May 14, 2008

Honorable Edward M. Kennedy
Chairman
Committee on Health, Education, Labor, and Pensions
United States Senate
Washington, DC 20510

Dear Mr. Chairman:

The Department of Education (ED) is committed to ensuring that students and their families have access to Federal student aid during the upcoming academic year. In light of recent uncertainty in the credit markets, I want to take this opportunity to assure you that ED is working hard to make sure that both the Direct Loan (DL) and the Federal Family Education Loan (FFEL) programs it administers are efficient, effective, and prepared to provide federal student loans to borrowers this fall.

Competition between the two federal student loan programs benefits students, so we are vigorously exploring ways to enhance the availability of student loan originations this coming school year. We appreciate that Congress, working with the Administration, has expeditiously enacted the "Ensuring Continued Access to Student Loans Act of 2008" (P.L. 110-227) and included flexible authority to efficiently implement the lender-of-last-resort (LLR) program. These efforts include the provision allowing eligible student and parent borrowers to receive LLR loans based on an institution-wide designation while granting the Secretary of Education discretion to determine these guidelines.

As Congress works to reauthorize the Higher Education Act of 1965 (HEA), we recommend consideration of the following amendments:

• restore the role of the guaranty agency in the LLR process by authorizing the guaranty agency, subject to the approval of the Secretary, to designate institution-wide LLR eligibility for all students attending a particular institution;

• eliminate any confusion regarding the continued FFEL status of FFEL loans purchased by the Secretary on the secondary market by moving that purchase authority to the FFEL program in a new Section 440B of the HEA rather than in the Direct Loan program as a new section 459A;

• include language giving the Secretary, in consultation with the Secretary of the Treasury, authority to sell loans that have been purchased on the secondary market if this is in the best financial interests of the United States and can be done at no additional cost to the taxpayer;

• propose additional limited waiver authority for the Secretary to address unforeseen circumstances and issues in implementing the LLR program and loan purchase authority;

• restore the Secretary's authority to ensure rigor in the Academic Competitiveness Grant (ACG) program; and

• make the ACG changes effective July 1, 2009, and waive the HEA's negotiated rulemaking and Master Calendar requirements with respect to these changes so that ED can move quickly to provide these benefits to students.

ED appreciates that Congress shares our concerns regarding current credit-market conditions, and we are committed to working with Congress to meet our shared commitment to students and families.

The Office of Management and Budget advises that there is no objection to the submission of this letter from the standpoint of the President's program.