Talking points about the Loan crisis
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Talking Points – Student Loan Financing
The student loan funding situation is dire and it is real.
- PHEAA directly uses its own capital to lend to students and buy loans from banks (this is known as being a secondary market).
- PHEAA has already experienced “failed auctions” of its securities, dramatically raising its cost of funds.
- In short, a “failed auction” means that there were not investors willing to purchase PHEAA’s securities.
- In response, PHEAA has temporarily suspended participation as a lender. PHEAA will continue to guarantee and service loans for the 400+ lenders in the state of PA.
- While banks may be able to “fill in the gaps” in the short-term, the long-term availability of student loans is jeopardized without swift, decisive federal action.
- This situation is national in scope and not limited to Pennsylvania.
Members of Congress should, immediately:
- Call or write Secretary of Treasury Henry Paulson, Secretary of Education Margaret Spellings, Federal Reserve Chairman Ben Bernanke, and President of the Pittsburgh Federal Home Loan Bank Board John Price.
- Request that they step in NOW to provide needed financing for student loan providers.
- Ask them to use all available means to inject needed capital into the student loan marketplace and restore investor confidence.
- This is not a bailout. This is a way to solve a crisis of confidence. These are good loans and support an important federal program.
Remind your Members of Congress that 97% of the schools in Pennsylvania depend on the Federal Family Education Loan Program (FFELP).
Emphasize to Members of Congress that this issue is in need of immediate attention and that:
- Students and families are making decisions today on what schools to attend this fall.
- If there is any uncertainty regarding the availability of student loans, some students could opt not to pursue higher education and miss out on their opportunity, or settle for a school that is not their first choice.
- Schools, students, and families need to be certain today that the loan funds their students depend upon to pay college costs will be there when they need them this fall.
- Pennsylvania’s economic future depends on an educated workforce – we cannot afford any missteps.