Murray Introduces Legislation to Keep Student Loans Available for Parents and Students Affected by Foreclosure Crisis

(Washington, D.C.) – Today, U.S. Senator Patty Murray (D-WA) joined with Senators Edward Kennedy (D-MA), Hillary Clinton (D-NY), Sherrod Brown (D-OH) and Bernie Sanders (I-VT) to introduce the PLUS Loan Borrower Protection Act. The bill will ensure that parents and students are not automatically deemed ineligible for a Federal PLUS Loan because of delinquency or foreclosure during the subprime mortgage crisis.

"This bill will help ensure that educational opportunities for young people don’t become trapped under the wreckage of this housing crisis," said Senator Murray. "It will provide students a fair shot at attaining their dreams even when their parents are struggling to stay above water."

Federal PLUS loans are available to help parents pay for their child’s undergraduate education and students pay for their own graduate tuition. Borrowers can qualify for PLUS loans regardless of financial need, but may not be eligible if determined to have an adverse credit history.

Currently, Department of Education regulations state that borrowers can be deemed ineligible for a PLUS loan if they have been delinquent on mortgage payments for more than 90 days, or if they have gone through a foreclosure in the previous five years unless the lender determines there is an extenuating circumstances existed. The PLUS Loan Borrower Protection Act ensures that a delinquency or foreclosure on a primary home resulting from the subprime mortgage crisis is considered an extenuating circumstance.

On April 3rd, Senator Murray also helped introduce the Strengthening Student Aid for All Act (S. 2815) with Senators Kennedy (D-MA), Dodd (D-CT), Levin (D-MI), Reed (D-RI), Sanders (I-VT). 

The bill:

• Reduces low-income families’ reliance on loans by increasing the maximum Pell Grant for the lowest-income Pell grant recipients by up to $750 above the maximum award ($4731 for the 2008-09 school year); 
• Reduces the need for students to take out expensive private loans by increasing access to guaranteed low interest Federal student loans.  To accomplish this, the bill would increase federal loan limits by $1000 annually for dependent undergraduate students, and by $2000 annually for independent undergraduate students and students whose parents can’t obtain federal parent loans because of poor credit; 
• Provides better options for parents who borrow for their children’s college education by allowing repayment of federal parent PLUS loans to be deferred while the student is enrolled in college; 
• Eases the ability of colleges to find new lenders for large numbers of students by requiring the Secretary of Education to designate guaranty agencies as “lenders of last resort” on a college-wide basis, rather than on a student-by-student basis, and by clarifying the Secretary’s authority to provide these lenders with capital to make the loans; 
• Ensures that existing lenders can continue to make new federal student loans by allowing the Department of Education to serve as a “secondary market of last resort” that would buy Federal Family Education Loan Program (FFELP) loans from lenders that need new capital in order to stay in business and continue their service to students.