WASHINGTON - Education Secretary Margaret Spellings is seeking to ease worries that tight credit markets might make it hard for students to get college loans.
Spellings said yesterday her department had reviewed the law and concluded that it has the authority to quickly free up money from the US Treasury, if needed, to finance student loans.
She said the money would be provided so guarantee agencies - nonprofits that traditionally back student loans issued by banks - can offer loans directly in a pinch.
Spellings said she was clarifying her authority to do that because there had been confusion about whether she would first have to go to Congress and seek legislative action before going to the Treasury. That could be time consuming, and legislative politics could cause further delay.
Lawmakers, students, and financial experts are worried the nation's ongoing credit crunch may make it more difficult for students and their families to find loans. Nearly two dozen lenders have dropped out of the federally backed student-loan program. That hasn't been a problem so far, because they aren't the biggest players and others have stepped in to provide the loans.
Spellings cautioned she was only providing a safety net in the event the federal government's help is needed. She likened it to preparing for a hurricane that might, or might not, hit.
"This is the equivalent of staging food and water," she said.
This is the time of year when students are figuring out where they are going to college in the fall and will seek financing in the coming months. Experts predict the impact of the tight credit market on students will become clearer this summer.
Spellings' announcement came a day after Massachusetts Democrat Edward Kennedy, the chairman of the Senate education committee, introduced legislation seeking to ensure students would have money to pay for college.
Due to the earlier confusion about the education secretary's authority, the bill includes language stating that Spellings can go directly to the Treasury to free up capital for college loans.
The bill also would improve the terms of loans parents take out for their children by allowing repayment to be deferred while students are in school. The legislation also would increase tuition grants to the poorest students.