Total Bankruptcy

In the midst of concerns about student loan availability during the credit crunch, the House Education and Labor Committee approved a bill yesterday that would aim to prevent current market problems in the United States from curtailing the abilities of aspiring college students to obtain student loans.

There has recently been a lot of concern about student loan availability as the current economic climate has prompted investors to stay away from asset-based securities that often provide the backing for student loans.

Just this week, the Education Resources Institute (“TERI”) -- the oldest and largest non-profit guarantor of private education loans in the country -- announced that it was filing bankruptcy. Other recent developments in the student lending industry had prompted many to call out the Department of Education to take some action and ensure student loan availability for aspiring high schoolers and their parents.

With this issue in mind,  the House Education and Labor Committee's bill (H.R. 5715) aims to prevent students from experiencing any future problems in obtaining student loans as a result of financial market shocks, according to Committee Chairman George Miller as reported in a CongressDaily.com story.

So what will the bill do? H.R. 5715 will strive to get aspiring college students away from relying so heavily on private loans by increasing:

• annual loan limits on federal student loans by $2000 for all students and
• total amounts that students can borrow for their college education.

The bill would also provide parents with six additional months to defer payments on their children's loans.

While this bill may not address every potential issue that could arise with market troubles affecting student loan availability, at least it's a start. Because when it comes to something as critical as higher education, there needs to be more urgency when addressing such issues.