WASHINGTON — Congressman Paul Kanjorski (D-Pa.) and 20 other Members of the U.S. House of Representatives have urged Secretary of the Treasury Henry M. Paulson, Jr. and Secretary of Education Margaret Spellings to take action to ensure that students can afford higher education.
In recent weeks, the liquidity of the student loan market has considerably tightened, according to Kanjorski's office. Lenders participating in loans under the Federal Family Education Loan Program engage in securitizations as strategy, but liquidity is now threatened by the continuing credit crunch. College Loan Corporation, one of the largest lenders, has already announced that it will no longer participate in FFELP.
Financing education loans through asset-backed securities has become uneconomical in the current environment, wrote Kanjorski, the chairman of the House Financial Services Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee, and recent loan auctions for student loans securities have failed. He feels a pattern of failed auctions may affect the entire $80 billion student loan auction rate securities market.
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Kanjorski urged Paulson and Spellings to "engage with each other and with federal financial institutions such as the Federal Financing Bank, the Federal Home Loan Bank System, the Federal Reserve, and all other appropriate entities…to assist in ensuring liquidity and the availability of various financing mechanisms for the purpose of bringing stability to the student loan financing market."
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