Responding to reports that some lenders have stopped offering federal loans at community and other colleges, two Democratic senators introduced legislation Tuesday to prohibit lenders from picking and choosing among institutions.
Under the proposal, lenders that participate in the federal loan program would have to extend credit to any eligible student, regardless of such things as income or the number of years of education, as long as the college is part of the program.
The government already guarantees the loans at nearly full value.
Sens. Patty Murray, D-Wash., and Chris Dodd, D-Conn., introduced the proposal after a New York Times story identified several lenders that had stopped offering federally guaranteed loans at community colleges and some four-year institutions.
“Lenders offering loans backed by taxpayer dollars shouldn't be able to discriminate against certain schools or students,” Murray said in a statement. “Denying loans based on school, program length, or income level locks the door for far too many.”
But some financial aid officials worried that the bill could have the undesirable effect of pushing lenders out of the Federal Family Education Loan Program, as the guaranteed loan program is officially named.
Pat Watkins, director of financial aid at Eckerd College in St. Petersburg, Fla., said, “A lot of the banks will just say, we're out of the business completely, you pushed us out.”