U.S. moving ahead on urgent student loan programs
WASHINGTON (Reuters) - The Bush administration said on Monday it will be ready to accept requests for emergency student loans from state guaranty agencies by June 1 under a program to stabilize the $85 billion student loan industry.
With fallout from the subprime mortgage crisis threatening to trigger a student loan shortage this summer, an official of the U.S. Education Department said it is moving to implement the stabilization plan approved last week by Congress.
"Millions of students could potentially benefit from this legislation," David Dunn, the department's chief of staff, told reporters on a conference call.
Loan providers such as Sallie Mae,
Lenders have warned of a potential loan shortage in coming months as millions of students seek financial aid for college.
But Dunn said: "We've still not had any reports of individual students being unable to obtain loans."
Under the plan, the Education Department would channel federal funds to 35 state-level guaranty agencies. Under a "lender-of-last resort" program, the agencies could then use the funds to provide loans to individual students or colleges that cannot obtain loans elsewhere.
The stabilization plan also calls for the Education Department to buy up student loans that lenders are unable to sell on the secondary market, from which many investors have fled in recent months after being burned by losses on securities backed by subprime home mortgages.
Dunn said the department was still working on that aspect of the program, in cooperation with the Treasury Department and the White House's Office of Management and Budget.
(Editing by Andre Grenon)
