Amid a weak national lending market that has already led to losses for large and small lenders across the country, some officials are worried that a new victim might emerge: students who take out private loans to pay for college.

embers of Congress have expressed concerns with rising interest rates for student loans – currently averaging near 10 percent but sometimes as high as 18 percent – as private loans are becoming harder to secure. As a part of the search for a solution to the credit crunch, the House Education and Labor Committee is holding a hearing Monday to discuss how to keep federal student loans available.

Sen. Ted Kennedy (D-Mass.) submitted an amendment to the Senate budget resolution this week aimed at protecting students who need loans to help pay for higher education.

“The maximum amount in federal loans a student may access to pay for college has remained essentially stagnant over the past 15 years,” Kennedy said in a speech introducing the amendment.

As a result, students have had to turn increasingly to private lenders, which are less predictable than the federal government, Kennedy said.

“In recent weeks, disruptions in the credit market have increased costs for lenders. This has caused some lenders operating outside the federal student loan program to cut back on lending to high-risk borrowers or offer higher interest rates or less favorable terms for students,” Kennedy said in the speech. “By providing for Congress to increase federal loan limits, this amendment would protect students from having to turn to the private markets to finance their education.”

The amendment does not specify by how much federal funding of student loans would increase, but it would allow for future increases in funding for federal student loans.

On Feb. 28, Rep. George Miller (D-Calif.), chairman of the House Committee on Education and Labor, and Kennedy wrote a letter to the Secretary of Education Margaret Spellings about the issue.

“Recently, certain student loan lenders have encountered difficulties in accessing the capital markets to finance their lending activity,” the letter said. “While these disruptions have had an impact on some lenders, they so far have not negatively affected students’ ability to access federal loans.”

But according to Scott Fleming (SFS ’72), assistant to the president for federal relations, students should not be immediately alarmed by the fluctuations in the loan market.

“I would emphasize that, while this is clearly a situation that warrants vigilant attention by everyone concerned – and it is receiving careful attention here at Georgetown – it should not be cause for overblown concern, particularly for students at an institution like Georgetown, where our default rate on student loans is among the lowest in the country,” Fleming said.

University spokesperson Julie Bataille said the university does not anticipate students encountering problems getting loans.

“At this point, we do not believe that Georgetown students will have trouble accessing student loans. We are in touch with lenders, federal officials and others as part of ongoing efforts to look at these issues but do not believe that, at this time, there is reason for Georgetown students to worry,” she said. “A contingency option would be to participate in the federal government direct lending program, but at this point, we are not actively taking steps to do so, as we do not anticipate a problem in our students’ ability to access private loans.”

One private lender, Wachovia, is not planning on decreasing funding for private student loans.

“We haven’t changed our commitment to the student lender market,” Wachovia spokesperson Ferris Morrison said. “Wachovia is a large company, and there’s a lot of security that comes for folks with that.”

In their letter, Miller and Kennedy laid out a plan in order to ensure that students continue to receive their federal loans as the market becomes tougher on private lenders. The letter specifically focused on the impact of the struggling market on the Federal Family Education Loan Program, the largest source of federal financial aid for college.

iller and Kennedy wrote, “We urge you to take any steps necessary to ensure that these options are readily available so that recent activity in the credit market does not adversely affect students’ ability to secure federal student loans in a timely manner.”

iller and Kennedy also urged Spellings to consider authorizing for the use of federal funds to ensure the availability of student loans and the protection of the Direct Loan program already in place.

Fleming said he has not heard of action taken by the DOE because of the letter.

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