As fears mount over a looming recession, the House of Representatives passed a bill Thursday to help the federal student loan program stay afloat.

The bill would allow the secretary of education to purchase excess loans, providing lenders with additional security and giving them an incentive to provide more student loans.

The bill would also attempt to make it easier for students to apply for and receive loans by allowing students to apply for “loans of last resort” – loans given to those who have been denied loans by at least two lenders – on a college-wide basis rather than an individual basis. Under the new system, Georgetown has the ability to apply for loans on behalf of all of its qualified students, rather than requiring each of them to approach the Department of Education directly.

The bill also raised the four-year maximum amount that an undergraduate student could borrow from $23,000 to $31,000.

Over 50 major lenders have pulled out of the federal student loan program in the past several years, including Bank of America, causing many to fear a student loan crisis.

In passing the bill, its creators hope to ensure that the federal loan system remains strong so that students will have less of a need for private loans. Private loans are generally accompanied by negative consequences such as higher interest rates.

Scott Fleming, assistant to the president for federal relations, said he thinks the program presented by the bill will be successful in helping prevent a student loan crisis.

“It certainly has the potential to help in that it will clarify, and thereby remove any doubt about, the ability of the Secretary of Education to advance funds to guarantee agencies so they can function as `lenders of last resort,'” Fleming said.

He added that empowering the secretary to purchase loans from lenders will help ensure that they maintain enough capital to continue supplying student loans, Fleming said. Georgetown students have a good history of paying back loans and therefore are in good standing with lenders.

“At least to date, Georgetown has not faced a problem of not having lenders willing to loan to our students, which, among other things, reflects the relatively low risk of a Georgetown student not repaying their student loans,” he said.

While Georgetown students have not yet been hit with a student loan crisis, Fleming said the university is prepared to aid students if loans become unavailable.

Fleming said that Georgetown has a number of options if such a crisis were to occur, including relying on the lender of last resort authorities or moving into the direct lending program, where loans come directly from the Department of Education, rather than from a bank.

He added that, at this time, the university does not foresee a need to implement such measures.

The bill, H.R.5715, is now awaiting passage in the Senate, although a vote has not yet been scheduled.

Have a reaction to this article? Write a letter to the editor.

Comments are closed.