Senators looking to expand the economic bailout to include student loans
Sen. Charles Schumer is calling on the federal government to protect college students and their families from the credit crunch by expanding the economic bailout to include student loans.
“We have to build a wall around the student loan market to protect our kids from the credit crisis,” Schumer said at a news conference yesterday in Massapequa outside Plainedge High School, where students from a senior government class peppered him with questions about college costs and loan availability.
“My parents tell me I have to be realistic about where I want to go, and money is nearly as important as how good my grades are,” said Marianne Kennedy, 17, of Seaford, who is applying to both public and private schools. “They don’t want me having huge debt when I graduate.”
The Wall Street bailout legislation passed by Congress last week gives the federal government authority to buy up bad student loan debt as well as bad mortgage debt.
In a letter to U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke yesterday, Schumer (D-N.Y.) asked that they “pay special attention to the student loan market” as they carry out the bailout plan. He also wrote to every college and university in New York State, asking those that do not participate in the federal Department of Education Direct Loan student aid program to reconsider. Nationwide, 1,369 of more than 4,000 colleges and universities participate, according to a Schumer spokesman.
Schumer also is proposing that a commission be established to determine whether the federal loan program has enough resources if private loan programs dry up.
In recent months, more than 50 lenders have either suspended new government-backed student loans, left the program altogether or begun raising interest rates for private loans - in some instances, Schumer said, to as high as 19 percent.
“Lots and lots of the banks that are doing the lending are pulling back,” he said. “This wouldn’t be just a two-year economic crisis, it would be a generation crisis.”