Sen. Edward Kennedy (D-Mass.) introduced legislation that would improve access to federal loans and increase the amounts of Pell Grants for certain college students, saying that Congress “cannot allow problems in the credit market to prevent students from going to college.”

The bill, called “Strengthening Student Aid for All Act” reduced low-income families’ reliance on loans by increasing the maximum Pell Grant for the lowest-income recipients by up to $750 above the maximum award. The new maximum appears to be $4,731 for the 2008-2009 school year, according to a statement from the Senator. The bill also seeks to increase federal loan limits by $1,000 annually for dependent undergraduate students and $2,000 for independent undergraduate students as well as those students whose parents are hindered from getting certain federal parent loans because of poor credit. This is an effort to minimize the growing reliance on private loans, according to a statement from the Senator’s office.

It also calls for strengthening the Department of Education’s ability to be a market for student loans, and shoring up Secretary of Education Margaret Spelling’s authority to keep capital flowing to that market. The bill would require the secretary to designate guaranty agencies as “lenders of last resort” on a college-wide basis, rather than on a student-by-student basis. It would also clarify Spelling’s authority to provide capital to those lenders to make those loans.

The bill also ensures that existing lenders can continue to make federal loans by allowing the Department of Education to serve as a secondary market of last resort. It would be able to buy Federal Family Education Loan Program (FFELP) loans from lenders that need new capital in order to stay in business. The bill also attempts to make federal parent loans more attractive. In recent years, parents chose to forego PLUS loans in favor of tapping home equity lines of credit or take out private loans with good terms and conditions.

This year, however, the number of PLUS loan borrowers declined – the first time that has happened in a decade. If this portion of the bill passes, parents will be able to defer payments on those loans until their children graduate from school. “With the credit crunch making it harder and more expensive for parents to borrow from private sources, this legislation will make it easier for parents to obtain federal loans,” Kennedy said.



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