April 15, 2008
DODD TO ASK TREASURY, FED TO TAKE ACTION TO HELP AVERT CRISIS IN STUDENT LOAN MARKET
WASHINGTON, DC - Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing and Urban Affairs, today held a hearing to examine how the turmoil in the U.S. credit markets, an outgrowth of the mortgage market crisis, is affecting the cost and availability of student loans. Thousands of American students are receiving acceptance letters from colleges and universities this month, and are working with schools and their families to explore and secure financing options, including federal and private student loans. But in recent months, more than 50 lenders of federally-guaranteed loans and nearly 20 private student loan issuers have indicated that they intend to suspend their lending activities, raising the question of the availability of educational loans for students enrolling in school this fall.
Dodd emphasized the importance of attaining a higher education in today’s global economy, and stressed the need for a healthy student loan market in order to help families finance that education in the face of skyrocketing tuition costs.
“While I am unaware of an instance to date when a student has been unable to secure a loan, the withdrawal of these lenders, the ongoing turmoil in U.S. credit markets and the illiquidity in the student loan market have fueled concerns that a potential student loan credit crunch may be looming – one which could leave millions of students in a last-minute dash to secure the financial assistance they need to attend college this academic year.”
At the hearing, Dodd urged that preventative action be taken in order to ensure that students and their families continue to have access to educational loans. Dodd announced his intention to send letters in the coming days asking Federal Reserve Board Chairman Ben Bernanke to use existing tools to avert a breakdown in the market for student loans, and Treasury Secretary Henry Paulson to consider using the Federal Financing Bank to help prime the pump of liquidity in order to help avert a funding crisis in the student loan market.
“Last month, the Treasury and the Fed demonstrated their willingness and ability to take strong action to preserve liquidity and order in the capital markets. Their actions were unprecedented. But so are the times in which we find ourselves. It would be a mistake, in my view, for anyone to think that the crisis has passed. If the Fed and Treasury can commit $30 billion of taxpayer dollars to enable the takeover of Bear Stearns by JP Morgan Chase, then surely they can step in to enable working families to achieve their dream of a college education for their kids. If they do not, then I stand ready to act legislatively to prevent a deepening of this crisis.”
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