New student loan bill protects financial aid

New legislation hopes to keep the rocky state of U.S. credit markets from preventing the granting of financial aid to parents and students.

The Ensuring Continued Access to Student Loans Act of 2008 (H.R. 5715), recently approved by the House of Representatives, will expand new protections to those already present under the current law.

These protections will guarantee that families will continue to have access to federal college loans, despite lenders' growing reluctance to give out private loans.

Director of the Office of Student Financial Services Vincent Amoroso recently attended a symposium addressing the issues of student loans.

He observed that the perceived student loan crisis "actually is more real than ... some people initially were thinking."

"We have students at Johns Hopkins, really just like at any other school, where even after we give them everything that they're eligible for in terms of financial aid, and that includes loans, they still need additional funding," Amoroso said.

Hopkins's status as a direct lending school means that both undergraduate and graduate students are borrowing subsidized loans, unsubsidized loans and plus loans directly from the federal government.

The issues surrounding cash loan availability for lenders will not really affect Hopkins students because of this process.

Students at the University will instead feel the strain brought on by the current financial situation only through the private loan sector.

Additional funds may be needed to cover expected payment contribution, but if all other resources from the University and federal loan programs have already been overextended, then students will have to delve in to a private loan program or find some other sort of personal financing.

When it comes to the fact that certain loaners may not be able to provide families with the same sort of financial help as they had in the past, Amoroso said, "I don't think we're at the place yet where there is not going to be a place to go. It's just, it may not be the place to go that you're used to going to."

Bank of America Corp. announced on April 17 that it would be stopping its private student loan products but will continue to provide government-backed student loans.

The bank reported that its products comprised less than 15 percent of the total $6 billion in student loans the company provided in 2007.

The largest and most popular student lender, SLM Corp. or Sallie Mae, predicted that it might not be able to make profitable loans at this time and stated a first-quarter loss earlier this week.

"Under current conditions, however, loans can only be made at an economic loss. Reflecting this environment, the company is assessing how best to balance its resources and its mission to provide access for higher education," said Beth Guerard, a Sallie Mae spokesperson.

The University's status as a direct lending school will somewhat cushion the effects of Sallie Mae's poor performance.

According to Amoroso, the percentage of families at Hopkins who need to borrow money from a lender is very small; the majority of those students will use a direct-loan program under government funding.

"In our opinion, the least disruptive, most cost-effective, most controllable and quickest proposal to implement would be for the Department of Treasury's Federal Financing Bank to provide liquidity for federally guaranteed loans," Jack Remondi, executive vice president and chief financial officer of Sallie Mae, said in congressional testimony.

The bill, which was passed by a vote of 383 to 27 in the House, will not create additional costs for taxpayers.

Department of Education spokesperson Jane Glickman declined to comment, referring instead to a previously-released written statement.

In it was stated that "The administration is committed to ensuring that students and their parents have access to the Federal student aid they need to pay for college this fall."

The Department of Education is also making preparations for the Direct Loan and Lender-of-Last-Rest (LLR) programs to be enacted if they are necessary. H.R. 5715 would give authorization to the Secretary of Education to buy Federal Family Education Loans.