Lawmakers Ask Federal Reserve to Rescue Student-Loan Companies Next

March 18, 2008

Washington — As the nation’s financial woes deepen, members of Congress are asking the Federal Reserve to intervene in the student-loan market.

In a letter sent on Monday, Rep. Paul E. Kanjorski, a Democrat of Pennsylvania, and 31 other lawmakers urged the Federal Reserve chairman, Ben S. Bernanke, to use his emergency authority to inject cash into the student-loan market.

The request came a day after the central bank played a key role in coming up with a rescue plan for the troubled investment firm of Bear Stearns & Company, and amid continuing disruptions in the market for asset-backed securities. Those disruptions have made it harder for some lenders to obtain financing for their loans, and have forced some of the nation’s largest lenders to either scale back or end their participation in the federally guaranteed student-loan program.

So far, the lender departures do not appear to have made federal loans less available to students. But despite assurances from the Education Department, some fear that students could have difficulty obtaining loans this fall if conditions worsen and more lenders withdraw from the program.

In the letter, the lawmakers urged Mr. Bernanke to help restore stability to the student-loan market to ensure continued access to student loans.

In February, Mr. Kanjorski and several other lawmakers sent a letter to the Treasury and Education Departments, asking them to work with institutions such as the Federal Financing Bank, the Federal Home Loan Bank System, and the Federal Reserve System to bolster the student-loan system. —Kelly Field