Department of Education Announces College Loan Plan

Secretary of Education Margaret Spellings, along with Secretary of the Treasury, Henry Paulson, announced that the Administration has approved a plan that will ensure that any qualified student will have access to student loans during the upcoming school year.

Building upon the recently passed Ensuring Continued Access to Student Loans Act of 2008, the plan will insure short term liquidity for those lenders unable to procure lending capital through their regular means, as well as a loan purchase commitment, where the Department of Education will purchase new federal loans originated for the 2008-09 year. Lenders will have until September 30, 2009, to decide if they will sell the loans to the Department of Education. So, if economic conditions improve, the lenders may still decide to hold the loans themselves.

The DOE will also utilize, if necessary, the Lender of Last Resort program, which would provide federal advances to guaranty agencies if theere are students unable to get FFELP loans to students otherwise unable to get them.

The Department has also committed to doubling Direct Loan origination volume from $15 billion to $30 billion, if necessary.

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