Uncle Sam: Stepping In On Students' Behalf

Shockwaves from the subprime mortgage crisis are still rippling across the student loan market. Luckily for cash-strapped college students, their cause is an easy one to get behind--for politicians on both sides of the aisle. H.R. 5717, the Ensuring Continued Access to Student Loans Act, was passed in the House yesterday with a large, bipartisan majority at 383-27. Intended to form a sort of federally-financed safety net in the case of collapse in the student loan market, the bill would: 

-require the Department of Education to pump federal funds into guarantee agencies without enough capital to meet loan demands

-permit the Department of Education to buy federally guaranteed student loans from lenders unable to attract secondary investors

-increase annual limits on federal unsubsidized loans by $2,000

-lengthen the amount of time parents are given to defer repayment of PLUS loans from 60 days to 6 months

Currently the bill's prospects are looking good: an OMB statement Wednesday indicates that it enjoys considerable support from the Bush Administration, and similar legislation has been proposed in the Senate. And financially speaking, maybe the sooner the law is passed, the better. Yesterday's vote coincided with major lender Bank of America's announcement that it will no longer be issuing private student loans; other lenders are dropping out of the market altogether.