergraduate and graduate students 

This section increases annual unsubsidized loan limits by $2,000 

for each year of undergraduate and graduate school. It also increases the aggregate loan limits to $31,000 for dependent undergraduates and $57,500 for independent undergraduate students. 

Increased levels under this section apply to loans issued on or after 

July 1, 2008. Amended levels are reflected in italic below: 

STUDENT LOAN LIMITS 

Subsidized Unsubsidized Total 

ANNUAL LIMITS 

Dependent Undergraduates: 

First-Year Students ....................... $3,500 (3,500) $5,500 (3,500) $5,500 

Second-Year Students .................... 4,500 (4,500) 6,500 (4,500) 6,500 

Third-Year Students ...................... 5,500 (5,500) 7,500 (5,500) 7,500 

Fourth-Year+ Students .................. 5,500 (5,500) 7,500 (5,500) 7,500 

Independent Undergraduates: 

First-Year Students ....................... 3,500 (4,000) 6,000 (7,500) 9,500 

Second-Year Students .................... 4,500 (4,000) 6,000 (8,500) 10,500 

Third-Year Students ...................... 5,500 (5,500) 7,000 (10,500) 12,500 

Fourth-Year+ Students .................. 5,500 (5,500) 7,000 (10,500) 12,500 

Graduate Students ......................... 8,500 (12,000) 14,000 (20,500) 22,500 

AGGREGATE LIMITS 

Dependent Undergraduates .......... 23,000 .................................. (23,000) 31,000 

Independent Undergraduates ....... 23,000 .................................. (46,000) 57,500 

Graduate Students ......................... 65,500 .................................. 138,500 


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Sec. 3. Grace period for parent PLUS loans 

This section amends the repayment of PLUS loans to give families an option of not entering repayment for up to 6 months after 

a student leaves school. This section applies to new loans issued on 

or after July 1, 2008. 

Sec. 4. Special rules for PLUS loans 

This section adds a special rule for the PLUS loan program to 

qualify up to 180 day delinquency on home mortgages as an extenuating circumstance for loans made on or after July 1, 2008 and 

before July 1, 2009. 

Sec. S. Lender-of-last-resort 

This section amends the Lender-of-Last-Resort provisions to 

allow a Guaranty Agency to designate a school (rather than an individual student) as a ‘‘lender of last resort school,’’ in accordance 

with guidelines set by the Secretary. This section will ensure all 

student and parent borrowers at such institutions would be eligible 

to receive lender-of-last-resort loans from Guaranty Agencies in a 

less cumbersome manner. 

Sec. 6. Mandatory advances 

This section includes language to clarify that the Secretary of 

Education is authorized to advance Federal funds to Guaranty 

Agencies in the case that they do not have sufficient capital to fulfill their obligation and clarifies the existing authorization for the 

appropriations of funds to make such advances. 

Sec. 7. Temporary authority to purchase student loans 

This section gives the Secretary the temporary authority, upon a 

determination that there is inadequate availability to meet demand 

for loans, to purchase loans from FFEL lenders. Such purchases 

could only be made in the case that purchases are revenue-neutral 

or beneficial to the Federal Government, and lenders must use proceeds from such transactions in a manner consistent with ensuring 

continued participation of such lender in the Federal student loan 

programs under Part B of the Higher Education Act of 1965. The 

Secretary’s authority under this section is from the date of enactment of this Act until July 1, 2009. H.R. 5715 also provides the 

Secretary the ability to let contracts for the servicing of purchased 

loans with entities that have extensive and relevant experience. 

Sec. 8. Sense of Congress 

This section includes a Sense of the Congress that the Federal 

Financial Institutions and other entities (including the Federal Financing Bank, the Federal Home Loan Banks, and the Federal Reserve) should consider using, in consultation with the Secretaries 

of Education and the Treasury, available authorities, if needed, to 

assist in ensuring continued student loan access. 

VI. EXPLANATION OF AMENDMENTS

During consideration of H.R. 5715, Mr. Price of Georgia offered 

an amendment to require budgetary offsets for any provision in the 

legislation resulting in a cost to the Federal Government. OppoVerDate Aug 31 2005 06:11 Apr 15, 2008 Jkt 069006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6602 E:\HR\OC\HR583.XXX HR583

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nents of the amendment pointed out that the bill would be fully 

paid for in compliance with House Paygo Rules. The amendment 

was defeated by a vote of 16 ayes and 21 nays. 

VII. APPLICATION OF LAW TO THE LEGISLATIVE BRANCH

Section 102(b)(3) of Public Law 104–1, the Congressional Accountability Act, requires a description of the application of this bill 

to the legislative branch. H.R. 5715 would apply to legislative 

branch employees in the same way it applies to other individuals, 

by protecting their access to student loans. 

VIII. UNFUNDED MANDATE STATEMENT

Section 423 of the Congressional Budget and Impoundment Control Act (as amended by Section 101(a)(2) of the Unfunded Mandates Reform Act, P.L. 104–4) requires a statement of whether the 

provisions of the reported bill include unfunded mandates. 

This issue is addressed by the CBO cost estimate letter included 

in section XIII of this report. 

IX. EARMARK STATEMENT

H.R. 5715 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9(d), 9(e) 

or 9(f) of rule XXI. 

X. ROLL CALL


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XI. STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS

OF THE COMMITTEE

In compliance with clause 3(c)(1) of rule XIII and clause 2(b)(1) 

of rule X of the Rules of the House of Representatives, the Committee’s oversight findings and recommendations are reflected in the 

body of this report. 

XII. NEW BUDGET AUTHORITY AND CBO COST ESTIMATE

With respect to the requirements of clause 3(c)(2) of rule XIII of 

the Rules of the House of Representatives and section 308(a) of the 

Congressional Budget Act of 1974 and with respect to requirements 

of clause 3(c)(3) of rule XIII of the Rules of the House of Representatives and section 402 of the Congressional Budget Act of 1974, the 

CBO estimate of the reported bill was not available at the time of 

filing this report. The Committee adopts as its own the CBO cost 

estimate as soon as it becomes available. 

XIII. STATEMENT OF GENERAL PERFORMANCE GOALS AND

OBJECTIVES

In accordance with clause 3(c) of House rule XIII, the goal of 

H.R. 5715 is to make sure contingency plans are in place to provide 

students and families with continued, uninterrupted access to federal loans, regardless of issues affecting the credit markets. 

XIV. CONSTITUTIONAL AUTHORITY STATEMENT

Under clause 3(d)(1) of rule XIII of the Rules of the House of 

Representatives, the Committee must include a statement citing 

the specific powers granted to Congress in the Constitution to 

enact the law proposed by H.R. 5715. The Committee believes that 

the amendments made by this bill, which ensure continued access 

to student loans, are within Congress’ authority under Article I, 

section 8, clause 18 of the Constitution of the United States. 

XV. COMMITTEE ESTIMATE

Clause 3(d)(2) of rule XIII of the Rules of the House of Representatives requires an estimate and a comparison of the costs 

that would be incurred in carrying out H.R. 5715. However, clause 

3(d)(3)(B) of that rule provides that this requirement does not 

apply when the Committee has included in its report a timely submitted cost estimate of the bill prepared by the Director of the Congressional Budget Office (CBO) under section 402 of the Congressional Budget Act. As noted in Section XII of this report, the CBO 

estimate of the reported bill was not available at the time of filing 

this report. The Committee adopts as its own the CBO cost estimate as soon as it becomes available. 

XVI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 


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HIGHER EDUCATION ACT OF 1965 

* * * * * * * 

TITLE IV—STUDENT ASSISTANCE 

* * * * * * * 

PART B—FEDERAL FAMILY EDUCATION LOAN PROGRAM

SEC. 421. STATEMENT OF PURPOSE; NONDISCRIMINATION; AND APPROPRIATIONS AUTHORIZED. 

(a) * * * 

(b) AUTHORIZATION OF APPROPRIATIONS.—For the purpose of carrying out this part— (1) * * * 

* * * * * * * 

(4) there are authorized to be appropriated (A) the sum of $12,500,000 for making advances after June 30, 1968, pursuant to sections 422 (a) and (b), and (B) such sums as may be 

necessary for making advances pursuant to section 422(c), for 

the reserve funds of State and nonprofit private student loan 

insurance øprograms, and¿ programs, 

(5) there are authorized to be appropriated such sums as 

may be necessary for the purpose of paying a loan processing 

and issuance fee in accordance with section 428(f) to guaranty 

øagencies.¿ agencies, and 

(6) there is authorized to be appropriated, and there are appropriated, out of any money in the Treasury not otherwise appropriated, such sums as may be necessary for the purpose of 

carrying out section 422(c)(7). 

Sums appropriated under paragraphs (1), (2), (4), and (5) of this 

subsection shall remain available until expended. No additional 

sums are authorized to be appropriated under paragraph (3) or (4) 

of this subsection by reason of the reenactment of such paragraphs 

by the Higher Education Amendments of 1986. 

* * * * * * * 

SEC. 428. FEDERAL PAYMENTS TO REDUCE STUDENT INTEREST 

COSTS. 

(a) * * * 

(b) INSURANCE PROGRAM AGREEMENTS TO QUALIFY LOANS FOR

INTEREST SUBSIDIES.—

(1) * * * 

* * * * * * * 

(7) REPAYMENT PERIOD.—(A) * * * 

* * * * * * * 

(C) In the case of a loan made under section 428Aø, 428B,¿ 

or 428C, the repayment period shall begin on the day the loan 

is disbursed, or, if the loan is disbursed in multiple installments, on the day of the last such disbursement, and shall exclude any period of authorized deferment or forbearance. 

* * * * * * * 

(j) LENDERS-OF-LAST-RESORT.—


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14 

(1) GENERAL REQUIREMENT.—In each State, the guaranty 

agency or an eligible lender in the State described in section 

435(d)(1)(D) of this Act shall make loans directly, or through 

an agreement with an eligible lender or lenders, to østudents 

eligible to receive interest benefits paid on their behalf under 

subsection (a) of this section who are otherwise unable to obtain loans under this part¿ students and parents who are otherwise unable to obtain loans under this part (except for consolidation loans under section 428C) or who attend an institution 

of higher education in the State that is designated under paragraph (4). Loans made under this subsection shall not exceed 

the amount of the need of the borrower, as determined under 

subsection (a)(2)(B), nor be less than $200. The guaranty agency shall consider the request of any eligible lender, as defined 

under section 435(d)(1)(A) of this Act, to serve as the lenderof-last-resort pursuant to this subsection. 

(2) RULES AND OPERATING PROCEDURES.—The guaranty agency shall develop rules and operating procedures for the lenderof-last-resort program designed to ensure that—

(A) * * * 

(B) consistent with standards established by the Secretary, students applying for loans under this subsection 

shall not be subject to additional eligibility requirements 

or requests for additional information beyond what is required under this title in order to receive a loan under this 

part from an eligible lender, nor, in the case of students 

and parents applying for loans under this subsection because of an inability to otherwise obtain loans under this 

part (except for consolidation loans under section 428C), be 

required to receive more than two rejections from eligible 

lenders in order to obtain a loan under this subsection; 

* * * * * * * 

(3) ADVANCES TO GUARANTY AGENCIES FOR LENDER-OF-LASTRESORT SERVICES.—(A) * * * 

* * * * * * * 

(C) The Secretary shall exercise the authority described in 

subparagraph (A) only if the Secretary determines that eligible 

borrowers are seeking and are unable to obtain loans under 

this part or designates an institution of higher education for 

participation in the program under this subsection under paragraph (4),, and that the guaranty agency designated for that 

State has the capability to provide lender-of-last-resort loans in 

a timely manner, in accordance with the guaranty agency’s obligations under paragraph (1), but cannot do so without advances provided by the Secretary under this paragraph. If the 

Secretary makes the determinations described in the preceding 

sentence and determines that it would be cost-effective to do 

so, the Secretary may provide advances under this paragraph 

to such guaranty agency. If the Secretary determines that such 

guaranty agency does not have such capability, or will not provide such loans in a timely fashion, the Secretary may provide 

such advances to enable another guaranty agency, that the 

Secretary determines to have such capability, to make lenderof-last-resort loans to eligible borrowers in that State who are 


wwoods2 on PRODPC68 with REPORTS
15 

experiencing loan access problems or to eligible borrowers who 

attend an institution in the State that is designated under 

paragraph (4). (4) INSTITUTION-WIDE STUDENT QUALIFICATION.—Upon the request of an institution of higher education and pursuant to 

standards developed by the Secretary, the guaranty agency designated for a State shall designate such institution for participation in the lender-of-last-resort program under this paragraph. If the guaranty agency designates an institution under 

this paragraph, such agency shall make loans, in the same 

manner as such loans are made under paragraph (1), to students and parent borrowers of the designated institution, regardless of whether the students or parent borrowers are otherwise unable to obtain loans under this part (other than a consolidation loan under section 428C). 

* * * * * * * 

SEC. 428B. FEDERAL PLUS LOANS. 

(a) AUTHORITY TO BORROW.— (1) * * * 

* * * * * * * 

ø(3) SPECIAL RULE.—Whenever necessary to carry out the 

provisions of this section, the terms ‘‘student’’ and ‘‘borrower’’

as used in this part shall include a parent borrower under this 

section.¿ 

(3) SPECIAL RULES.—

(A) PARENT BORROWERS.—Whenever necessary to carry 

out the provisions of this section, the terms ‘‘student’’ and 

‘‘borrower’’ as used in this part shall include a parent borrower under this section. 

(B) EXTENUATING CIRCUMSTANCES.—For loans made on 

or after July 1, 2008, and before July 1, 2009, a lender may 

determine that a borrower meets the extenuating circumstances requirement described in regulations promulgated by the Secretary to carry out this section or section 

455 if the borrower is 180 or fewer days delinquent on their 

home mortgage payments. 

* * * * * * * 

(d) PAYMENT OF PRINCIPAL AND INTEREST.—

ø(1) COMMENCEMENT OF REPAYMENT.—Repayment of principal on loans made under this section shall commence not 

later than 60 days after the date such loan is disbursed by the 

lender, subject to deferral during any period during which the 

graduate or professional student or the parent meets the conditions required for a deferral under section 427(a)(2)(C) or 

428(b)(1)(M). 

ø(2) CAPITALIZATION OF INTEREST.—Interest on loans made 

under this section for which payments of principal are deferred 

pursuant to paragraph (1) of this subsection shall, if agreed 

upon by the borrower and the lender (A) be paid monthly or 

quarterly, or (B) be added to the principal amount of the loan 

not more frequently than quarterly by the lender. Such capitalization of interest shall not be deemed to exceed the annual insurable limit on account of the borrower.¿ 


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16 

(1) COMMENCEMENT OF REPAYMENT.—Repayment of principal 

on loans made under this section shall— (A) commence not later than— (i) 60 days after the date such loan is disbursed by 

the lender, except as provided in clause (ii); and 

(ii) if agreed upon by a parent borrower, the day 

after 6 months after the date the student for whom the 

loan is borrowed ceases to carry at least one-half the 

normal full-time academic workload (as determined by 

the institution); and 

(B) be subject to deferral during any period during which 

the graduate or professional student or the parent meets the 

conditions required for a deferral under section 427(a)(2)(C) 

or 428(b)(1)(M). 

(2) CAPITALIZATION OF INTEREST.— (A) IN GENERAL.—Interest on loans made under this section— (i) which accrues prior to the beginning of repayment 

under paragraph (1)(A)(i), shall be added to the principal amount of the loan; and 

(ii) which accrues prior to the beginning of repayment under paragraph (1)(A)(ii) or during a period in 

which payments of principal are deferred pursuant to 

paragraph (1)(B) shall, if agreed upon by the borrower 

and the lender—

(I) be paid monthly or quarterly; or 

(II) be added to the principal amount of the loan 

not more frequently than quarterly by the lender. 

(B) INSURABLE LIMITS.—Capitalization of interest under 

this paragraph shall not be deemed to exceed the annual 

insurable limit on account of the borrower. 

* * * * * * * 

SEC. 428H. UNSUBSIDIZED STAFFORD LOANS FOR MIDDLE-INCOME 

BORROWERS. 

(a) * * * 

* * * * * * * 

ø(d) LOAN LIMITS.—

ø(1) IN GENERAL.—Except as provided in paragraphs (2) 

and (3), the annual and aggregate limits for loans under 

this section shall be the same as those established under 

section 428(b)(1), less any amount received by such student pursuant to the subsidized loan program established 

under section 428. 

ø(2) ANNUAL LIMITS FOR INDEPENDENT, GRADUATE, AND

PROFESSIONAL STUDENTS.—The maximum annual amount 

of loans under this section an independent student (or a 

student whose parents are unable to borrow under section 

428B or the Federal Direct PLUS Loan Program) may borrow in any academic year (as defined in section 481(a)(2)) 

or its equivalent shall be the amount determined under 

paragraph (1), plus—

ø(A) in the case of such a student attending an eligible institution who has not completed such student’s 

first 2 years of undergraduate study—


wwoods2 on PRODPC68 with REPORTS
17 

ø(i) $4,000, if such student is enrolled in a program whose length is at least one academic year 

in length; and 

ø(ii) if such student is enrolled in a program of 

undergraduate education which is less than one 

academic year, the maximum annual loan amount 

that such student may receive may not exceed the 

amount that bears the same ratio to the amount 

specified in clause (i) as the length of such program measured in semester, trimester, quarter, or 

clock hours bears to one academic year; 

ø(B) in the case of a student at an eligible institution who has successfully completed such first and second years but has not successfully completed the remainder of a program of undergraduate education—

ø(i) $5,000; or 

ø(ii) if such student is enrolled in a program of 

undergraduate education, the remainder of which 

is less than one academic year, the maximum annual loan amount that such student may receive 

may not exceed the amount that bears the same 

ratio to the amount specified in subclause (I) as 

such remainder measured in semester, trimester, 

quarter, or clock hours bears to one academic 

year; 

ø(C) in the case of such a student who is a graduate 

or professional student attending an eligible institution, $10,000 ; and 

ø(D) in the case of a student enrolled in coursework 

specified in sections 484(b)(3)(B) and 484(b)(4)(B)—

ø(i) $4,000 for coursework necessary for enrollment in an undergraduate degree or certificate 

program, and, in the case of a student who has obtained a baccalaureate degree, $5,000 for 

coursework necessary for enrollment in a graduate 

or professional program; and 

ø(ii) in the case of a student who has obtained 

a baccalaureate degree, $5,000 for coursework necessary for a professional credential or certification 

from a State required for employment as a teacher 

in an elementary or secondary school; 

except in cases where the Secretary determines, that a higher 

amount is warranted in order to carry out the purpose of this part 

with respect to students engaged in specialized training requiring 

exceptionally high costs of education, but the annual insurable 

limit per student shall not be deemed to be exceeded by a line of 

credit under which actual payments by the lender to the borrower 

will not be made in any years in excess of the annual limit. 

ø(3) AGGREGATE LIMITS FOR INDEPENDENT, GRADUATE, 

AND PROFESSIONAL STUDENTS.—The maximum aggregate 

amount of loans under this section a student described in 

paragraph (2) may borrow shall be the amount described 

in paragraph (1), adjusted to reflect the increased annual 

limits described in paragraph (2), as prescribed by the SecVerDate Aug 31 2005 06:11 Apr 15, 2008 Jkt 069006 PO 00000 Frm 00017 Fmt 6659 Sfmt 6601 E:\HR\OC\HR583.XXX HR583

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18 

retary by regulation. Interest capitalized shall not be 

deemed to exceed such maximum aggregate amount.¿ 

(d) LOAN LIMITS.— (1) IN GENERAL.—Except as provided in paragraphs (2), (3), 

and (4), the annual and aggregate limits for loans under this 

section shall be the same as those established under section 

428(b)(1), less any amount received by such student pursuant to 

the subsidized loan program established under section 428. 

(2) LIMITS FOR GRADUATE AND PROFESSIONAL STUDENTS.— (A) ANNUAL LIMITS.—The maximum annual amount of 

loans under this section a graduate or professional student 

may borrow in any academic year (as defined in section 

481(a)(2)) or its equivalent shall be the amount determined 

under paragraph (1), plus— (i) in the case of such a student who is a graduate 

or professional student attending an eligible institution, $14,000; and 

(ii) in the case of a graduate student enrolled in 

coursework specified in sections 484(b)(3)(B) and 

484(b)(4)(B), $7,000; 

except in cases where the Secretary determines, that a higher amount is warranted in order to carry out the purpose 

of this part with respect to students engaged in specialized 

training requiring exceptionally high costs of education, but 

the annual insurable limit per student shall not be deemed 

to be exceeded by a line of credit under which actual payments by the lender to the borrower will not be made in any 

years in excess of the annual limit. 

(B) AGGREGATE LIMIT.—The maximum aggregate amount 

of loans under this section a student described in subparagraph (A) may borrow shall be the amount described in 

paragraph (1), adjusted to reflect the increased annual limits described in subparagraph (A), as prescribed by the Secretary by regulation. 

(3) LIMITS FOR UNDERGRADUATE DEPENDENT STUDENTS.— (A) ANNUAL LIMITS.—The maximum annual amount of 

loans under this section an undergraduate dependent student (except an undergraduate dependent student whose 

parents are unable to borrow under section 428B or the 

Federal Direct PLUS Loan Program) may borrow in any 

academic year (as defined in section 481(a)(2)) or its equivalent shall be the sum of the amount determined under 

paragraph (1), plus $2,000. 

(B) AGGREGATE LIMITS.—The maximum aggregate 

amount of loans under this section a student described in 

subparagraph (A) may borrow shall be $31,000. 

(4) LIMITS FOR UNDERGRADUATE INDEPENDENT STUDENTS.—

(A) ANNUAL LIMITS.—The maximum annual amount of 

loans under this section an undergraduate independent student, or an undergraduate dependent student whose parents are unable to borrow under section 428B or the Federal Direct PLUS Loan Program, may borrow in any academic year (as defined in section 481(a)(2)) or its equivalent 

shall be the sum of the amount determined under paragraph (1), plus—


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19 

(i) in the case of such a student attending an eligible 

institution who has not completed such student’s first 

2 years of undergraduate study— (I) $6,000, if such student is enrolled in a program whose length is at least one academic year in 

length; or 

(II) if such student is enrolled in a program of 

undergraduate education which is less than one 

academic year, the maximum annual loan amount 

that such student may receive may not exceed the 

amount that bears the same ratio to the amount 

specified in clause (i) as the length of such program measured in semester, trimester, quarter, or 

clock hours bears to one academic year; 

(ii) in the case of such a student at an eligible institution who has successfully completed such first and 

second years but has not successfully completed the remainder of a program of undergraduate education— (I) $7,000; or 

(II) if such student is enrolled in a program of 

undergraduate education, the remainder of which 

is less than one academic year, the maximum annual loan amount that such student may receive 

may not exceed the amount that bears the same 

ratio to the amount specified in subclause (I) as 

such remainder measured in semester, trimester, 

quarter, or clock hours bears to one academic year; 

and 

(iii) in the case of such a student enrolled in 

coursework specified in sections 484(b)(3)(B) and 

484(b)(4)(B), $6,000 for coursework necessary for enrollment in an undergraduate degree or certificate program. 

(B) AGGREGATE LIMITS.—The maximum aggregate 

amount of loans under this section a student described in 

subparagraph (A) may borrow shall be $57,500. 

(5) CAPITALIZED INTEREST.—Interest capitalized shall not be 

deemed to exceed a maximum aggregate amount determined 

under subparagraph (B) of paragraph (2), (3), or (4). 

* * * * * * * 

PART D—WILLIAM D. FORD FEDERAL DIRECT 

LOAN PROGRAM 

SEC. 451. PROGRAM AUTHORITY. 

(a) IN GENERAL.—There are hereby made available, in accordance with the provisions of this part, such sums as may be necessary (1) to make loans to all eligible students (and the eligible 

parents of such students) in attendance at participating institutions of higher education selected by the Secretary, to enable such 

students to pursue their courses of study at such institutions during the period beginning July 1, 1994; and (2) for purchasing loans 

under section 459A. øSuch loans shall¿ Loans made under this part 

shall be made by participating institutions, or consortia thereof, 


wwoods2 on PRODPC68 with REPORTS
20 

that have agreements with the Secretary to originate loans, or by 

alternative originators designated by the Secretary to make loans 

for students in attendance at participating institutions (and their 

parents). 

* * * * * * * 

SEC. 456. CONTRACTS. 

(a) * * * 

(b) CONTRACTS FOR ORIGINATION, SERVICING, AND DATA SYS- TEMS.—The Secretary may enter into contracts for— (1) * * * 

(2) the servicing and collection of loans made or purchased 

under this part; 

(3) the establishment and operation of 1 or more data systems for the maintenance of records on all loans made or purchased under this part; and 

* * * * * * * 

SEC. 459A. TEMPORARY AUTHORITY TO PURCHASE STUDENT LOANS. 

(a) AUTHORITY TO PURCHASE.—Upon a determination by the Secretary that there is an inadequate availability of loan capital to 

meet the demand for loans under sections 428, 428B, and 428H, 

whether as a result of inadequate liquidity for such loans or for 

other reasons, the Secretary, in consultation with the Secretary of 

the Treasury, is authorized to purchase from any eligible lender, as 

defined by section 435(d)(1), loans originated under sections 428, 

428B, or 428H on or after October 1, 2003, on such terms as the 

Secretary determines (after consultation with the Secretary of the 

Treasury) are in the best interest of the United States, except that 

any loan purchase under this section shall not result in any cost to 

the Federal Government. The Secretary shall promptly publish any 

determination under this subsection in the Federal Register. 

(b) PROCEEDS.—The Secretary shall require, as a condition of any 

purchase under subsection (a), that the funds paid by the Secretary 

to any eligible lender under this section shall be used in a manner 

consistent with ensuring continued participation of such lender in 

the Federal student loan programs authorized under part B of this 

title. 

(c) EXPIRATION OF AUTHORITY.—The Secretary’s authority to purchase loans under this section shall expire on July 1, 2009. 

* * * * * * * 

XII. COMMITTEE CORRESPONDENCE

None. 


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(21) 

REPUBLICAN VIEWS 

Republican Members of the Committee on Education and Labor 

are committed to ensuring that every eligible American family is 

able to access the Federal funds available to help them pay for the 

cost of their, or their child’s, postsecondary education. Unfortunately, the turmoil facing the home mortgage industry in the U.S. 

credit markets has bled into the student loan credit markets. It is 

our goal to take action that will prevent these market weaknesses 

from producing a crisis in student loan access rather than simply 

reacting once a crisis has occurred. For that reason, Committee Republicans were pleased to see the announcement of the hearing 

that took place on March 14th and were also pleased to be invited 

to work with Committee Democrats on H.R. 5715, Ensuring Continued Access to Student Loans Act of 2008. 

Unanimous Committee passage by voice vote of H.R. 5715 reflects the bipartisan nature of the process used to craft the legislation. Likewise, the role of the Committee’s Senior Republican, Rep. 

Howard P. ‘‘Buck’’ McKeon (R–CA), as an original cosponsor signifies a shared commitment to act expeditiously in the face of growing market turmoil. Regrettably, however, the Committee Report 

drafted by the majority does not reflect that same spirit of cooperation and good-faith negotiation. As such, the Committee Report 

does not reveal what Republicans believe to be an accurate and 

complete account of Congressional intent with respect to the bill’s 

goals and purposes. These Republican views serve to illuminate the 

discussion of this legislation to better and more appropriately represent the tone and tenor of Congressional discourse on the critical 

issue of student loan access. 

STUDENT LOAN CREDIT CRISIS

In recent months, Committee Republicans have become increasingly alarmed as one lender after another announced they were 

leaving the privately-run Federal student loan program, scaling 

back on the benefits offered on loans to students (thereby making 

loans more expensive for students), ceasing to offer private (nonFederal) student loans or being more selective in their lending. 

Committee Republicans, along with Members from both sides of the 

aisle of the Committee, started to raise concerns early with the 

goal of trying to engage the rest of the Congress and the Administration in a dialogue. 

Reps. McKeon and Keller, the senior Republican members of the 

Full Committee and Higher Education, Lifelong Learning, and 

Competitiveness Subcommittee, respectively, sent a letter to Secretary Spellings urging her to monitor the situation and consult 

with her colleagues in other Departments, including the Treasury 

Department, and utilize their existing authorities to help prevent 

a situation where students would be left without options. In addiVerDate Aug 31 2005 06:11 Apr 15, 2008 Jkt 069006 PO 00000 Frm 00021 Fmt 6604 Sfmt 6604 E:\HR\OC\HR583.XXX HR583

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tion, Rep. McKeon signed a letter spearheaded by the Chairman of 

the Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises, Rep. Paul Kanjorski (D–PA), to Federal Reserve Chairman Ben Bernanke urging intervention by the 

Federal Reserve. This letter was signed by 32 Members of Congress 

from both sides of the aisle. 

Despite widespread media accounts of this grave and growing 

threat to our nation’s largest source of college financial aid, it was 

not until March 14th that the majority scheduled its first and, to 

date, only official Committee hearing on the matter. It was at that 

same hearing that the Administration presented its first clear plan 

to begin to address the challenges in the financial markets and 

their spillover into the student loan programs. Although Committee 

Republicans welcome that decision by both the majority and the 

Administration to engage in efforts to stave off loan access problems for students and families, we continue to believe that if warnings had been heeded earlier, some of the current uncertainty could 

have been prevented. As it stands today, this legislation is being 

considered less than two months before the height of lending season, when millions of students and families are attempting to secure billions in low-cost financing for the upcoming academic year. 

DIRECT LOAN PROGRAM

Included in the majority’s Committee Report is a recommendation that all institutions prepare to undertake administrative steps 

to enter the Direct Loan program in the coming academic year regardless of their intent to actually leave the Federal Family Education Loan (FFEL) program. This language was crafted without 

any consultation with Committee Republicans and reflects neither 

the legislative language nor its intent as understood by Committee 

Republicans who were intimately involved in the bill’s drafting. 

Committee Republicans believe this operational advice to institutions, in addition to being wholly outside the scope of the legislation, is short-sighted and unwise. Such a recommendation encourages schools to unnecessarily expend time and resources on a program that approximately four out of five schools have already rejected. Moreover, if followed, this course of action would result in 

a tremendous administrative burden on the U.S. Department of 

Education, potentially diverting resources from students and 

schools that truly need help. 

The Direct Loan program reached its peak in 1998 when it encompassed 34 percent of the market. Since that time, schools have 

actually left the program to the extent that the program now encompasses 20 percent of total loan volume. We agree with Committee Democrats that it is up to the institution to select the student loan program that it believes will best meet the needs of its 

student population. Eighty percent of institutions have chosen the 

FFEL program. Given that overwhelming support, the Federal government should do what it can to ensure that the upcoming lending 

season unfolds without a hitch to the students. This Committee 

should not use this opportunity to advocate for one lending program over another, but should ensure that students are able to access loans in a seamless fashion with as little disruption as possible. 


wwoods2 on PRODPC68 with REPORTS
23 

Congress has not a single piece of evidence to indicate that the 

Direct Loan program is capable of successfully taking on a significant increase in loan volume. The only indications that have been 

given are the verbal and written statements of the Secretary of 

Education. The majority finds these assurances compelling enough 

to encourage thousands of institutions to undertake a major operational change in how their financial aid programs are administered; yet just last year, Democrats called the Secretary’s stewardship of the loan programs into question. 

Despite the lack of evidence that the Direct Loan program is 

equipped to serve a greater number of students and schools, we 

have concrete evidence that the government-run Direct Loan program has, in the past, been unable to, handle spikes in volume. In 

1998, the Department of Education abandoned more than 84,000 

students and left these students without the ability to consolidate 

their student loans. This occurred because the Direct Loan consolidation program was shut down after it could not handle a sharp 

increase in loan volume. Congress had to step in, on the brink of 

a reauthorization of the Higher Education Act, to ensure that the 

FFEL program was statutorily permitted to assist the Direct Loan 

program’s students. History may repeat itself again a decade later. 

This history of program instability and a preference among institutions for the FFEL program is what we do know about the Direct 

Loan program. There are also many things we do not know about 

the program and how it is being run. For example, we do not know 

how many employees are currently in place to run the Direct Loan 

program or train new schools on the software. We also do not know 

whether the Department plans to hire additional staff or seek additional contracts to handle any potential shift in volume. We do not 

know, specifically, how quickly the Direct Loan program can absorb 

additional volume and exactly how much volume can be assumed 

in a short period of time. We do not know whether the Department 

has the infrastructure and administrative capacity to ensure that 

their systems will not crash. Nor do we know if students will have 

access to knowledgeable customer service representatives in a timely fashion to answer questions, or whether they will be forced to 

contend with long hold times because of a shortage in trained personnel. 

We believe that Committee Democrats provided questionable advice prior to gathering all the facts. In talking to institutions that 

have been in and out of the Direct Loan program, we have heard 

that it could take up to nine months for a big institution, with 

plenty of staff, to be ready to issue its first loan. In addition, we 

have heard that the cost to institutions of switching programs 

could be as much as $400,000 for staffing costs, system changes, 

updates, etc. Switching programs is not like flipping a light switch. 

Congress should not be recommending that schools spend significant time and money to switch into a program that may not be 

ready to handle the volume. Gaining eligibility for the Direct Loan 

program and being ready to operate the program on an institutionwide basis are two very different issues. 


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24 

LENDER OF LAST RESORT

H.R. 5715 provides for some important reforms that will make 

the lender of last resort program easier to administer on a broader 

scale if needed. However, Committee Republicans believe that we 

should consider whether a threshold should be put in place so that 

an institution does not turn to this program as a lender-of-first-resort. 

NATIONAL SECONDARY MARKET

Committee Republicans support efforts to provide the Secretary 

of Education with the temporary authority to purchase student 

loans should a FFEL lender decide to sell its loans to the Secretary, as long as the funds received by the lender are reinvested 

into the FFEL program. This authority will expire after one year 

and we do not envision extending this authority. We are optimistic 

that after one year, actions by the Treasury in conjunction with the 

credit markets will render this authority unnecessary. We strongly 

oppose any activities that would expand the Direct Loan program 

or turn lenders simply into originating agents for the Direct Loan 

program. 

In exercising this authority, Committee Republicans support all 

efforts to ensure that any loan sale not be disruptive or confusing 

to students. In addition, Committee Republicans support providing 

the Secretary with the greatest amount of flexibility in negotiating 

purchase agreements so this provision has the intended effect of increasing liquidity in the student loan market. 

CONCLUSION

The troubles facing our financial markets and our economy as a 

whole are daunting. But we would do a real disservice to students 

and families if we dismissed the challenges in the student loan program as merely a symptom of a larger problem that is outside our 

control. The fact is we can take steps to prevent a collapse in the 

student loan market. We can do so quickly, and without a cost to 

taxpayers, by focusing on our commitment to market stability. 

Committee Republicans strongly believe that H.R. 5715 is not 

the only answer to ensuring uninterrupted access to student loans 

for the millions of students and families now preparing for the upcoming academic year. It is, at best, one small piece of the puzzle. 

The situation that has been created is a perfect storm. The socalled College Cost Reduction & Access Act (CCRAA) slashed the 

return on these loans to the point that many loans made today result in a net loss to the lender due to the combination of reduced 

Federal support and a higher cost of funds in the current marketplace. During debate on CCRAA, Committee Democrats argued 

that even if a few smaller lenders dropped out of the program, the 

big lenders would remain and be able to capitalize on their economies of scale, while Committee Republicans voiced concern with respect to excessive cuts driving lenders from the loan programs. Our 

concerns should have been taken more seriously as we now sit and 

watch several deposit banks drop out of the program because the 

subsidy levels are too low. While a few banks have offered tentative 

support to help fill in the gaps, that level of support is not nearly 


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25 

as overwhelming as it could have been had last year’s subsidy cuts 

not taken place. Now is the time to revisit those cuts, along with 

the other available options, in order to ensure a strong and viable 

FFEL program. Committee Republicans look forward to continuing 

to work with Committee Democrats as H.R. 5715 moves through 

the legislative process. 

HOWARD P. ‘‘BUCK’’ MCKEON. 

RIC KELLER. 

JOE WILSON. 

JOHN KLINE. 

CATHY MCMORRIS RODGERS. 

KENNY MARCHANT. 

CHARLES W. BOUSTANY, Jr. 

ROB BISHOP. 

DAVID DAVIS. 

TIMOTHY WALBERG. 

Æ 


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