Continues Administration's commitment to ensure uninterrupted access to Federal student loans
January 15, 2009
Stephanie Babyak or Jane Glickman
U.S. Secretary of Education Margaret Spellings today announced the U.S. Department of Education, U.S. Department of the Treasury and Office of Management and Budget published a notice in today's Federal Register to replicate the 2008-2009 Federal Family Education Loan Program (FFELP) Loan Purchase programs for the 2009-2010 academic year and provide liquidity support to one or more conforming Asset-Backed Commercial Paper (ABCP) Conduits. Publication of this notice is a key step in implementing the programs announced by Secretary Spellings on Nov. 8, 2008 (www.ed.gov/news/pressreleases/2008/11/11082008.html) and ensures students and their families have continued access to Federal student loans.
As credit markets for student loans continued to tighten in the Fall, there was a growing concern among schools, students and lenders about the availability of funds for the 2009-2010 academic year. More than $65 billion in expected 2008-2009 loans and approximately $130 billion in eligible 2003-2007 student loans are on bank balance sheets and auction rate securitizations, and the capital markets are currently unable to generate adequate funds at prices that will ensure 2009-2010 loans can be made. Recognizing that these broader credit market issues posed a risk to the availability of student loans, Congress quickly passed an extension of the Ensuring Continued Access to Student Loans Act with overwhelming bipartisan support.
Using this extended authority, Secretary Spellings announced in Nov. 2008 the Department of Education will replicate for the 2009-2010 academic year the successful loan purchase and participation interest programs announced in May 2008 for the 2008-2009 academic year (http://www.ed.gov/news/pressreleases/2008/05/05212008.html). To date, these programs have supported $14.7 billion of the more than $25.2 billion in FFELP loans disbursed thus far this year. Secretary Spellings also announced the Department's intention to provide liquidity support to one or more conforming ABCP conduits to purchase and provide longer-term financing for FFELP loans. This helps to ensure the uninterrupted access to 2009-2010 loans by providing lenders with a broad base of liquidity using private, not government, financing.
For more information and to view the Federal Register Notice, visit http://www.federalstudentaid.ed.gov/ffelp/library/EA43.doc.
Additional information on the loan purchase and loan participation programs and steps taken to ensure uninterrupted access to Federal student loans and grants for students and their families is available at www.ed.gov/about/bdscomm/list/hiedfuture/plan/index.html.
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