WASHINGTON, April 10 (UPI) -- The U.S. Department of Education may be authorized to purchase federally guaranteed student loans to restore stability in the lending program, officials said.
Federally guaranteed loans have become harder to find, as many lenders have dropped out of the business in recent weeks, The Washington Post reported.
The House Education Committee, chaired by Rep. George Miller, D-Calif., approved a measure Wednesday that would allow the Education Department to purchase loans. Sen. Edward M. Kennedy, D-Mass., has introduced a similar bill in the Senate.
"The turmoil in the credit markets has become a crisis," Kennedy said. "The question for Congress is how to prevent it from becoming a crisis for students."
Since October, when a cut in federal subsidies for student loan lenders took effect, 12 percent of lenders of federally guaranteed loans have dropped out of the business, the Post reported.
The problem escalated when the auction-rate securities market, a critical source of funding, collapsed this winter.
In purchasing loans, the Department of Education would add liquidity to the market, helping lenders weather through the economic downturn.
"This is the equivalent of a hurricane coming, and staging food and water at the site," Education Secretary Margaret Spellings said.
