FFELP Guide Seven Major Players in FFELP Federal government. Borrower. School. Lender. Guarantor. Servicer. Secondary market. 2 FFELP Players Federal Government. U.S. Citizens and Residents. Taxpayers. Congress. U.S. Department of Education. 2 FFELP Players Federal Government. U.S. Citizens and Residents. Beneficiaries. Taxpayers. Source of funds. 2 FFELP Players Borrower. Student/parent who borrows money for post-secondary education. Must apply for the loan. Understand terms. Sign promissory note. Repay the loan. 3 FFELP Players Educational institutions. Determine borrower’s eligiblity. Award federal aid. Process application files. Certify loan applications. Process loan proceeds. Monitors borrower’s enrollment status. Reconcile student accounts. 3 FFELP Players Lender. Must comply with ED’s lending regulations. Sets institutional policy. Provides capital. Provides loan servicing or work with a servicer. Interaction with guarantors. 3 FFELP Players Guarantor. Provides guarantee for lender. Maintains reserve fund to pay lender claims. Monitors compliance with federal regulations and guarantor policies. Provides administrative support services. Issues Notice of Loan Guarantee and Disclosure Statement. Provides reports. Processes default claims. Pursues collection of defaults. 4 FFELP Players Servicer. Manages loans on behalf of the owner. Lender remains owner of loan. Lender remains responsible for loan. 5 FFELP Players Secondary Market. Buys loans from lenders. Frees-up funds for new loans. All responsibility for the loan is transferred to the secondary market. 5 FFEL Program Parameters 6 Federal Loan Program Parameters Federal Stafford Loan Program. Definition and eligibility formulas. Subsidized Federal Stafford Loans. Unsubsidized Federal Stafford Loans. 6 Federal Loan Program Parameters Subsidized Federal Stafford Loan. Eligibility based on financial need. Schools may reduce eligibility. Schools may decline to certify a loan for less than $200. Review chart for loan limits. 6 Federal Loan Program Parameters Unsubsidized Federal Stafford Loan. Eligibility not based on financial need. Interest rate same as subsidized Stafford. May receive subsidized and unsubsidized loans for the same loan period. 7 Federal Loan Program Parameters Student eligibility. List of requirements on page 8. Fixed interest rate of 6.8% as of July 1, 2006. 8-9 Federal Loan Program Parameters Stafford-loan guarantee and origination fees. Guarantee fee is paid by the lender to the guarantor. Origination fee is paid to ED by the lender. Grace period for federal Stafford loans. Stafford-loan repayment terms. Standard. Graduated. Income-sensitive. Extended. 11-12 Federal Loan Program Parameters Borrowing limits. 13 Federal Loan Program Parameters Aggregate loan limits. 14 Federal Loan Program Parameters Federal PLUS for parents. Available for parents without adverse credit. EFC is not considered in determining PLUS loan eligibility. Parent must be natural or adoptive parent of the student. 16 Federal Loan Program Parameters Graduate-student eligibility. Beginning July 1, 2006, graduate and professional students who qualify for federal financial aid and have no adverse credit will be eligible to borrow through the PLUS-loan program. 16 Federal Loan Program Parameters Federal PLUS. Loan Limits. Annual = COA - Other Aid Begins day loan is disbursed. PLUS rates page 18-19. Begins day after the last disbursement. Interest Rate. Repayment. 17-19 Federal Loan Program Parameters Loan Proration. Student is enrolled in a program less than one academic year. Student is enrolled in a program equal to or longer than the statutory minimum for an academic year, but completing a period shorter than a year. 20 Federal Loan Program Parameters Loan Proration. Proration Method 1. Proration Method 2. 22-23 Federal Stafford-loan Certification Case Study 24 Federal Loan Program Parameters Life of a Stafford loan. Life of a PLUS loan. 26-27 Test Your Knowledge with these case studies! 29-30 FFELP Guide Thank you!