WASHINGTON - Students may increase their borrowing for college by $2,000 a year and private lenders could sell the debt to the government for a profit under legislation approved by a House panel yesterday.
The measure, passed by the House Education and Labor Committee on a voice vote, is intended to ensure that turmoil in the credit markets doesn't prevent students from financing their educations, sponsors said.
Democratic Representative George Miller of California, the committee chairman, said the breakdown of the auction-rate bond market has limited the ability of some student-loan companies to raise new capital. These lenders won't "participate at the same level" so there will be a gap between the demand and supply of the student loans, he said.
More than 6 million students used the guaranteed student loan program last year to help pay for their college education.
The measure would authorize the Education Department to buy student loans as long as there is no net cost to the US Treasury. The government loan purchases would provide capital for cash-strapped lenders to make additional loans to students.
The bill is sponsored by Miller and the committee's top Republican, Howard McKeon of California.
The legislation would also increase the total amount that students could borrow during the course of their college education to $31,000 for undergraduates who are financially dependent on their parents. It would raise the limit to $57,500 for undergraduates who are financially independent of their families.
Parents would also be given additional time to pay off federally guaranteed loans.