Kennedy to Colleges: Have Back-Up Plan for Students

In a letter sent to the American Council on Education on April 15, Sen. Edward Kennedy, D-Mass., the chairman of the Senate Education Committee, urged colleges to sign up for the Department of Education’s Federal Direct Loan Program as a preventive measure against the potential funding inadequacies within the Federal Family Education Loan Program.

His recommendation to colleges and universities to enroll in the direct-lending program as a backup option for student loan funding is yet another one of Kennedy’s attempts to help protect students against a federal funding nightmare this fall.

Kennedy has also introduced the Strengthening Student Aid Act of 2008 into the Senate that would, in part, allow the federal government to inject liquidity into the student loan market and enable the Department of Education to purchase FFELP loans from failing lenders.

Kennedy’s efforts to help secure the federal student loan sector come at a time when almost 50 FFELP lenders have suspended their federal student loan programs in recent months, including 21 of the top originators of federal student loans and five of the largest holders of student loan portfolios, according to FinAid.org.

Several schools had already made the move to the Direct Loan Program before Kennedy sent his letter to the ACE, including Pennsylvania State University, which, at $276 million, has a substantial federal student loan volume. Secretary of Education Margaret Spellings has assured schools that the Education Department is equipped to handle double the volume within the Direct Loan Program, if necessary.