May 1 (Bloomberg) -- Congress gave final approval to legislation designed to ensure that turmoil in the credit markets doesn't cause a shortage in student loans. President George W. Bush plans to sign it into law.

The measure would inject liquidity into the student loan market by allowing the U.S. Department of Education to buy federally guaranteed student loans that lenders haven't been able to sell to investors.

The House voted 388-21 to ratify minor changes made by the Senate to a bill that passed the House last month.

``In order to ensure that Americans can continue to compete in the global marketplace, the federal government has an obligation to encourage and support people pursuing higher education,'' Bush said in a statement issued by the White House. ``By granting the Department of Education greater authority to purchase federal student loans, today's action should ease the anxiety many students may feel about their ability to finance their education this fall.''

House Education and Labor Committee Chairman George Miller said during floor debate today that students haven't yet been hurt by the tightening credit market.

``We believe that it is only prudent to prepare for that possibility, that the ongoing stress in the nation's financial markets could jeopardize access to student loans,'' Miller said.

The legislation is intended to address a crisis in the market that has forced Citigroup Inc.'s Student Loan Corp., SLM Corp. and about 50 other lenders to stop writing some forms of student loans. The companies cite increased borrowing costs, cuts in government subsidies for education loans and a lack of investor interest in securities backed by loans.

Lenders' Costs Higher

Without government action, demand for federally backed student loans would outstrip supply, industry officials said. About 7 million borrowers will need more than $68 billion in federal loans this academic year, according to Education Department estimates.

The global credit crunch has raised lenders' financing costs, and they are unable to raise the rates they charge for federally guaranteed loans because they are locked in by the government.

To contact the reporter on this story: Christopher Stern in Washington at cstern3@bloomberg.net.

Last Updated: May 1, 2008 19:35 EDT