Talking Points – Student Loan Financing
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The student loan funding situation is dire and it is real.
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Members of Congress should, immediately:
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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).
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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 suspended its loan originations and purchases.
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.
If action is not taken today, the future of the FFEL Program could be in jeopardy.
 Banks have depended upon the secondary market and/or the bond market for decades to raise
new capital that they use to make new loans.
 If this part of the FFEL Program is not functioning, the banks will eventually “fill up” with student
loans and stop making new student loans.
Once investors desert the FFEL Program, we may never be able to attract them back.
For schools only, if applicable: Provide Members of Congress with information on the proportion
of your students that depend on student loans and PHEAA.
 Advise them that, as a not-for-profit, the revenue that PHEAA generates from its FFEL guaranty
and servicing activities pays for a host of loan fee savings and grant programs for students.
Advise them that private (non-federal) loans may be affected as well.
 The costs of these loans are already increasing interest rates and fees on these loans.
 Access to private loans could be limited as credit criteria are made more stringent and
borrowers are unable to qualify unless their parents will co-sign the loans and can, themselves,
pass a credit check.
 As a not-for-profit, the revenue that PHEAA generates from its FFEL guaranty and servicing
activities
Emphasize to Members of Congress that this issue is in need of immediate attention and that:
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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.