DODD, BANKING COMMITTEE MEMBERS URGE TREASURY, FED TO TAKE ACTION TO AVERT CRISIS IN STUDENT LOAN MARKET

WASHINGTON, DC – Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing and Urban Affairs, along with other members of the Committee, today sent letters to Treasury Secretary Henry Paulson and Federal Reserve Board Chairman Ben Bernanke urging each to take action to ensure that lenders are able to continue providing educational loans to students and their families. Millions of American students are receiving acceptance letters from colleges and universities this month, and are working with schools and their families to explore and secure financing options, including federal and private student loans.  But in recent months, more than 50 lenders of federally-guaranteed loans and nearly 20 private student loan issuers have indicated that they intend to suspend their lending activities, raising the question about the availability of educational loans for students enrolling in school this fall.  Dodd held a hearing on the issue on Tuesday.

Senators Johnson, Carper, Menendez, Akaka, Casey and Tester joined Dodd in sending both letters; Senator Corker joined Dodd in sending the letter to Secretary Paulson.

“Just this week, two major banks announced that they will be scaling back their student loan businesses as a result of the turmoil in our credit markets,” said Dodd.  “This is the latest sign that lenders are finding it increasingly difficult to provide educational loans to students.  Attaining a higher education is crucial to be competitive in today’s global economy, but is no easy task in the face of skyrocketing tuition costs. We must act quickly and aggressively in order to avert a crisis in the student loan market, so that students and their families have options to finance their education.  The Treasury Department and the Federal Reserve Board must be prepared to take immediate, decisive action to prevent today’s concern from worsening into tomorrow’s crisis.”

A copy of each letter is attached.