WASHINGTON -(Dow Jones)- Legislation aimed at preventing the credit crisis from extending to the student loan market passed through the House Thursday and will now make its way to the White House for the president's signature.
The bill sailed through the Senate Wednesday and was adopted by the House Thursday with a strong majority.
There have been no reports of eligible students unable to secure loans to pay for college, but there are a growing number of private lenders who have withdrawn from both a government-backed program and lending directly to students.
"Today's vote will help ensure that students' dreams of going to college aren't sidelined by the turmoil in the credit markets," said Rep. George Miller, D-Calif., the chairman of the House Education and Labor Committee, and one of the bill's authors.
The bill recognizes the authority granted previously to the Department of Education but never invoked, to pour liquidity into the student loan marketplace if there are signs it is seizing up.
The education secretary would be able to designate firms as lenders of last resort and provide them with capital to ensure there is sufficient liquidity in the marketplace.
As a further measure to ensure liquidity, the secretary would be able to purchase loans from lenders unable to securitize them and sell them on.
The bill moved through Congress swiftly, a sign of the degree of seriousness with which lawmakers view the possibility of students being unable to get funding for education in the fall.
The White House has indicated its support for measures to bolster the student loan industry. Last week it sent a letter to Sen. Christopher Dodd, D-Conn., underlining the need to move quickly.
"Implementing this authority will take time, so it is imperative to move this legislation without delay if this authority is to be used in the upcoming school year," the letter from the administration said.
The bill would also provide direct support for families who are struggling due to the weakening economy.
It would increase the amount that students whose parents are acting as a guarantor can borrow over the course of their post-secondary education to $31, 000 in federal loans, from the current $23,000.
Students who are independent would be allowed to borrow $57,500, up from the current ceiling of $46,000.
Parents would be given six months from the time their children graduate before they have to begin paying off their student loan without incurring interest on it.
And families that would otherwise be eligible for the federal funding program but have become delinquent in their mortgage payments or medical bills would still be able to qualify for loans.
A spokeswoman for the House Education panel said that over the course of five years, the bill would generate $455 million in savings for the Treasury Department. That money would be automatically poured into a grant program for low-income students majoring in areas deemed to be in high demand in the workforce like math, science, engineering and languages.
