Murray, Dodd Introduce Legislation to End Growing Discrimination Against Community College Students in Student Loan Market

Jun 17 2008

Senators' bill stipulates that lenders who provide federally backed loans can no longer deny certain community colleges and four-year schools access to loans

(Washington, D.C.) – Today, U.S. Senators Patty Murray (D-WA) and Chris Dodd (D-CT) introduced legislation that aims to end the growing practice of denying students at certain community and technical colleges and four-year colleges access to federally guaranteed students loans. In recent months, several lenders in the Federal Family Education Loan Program (FFELP) have begun to discontinue their participation with particular types of colleges, including two-year colleges and small four-year colleges, across many states.  Discrimination against particular students and schools in the federal loan program can have detrimental effects on access to postsecondary education across our nation, particularly among low-income students. 

"Lenders offering loans backed by taxpayer dollars shouldn't be able to discriminate against certain schools or students," said Senator Murray. "I applaud the efforts of lenders to continue to offer student loans at a very hard time for their industry, but when families are struggling to pay for gas, let alone afford college, these discriminatory tactics make the job even harder.  Access to higher education is the key that opens the doors of opportunity for millions of Americans, but denying loans based on school, program length, or income level locks the door for far too many."

“Student loans help make the dream of higher education a reality for many Americans.  Unfortunately, however, some lenders backed by the federal government are beginning to turn students away based on nothing more than the school they attend or their family’s income,” said Senator Dodd.  “As millions of hardworking American families are being squeezed between rising energy and fuel prices and stagnant incomes, we cannot stand by and allow these discriminatory practices to continue.  No student should be denied their dream of a higher education simply due to the school they attend or their income.”   

Under the Preventing Student Loan Discrimination Act, introduced today by Murray and Dodd, lenders that receive federal subsidies on loans under the FFELP program would no longer be able to deny loans to particular eligible students or colleges loans simply based on characteristics of their college. The bill will ensure that FFELP lenders do not discriminate against students based on the school they attend, the length of their college program, or their income level, if they are otherwise eligible for Federal student loans. Federal loans provided by FFELP lenders are subsidized by federal funds and are federally guaranteed against student default at a 95% rate. 

Murray and Dodd have been increasingly concerned about pattern of lenders in the Federal Family Education Loan Program pulling away from specific types of schools in recent months. Students, college presidents, and student aide officials have voiced their concern about this detrimental trend and what it means for students that need college degrees to compete in the global job market.

An example of the problems community colleges face has been seen at Tacoma Community College in Washington state. This year the school started out the year with ten FFELP lenders and currently now have only four that are providing loans to students.

Congress has been working hard with schools, lenders, and the Department of Education to ensure that all students have access to financial aid, regardless of recent economic changes. Significant progress was made last month when the Ensuring Continued Access to Student Loans Act, which Senators Dodd and Murray sponsored, was signed into law.  Students across the country can now access student loans even in rocky financial times because of the safeguards that legislation put in place.