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ENSURING CONTINUED ACCESS TO STUDENT LOANS ACT MATRIX

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ENSURING CONTINUED ACCESS TO STUDENT LOANS ACT MATRIX Powered By Docstoc
					        ENSURING CONTINUED ACCESS TO STUDENT LOANS ACT
                           MATRIX*
       The U.S. Congress passed the Ensuring Continued Access to Student Loans Act of 2008
       (HR 5715) on April 30, 2008. The President signed the bill (P.L. 110-227) on May 7,
       2008, which is the date of enactment. Unless otherwise indicated, the effective date of
       the changes in the legislation is the date of enactment. Unless otherwise noted, the
       provisions outlined in this matrix are not subject to negotiated rulemaking or HEA
       Master Calendar provisions.




                             Prepared by Great Lakes Higher Education Corporation

                                                        June 10, 2008


*This matrix is a summary of the Ensuring Continued Access to Student Loans Act. The information provided is subject to change
based upon guidance obtained from the Department of Education or clarifications that may be received. Readers should refer to the
actual statutory or legislative language to resolve any questions.
                                                                                                   TABLE OF CONTENTS

    STAFFORD LOAN LIMITS ........................................................................................................................................................................................................ 2
          Dependent Students................................................................................................................................................................................................................ 2
          Independent Students............................................................................................................................................................................................................. 4


    PLUS LOAN PROGRAM CHANGES ........................................................................................................................................................................................ 6
          Parent PLUS Repayment Start Date/Postponement of Repayment................................................................................................................................... 6
          Interest Capitalization............................................................................................................................................................................................................ 6
          Underwriting Criteria/Credit Check .................................................................................................................................................................................... 7


    LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES ..................................................................................................................................... 8
    Parameters of LLR Program........................................................................................................................................................................................................ 8
                       School-Wide LLR Designation................................................................................................................................................................................ 8
                       Eligible LLR Loan Types......................................................................................................................................................................................... 8
                       No Borrower Benefits under LLR .......................................................................................................................................................................... 8
                       Mandatory Advances to Guaranty Agencies from the Department .................................................................................................................... 10
          Lender Liquidity Options ...................................................................................................................................................................................................... 11
                       Department of Education Authority to Purchase FFELP Loans......................................................................................................................... 11
          Department Reporting and Disseminating of LLR Program Information ....................................................................................................................... 15
          Inducements ............................................................................................................................................................................................................................ 15




1
KEY
• Date/Trigger = Effective date of statutory change and trigger event as provided for in the legislation.
•   Additional Guidance/Clarifying Comments = Outlines additional guidance provided by the Department of Education and/or clarifying comments provided by the
    FFELP community.
•   GL Implementation Notes = Notes on how Great Lakes intends to implement the changes. This information is subject to change as Great Lakes works through the
    implementation issues associated with the changes.

    STAFFORD LOAN LIMITS
                                                                                                        Additional Guidance/Clarifying
    #                         Summary of Regulatory Change                           Date/Trigger                                                GL Implementation Notes
                                                                                                                  Comments

    1    Unsubsidized Stafford Loan Limits: Dependent Undergraduate                  Loans first     No changes made to annual             Great Lakes has made the necessary
         Students                                                                    disbursed on    subsidized Stafford loan limits for   system revisions to accommodate the
                                                                                     or after July   dependent undergraduate students.     increased loan limits for loans
         The annual amount that dependent undergraduate students are able
                                                                                     1, 2008                                               certified with a first disbursement on
         to borrow in unsubsidized Stafford loans is increased by $2000. The
                                                                                                     No changes made to annual             or after July 1, 2008. For questions
         annual limits for subsidized and unsubsidized Stafford loans are as
                                                                                                     subsidized Stafford loan limits for   about the increased limits, please
         follows:
                                                                                                     graduate students. The maximum        contact Client Services at (800) 236-
                                                 Unsubsidized         Maximum                        amount remains at $8,500.             0051.
                                                Stafford Limit        Combined
                     Year        Subsidized       (minus any        Stafford Loan
                               Stafford Limit   subsidized loan         Limit
                                                   amount)
                                                                                                     The Stafford MPN Addendum and
                                                                                                     Plain Language Disclosure statement
          1st year                $3,500            $5,500             $5,500                        are being revised to reflect the
           nd
          2 year                  $4,500            $6,500             $6,500                        increased loan limits.
           rd
          3 year and beyond       $5,500            $7,500             $7,500

                                                                  [HEA 428H(d)(3)]




2
    STAFFORD LOAN LIMITS
                                                                                                   Additional Guidance/Clarifying
    #                       Summary of Regulatory Change                        Date/Trigger                                                GL Implementation Notes
                                                                                                             Comments

    2   Aggregate Stafford Loan Limits: Dependent Undergraduate                 Loans first     No changes made to aggregate          Great Lakes has made the necessary
        Students                                                                disbursed on    subsidized Stafford loan limit for    system revisions to accommodate the
                                                                                or after July   undergraduates.                       increased loan limits for loans
        The aggregate amount for unsubsidized Stafford loan borrowing for
                                                                                1, 2008                                               certified with a first disbursement on
        dependent undergraduate students is increased as follows:
                                                                                                No changes made to aggregate          or after July 1, 2008. For questions
         Aggregate Loan Limits    Subsidized Stafford    Combined Stafford                      subsidized Stafford loan limit for    about the increased limits, please
                                        Loans             Loans (including                                                            contact Client Services at (800) 236-
                                                          subsidized limit)                     graduate students. This amount
                                                                                                remains at $65,500.                   0051.
            Undergraduate              $23,000          $31,000 (with no more
              Students                                     than $23,000 in
                                                          subsidized loans)                     The Stafford MPN Addendum and
                                                            [HEA 428H(d)(4)]                    Plain Language Disclosure statement
                                                                                                are being revised to reflect the
                                                                                                increased loan limits.




3
    STAFFORD LOAN LIMITS
                                                                                                    Additional Guidance/Clarifying
    #                       Summary of Regulatory Change                         Date/Trigger                                                  GL Implementation Notes
                                                                                                              Comments

    3   Unsubsidized Stafford Loan Limits: Independent                           Loans first     No changes made to subsidized           Great Lakes has made the necessary
        Undergraduate Students                                                   disbursed on    Stafford annual limits for              system revisions to accommodate the
                                                                                 or after July   independent undergraduate students.     increased loan limits for loans
        The annual amount that independent undergraduate students (or
                                                                                 1, 2008                                                 certified with a first disbursement on
        dependent students whose parents are unable to borrow PLUS loans)
                                                                                                 No changed made to additional           or after July 1, 2008. For questions
        are able to borrow in unsubsidized Stafford loans is increased by
                                                                                                 annual unsubsidized Stafford loan       about the increased limits, please
        $2000. The annual limits for subsidized and unsubsidized Stafford
                                                                                                 limits for graduate students. This      contact Client Services at (800) 236-
        loans are as follows:
                                                                                                 amount remains at $12,000.              0051.
                            Base Sub/Unsub      Additional        Maximum
                             Stafford Limit   Unsubsidized        Combined
                                              Stafford Loan     Stafford Loan                    The Stafford MPN Addendum and
                   Year                          Amount             Limit
                                                                                                 Plain Language Disclosure statement
        1st year                $3,500           $6,000            $9,500                        are being revised to reflect the
         nd                                                                                      increased loan limits.
        2 year                  $4,500           $6,000            $10,500
         rd
        3 year and beyond       $5,500           $7,000            $12,500
                                                                                                 Outstanding Issue/Tentative
                                                              [HEA 428H(d)(4)]                   Guidance:
                                                                                                 Independent students taking
                                                                                                 preparatory courses for enrollment in
                                                                                                 an undergraduate degree program
                                                                                                 are able to receive up to $6000 (up
                                                                                                 from $4000). However, there
                                                                                                 appears to be no increase for
                                                                                                 dependents students enrolled in these
                                                                                                 same programs. Also, the additional
                                                                                                 unsubsidized Stafford loan amount
                                                                                                 for independent students taking
                                                                                                 preparatory courses for enrollment in
                                                                                                 a graduate degree program or
                                                                                                 teacher certification program remains
                                                                                                 at $7,000.




4
    STAFFORD LOAN LIMITS
                                                                                                   Additional Guidance/Clarifying
    #                       Summary of Regulatory Change                        Date/Trigger                                                GL Implementation Notes
                                                                                                             Comments

    4   Aggregate Stafford Loan Limits: Independent Undergraduate               Loans first     No changes made to aggregate          Great Lakes has made the necessary
        Students                                                                disbursed on    subsidized Stafford loan limit for    system revisions to accommodate the
                                                                                or after July   independent undergraduate students.   increased loan limits for loans
        The aggregate amount for unsubsidized Stafford loan borrowing for
                                                                                1, 2008                                               certified with a first disbursement on
        independent undergraduate students (or dependent students whose
                                                                                                No changes made to combined           or after July 1, 2008. For questions
        parents are unable to borrow a parent PLUS loan) is increased as
                                                                                                aggregate Stafford loan limits for    about the increased limits, please
        follows:
                                                                                                graduate students. This maximum       contact Client Services at (800) 236-
         Aggregate Loan Limits    Subsidized Stafford    Combined Stafford                      remains at $138,500 (no more than     0051.
                                        Loans             Loans (including
                                                          subsidized limit)                     $23,000 can be in subsidized
                                                                                                Stafford loans).
            Undergraduate              $23,000          $57,500 (with no more
              Students                                     than $23,000 in
                                                          subsidized loans)                     The Stafford MPN Addendum and
                                                            [HEA 428H(d)(4)]                    Plain Language Disclosure statement
                                                                                                are being revised to reflect the
                                                                                                increased loan limits.




5
    PLUS LOAN PROGRAM CHANGES
                                                                                                    Additional Guidance/Clarifying
    #                    Summary of Regulatory Change                          Date/Trigger                                                    GL Implementation Notes
                                                                                                              Comments
    5
        Parent PLUS Repayment Start Date/Postponement of                      Loans first        Parent PLUS loans disbursed prior to     Great Lakes has made the necessary
        Repayment                                                             disbursed on       July 1, 2008, are not eligible for the   system revisions to accommodate a
                                                                              or after July 1,   postponement option and enter            postponement request from a parent
        For parent PLUS loans first disbursed on or after July 1, 2008,
                                                                              2008               repayment within 60 days of the final    PLUS borrower. For questions about
        borrowers may elect to postpone repayment of principal until the
                                                                                                 disbursement. As a result, parent        this option, please contact Client
        day after six months after their dependent student beneficiary
                                                                                                 borrowers with loans made both           Services at (800) 236-0051.
        ceases to be enrolled on at least a half-time basis.
                                                                                                 prior to and on or after July 1, 2008,
        As a result, parent borrowers who have PLUS loans first disbursed                        may have loans in different
        on or after July 1, 2008, will have two repayment options:                               repayment statuses.
        1. Begin repayment within 60 days after the loan is fully                                As written in the statute, this change
        disbursed.                                                                               is a “postponement of repayment”
                                                                                                 rather than a deferment. A
        2. Begin repayment the day after the six months following the                            legislative change has been proposed
        date their dependent student beneficiary ceased to be enrolled on
                                                                                                 to clarify the “postponement” may be
        at least a half-time basis (as determined by the school).                                processed as a deferment.
                                          [HEA 428B(d)(1)(A); 428(b)(7)(C)]
                                                                                                 The PLUS MPN Addendum and
                                                                                                 Plain Language Disclosure statement
                                                                                                 are being revised to reflect this
                                                                                                 option for parent PLUS borrowers.


    6
        PLUS Interest Capitalization                                          Loans first        The PLUS MPN Addendum and                Great Lakes has made the necessary
                                                                              disbursed on       Plain Language Disclosure statement      system revisions to accommodate a
        Interest on PLUS loans (parent and Grad PLUS) shall be
                                                                              or after July 1,   are being revised to reflect this        postponement request from a parent
        capitalized as follows:
                                                                              2008               option for parent PLUS borrowers.        PLUS borrower. For questions about
        •   For loans that enter repayment within 60 days of                                                                              this option, please contact Client
            disbursement, the accrued interest shall be added to the                                                                      Services at (800) 236-0051.
            principal of the loan.
        •   For loans on which repayment is postponed or are deferred,
            interest shall, if agreed to by the borrower and the lender, be
            paid monthly or quarterly, or be added to the principal
            amount of the loan by the lender nor more frequently than
            quarterly.
                                                      [HEA 428B(d)(2)]



6
    PLUS LOAN PROGRAM CHANGES
                                                                                              Additional Guidance/Clarifying
    #                   Summary of Regulatory Change                       Date/Trigger                                                  GL Implementation Notes
                                                                                                        Comments
    7
        PLUS Underwriting Criteria/Credit Check                           Extenuating      Mortgage loans are defined as           Great Lakes is evaluating this change
                                                                          circumstances    extensions of credit secured for the    to determine system and procedural
        The legislation temporarily broadens the definition of
                                                                          decisions        borrower’s primary residence. Also,     implications and will notify lenders
        “extenuating circumstances” to allow, but not require, lenders to
                                                                          made on or       the provision is not limited to first   for whom we originate on any
        approve PLUS loan borrowers who are up to 180 days delinquent
                                                                          after the date   mortgages (can be second or third       changes in operational policy or
        on mortgage payments and/or medical bill payments. The
                                                                          of enactment     mortgages).                             procedures related to PLUS credit
        approval is contingent upon the borrower being less than 90 days
                                                                          (May 7, 2008)                                            checks. In the interim, please direct
        delinquent on the repayment of other debt.                                         The change is not limited to parent
                                                                          for                                                      questions to Client Services at (800)
                                                                                           PLUS borrowers and does include
                                                     [HEA 428B(a)(3)(B)] delinquencies                                             236-0051.
                                                                                           credit standards for graduate and
                                                                          during the
                                                                                           professional PLUS borrowers.
                                                                          period
                                                                          beginning        This provision is subject to
                                                                          January 1,       regulations promulgated by the
                                                                          2007 and         Secretary, but is not subject to
                                                                          ending           negotiated rulemaking or Master
                                                                          December 31,     Calendar provisions.
                                                                          2009.




7
    LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES
                                                                                                     Additional Guidance/Clarifying
    #                     Summary of Regulatory Change                           Date/Trigger                                                GL Implementation Notes
                                                                                                               Comments

    8   Parameters of LLR Program                                               Date of          School-Wide LLR Designation –          Great Lakes has offered the
                                                                                enactment.                                              following commitment to every
        School-Wide LLR Designation
                                                                                Authority to     The statute directs the Secretary to   institution in its designated states:
        The legislation provides the Secretary with the authority to            designate        determine a school’s eligibility for
                                                                                                                                        •   GL will work with every
        designate schools as eligible for the lender of last resort program     schools as       LLR on a school-wide basis.
                                                                                                                                            school and applicant to secure
        on an institutional basis, rather than on a student-by-student basis    eligible         However, guarantors are working with
                                                                                                                                            a student loan lender or choice
        as was previously required. In using her authority, the Secretary       expires on       the Department to determine how
                                                                                                                                            of lenders willing to make
        does not need to verify that all students and parents from a school     June 30, 2009.   guarantors may help facilitate this
                                                                                                                                            conventional FFELP loans.
        are not able to obtain loans before the school is able to participate                    designation process.
        in the lender of last resort program. However, the Secretary may                                                                •   GL will work with every
        require that a school demonstrate that they have been unable to                                                                     school to obtain the necessary
        secure lenders, despite diligent efforts. The Secretary may also                                                                    certification as an LLR
        require the school to demonstrate that a certain percentage of                                                                      school, or certification of any
        students have been rejected by eligible lenders. The threshold and                                                                  applicant to obtain a loan
        other standards are to be determined by the Secretary of Education                                                                  under the LLR program.
        in consultation with the Secretary of Treasury.
                                                                                                                                        •   GL schools, lenders and
                                                         [HEA 428(j)(1)]                                                                    student loan applicants who
                                                                                                                                            participate in the LLR
        Eligible LLR Loan Types
                                                                                                                                            program should experience
        The statute is amended to clarify that the program is not limited to                                                                minimal change to existing
        subsidized Stafford loans, but includes unsubsidized Stafford                                                                       loan processes and will
        loans and PLUS loans as well. The legislation, however, does                                                                        continue to receive the same
        specifically exclude Consolidation loans from the LLR program.                                                                      high level of customer service
                                                                                                                                            they’ve come to expect.
                                                             [HEA 428(j)(1)]
                                                                                                                                                                    Cont’d.




8
    LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES
                                                                                                 Additional Guidance/Clarifying
    #                     Summary of Regulatory Change                        Date/Trigger                                                    GL Implementation Notes
                                                                                                           Comments

    8   Parameters of LLR Program – Cont’d                                                   Dear Guaranty Agency Director letter        Cont’d.
                                                                                             [GEN-08-05/FP-08-05], dated May 5,
        No Borrower Benefits under LLR                                                                                                   •   GL will make every effort to
                                                                                             2008, includes specific questions and
                                                                                                                                             ensure that all of the
        No lender of last resort loans can be made with interest rates,                      answers related to the LLR program.
                                                                                                                                             applicant’s loans are
        origination fees or default fees or other terms and conditions that
                                                                                                                                             combined for repayment
        are more favorable to the borrower than the maximum terms                            Q & A #13 states the following related
                                                                                                                                             purposes, particularly if a
        applicable under the HEA for the type of loan.                                       to the fees attached to LLR loans:
                                                                                                                                             student has prior FFELP
                                                                                             •    Origination fee – the borrower
                                                        [HEA 428(j)(1)]                                                                      loans.
                                                                                                  must be assessed the origination
                                                                                                  fee on an LLR loan.                    •   GL will attempt to use a
                                                                                             •    Default fee – the borrower must be         school’s existing application
                                                                                                  assessed the federal default fee on        process for the making of
                                                                                                  an LLR loan.                               LLR loans, whenever
                                                                                             •    Lender fee – the lender fee must be        possible. If a school’s
                                                                                                  paid by a lender making an LLR             existing processes do not have
                                                                                                  loan and by a guaranty agency              connectivity to GL, we will
                                                                                                  making LLR loans using its own             work with the school to
                                                                                                  funds.                                     establish this connectivity
                                                                                                                                             with minimal impact.
                                                                                             Outstanding issues/questions –
                                                                                             •   It is not clear whether a lender that   Please contact your current Great
                                                                                                 is currently subsidizing the            Lakes representative or Client
                                                                                                                                         Services at (800) 236-0051 with
                                                                                                 origination fee for non-LLR
                                                                                                 Stafford borrowers in a certain         any questions about the LLR
                                                                                                 State must begin to charge this fee     program or any other concerns.
                                                                                                 to all borrowers if the lender
                                                                                                 begins participation in the LLR
                                                                                                 program.
                                                                                             •   Although a lender is not allowed to
                                                                                                 offer benefits on LLR loans it
                                                                                                 makes, it appears the lender may
                                                                                                 offer benefits (such as reduced
                                                                                                 interest rates for auto-debit
                                                                                                 payments) under its non-LLR
                                                                                                 program.




9
     LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES
                                                                                                      Additional Guidance/Clarifying
     #                     Summary of Regulatory Change                            Date/Trigger                                                 GL Implementation Notes
                                                                                                                Comments

     8   Parameters of LLR Program – Cont’d                                       Date of         In a DCL dated May 21, 2008, the          Great Lakes has submitted its LLR
                                                                                  Enactment       Department indicates it is prepared to    plan according to the requirements
         Mandatory Advances to Guaranty Agencies from the Department
                                                                                                  provide, if necessary, federal advances   in GEN-08-03/FP-08-03 (dated
         Under the HEA, guaranty agencies are obligated to serve as                               to guaranty agencies so that they can     March 26, 2008), and commitment
         lenders of last resort if requested to do so by the Secretary. The                       make LLR loans to students who are        information according to the
         legislation clarifies that the Secretary of Education is authorized to                   otherwise unable to obtain FFELP          requirements of the subsequent
         advance federal funds to guaranty agencies in the event that they                        loans. The letter indicates that the      Dear Guaranty Agency Director
         do not have sufficient capital to originate new loans and                                applications for advances will be         letter (dated May 16, 2008).
         appropriates such sums as may be necessary to carry out the                              accepted beginning June 1, 2008.
         lender of last resort program.                                                           However, the Department has not yet
                                                                                                  responded to guarantor-submitted
                                                        [HEA 421(b)]                              plans.

                                                                                                  Finally, Q & A’s #33 & 35 in Dear
                                                                                                  Guaranty Agency Director letter
                                                                                                  [GEN-08-05], dated May 5, 2008, and
                                                                                                  subsequent statements in the Dear
                                                                                                  Guaranty Agency Director letter dated
                                                                                                  May 16, 2008, state that if the
                                                                                                  guarantor uses federal advances to
                                                                                                  make LLR loans, these loans are
                                                                                                  subject to immediate assignment to the
                                                                                                  Department whereby the Department
                                                                                                  will subsequently determine servicing
                                                                                                  arrangements. There are ongoing
                                                                                                  discussions with the Department
                                                                                                  related to the immediate assignment of
                                                                                                  LLR loans made with federal advances
                                                                                                  and the negative impact it could have
                                                                                                  on borrowers due to split servicing of
                                                                                                  loans between FFELP and those
                                                                                                  serviced by the Department.




10
     LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES
                                                                                                     Additional Guidance/Clarifying
     #                     Summary of Regulatory Change                          Date/Trigger                                                    GL Implementation Notes
                                                                                                               Comments

     9   Lender Liquidity Options                                               Loans first      The Department will publish the terms      Component 1: On June 3, 2008,
                                                                                disbursed on     and conditions on which it will            Great Lakes announced the
         Department of Education Authority to Purchase FFELP Loans
                                                                                or after         purchase FFELP loans originated for        suspension of its federal default
         The legislation provides temporary authority to the Secretary to       October 1,       the 2008-2009 academic year in the         fee waiver, effective for loans
         purchase FFELP loans (except Consolidation loans) originated on        2003 and         Federal Register. The FR will include      guaranteed on or after July 1,
         or after October 1, 2003, if the Secretary determines there is         before July 1,   the final prices, terms, and conditions,   2008. Great Lakes’ revenues have
         inadequate availability of loan capital. This authority does include   2009.            as well as the methodology used by the     decreased significantly as a result
         forward purchase agreements. The Secretary of Education, in                             Department for determining cost            of the Higher Education
         consultation with the Secretary of Treasury, must determine that                        neutrality. To date, this FR has not       Reconciliation Act of 2005 and the
         the sale is in the best interest of the U.S. and that the proceeds                      been published.                            College Cost Reduction and
         paid will be used by the lenders in a way that is consistent with                                                                  Access Act of 2007. Most
                                                                                                 In a DCL dated May 21, 2008, the
         ensuring continued participation by such lenders in FFELP. This                                                                    recently, the Ensuring Continued
                                                                                                 Secretary of Education outlined a plan
         new authority is contained in Part D of the HEA, which implies                                                                     Access to Student Loans Act of
                                                                                                 developed by the Departments of
         that these loans, once purchased, will become Direct Loans.                                                                        2008 was enacted in response to
                                                                                                 Education and Treasury. The plan
                                                                                                                                            the current capital market crisis
         The Secretaries of Education and Treasury, along with the Office                        contains four components, including
                                                                                                                                            and its direct impact on potential
         of Management and Budget (OMB) shall publish a joint notice in                          the plan to purchase loans from lenders
                                                                                                                                            availability of student loans.
         the Federal Register with the terms and conditions of the                               (but not going back to October 1, 2003
         purchase, methodology and factors in setting the price and how                          as the legislation allowed). The four      In its May 21, 2008 Dear
         the methodology will not result in any net cost to the government.                      components are:                            Colleague Letter and subsequent
                                                                                                                                            statements, the Department
                                                      [HEA 459A]                                 Component 1:                               announced its intent to convert
                                                                                                 A specific package to offer to purchase    loans it purchases under the lender
                                                                                                 loans from lenders for the 2008-2009       liquidity provisions of this most
                                                                                                 academic year and to offer lenders         recent legislation to the Federal
                                                                                                 access to short-term liquidity. This       Direct Loan servicer. This
                                                                                                 component has the following two            conversion will remove these loans
                                                                                                 options:                                   from Great Lakes guaranty and
                                                                                                                                            eliminate the revenues that would
                                                                                                 •   Purchase plan – The Department
                                                                                                                                            otherwise support the fee waiver.
                                                                                                     will purchase an eligible FFELP
                                                                                                     loan at a price equal to the sum of    Great Lakes will closely monitor
                                                                                                     (i) par value, (ii) accrued interest   its guaranty portfolio losses under
                                                                                                     (net of special allowance              the newly enacted lender liquidity
                                                                                                     payments), (iii) the 1% origination    provisions and to DL directly. We
                                                                                                     fee paid to the Department, and        will also engage our school and
                                                                                                     (iv) a fixed amount of $75 per loan    lender partners in discussion that
                                                                                                     (used to defray the lender’s           may otherwise support a waiver of
                                                                                                     estimated administrative costs).       the federal default fee.
                                                                                                     The Department will determine
11
     LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES
                                                                                         Additional Guidance/Clarifying
     #                   Summary of Regulatory Change                 Date/Trigger                                                    GL Implementation Notes
                                                                                                   Comments

     9
                                                                                         servicing arrangements for the
         Lender Liquidity Options, Cont’d                                                                                        If you have any questions or
                                                                                         loans based on costs and security
                                                                                                                                 comments, please contact your
         Department of Education Authority to Purchase FFELP Loans,                      concerns, taking into account the
                                                                                                                                 current Great Lakes representative
         Cont’d                                                                          best interest of schools and
                                                                                                                                 and watch for updates posted on
                                                                                         students.
                                                                                                                                 the web at www.glhec.org or
                                                                                                                                 www.mygreatlakes.org.
                                                                                     •   Participation interest option— The
                                                                                         Department will purchase
                                                                                         participation interests in pools of
                                                                                         loans made by lenders for the
                                                                                         2008-2009 academic year, and will
                                                                                         hold these interests up to
                                                                                         September 30, 2009. Under this
                                                                                         program, new loans originated by
                                                                                         FFELP lenders will be put into
                                                                                         short-term trusts. The Department
                                                                                         then buys “participation interests”
                                                                                         in these trusts. The participation
                                                                                         interests will be priced to yield the
                                                                                         Department the commercial paper
                                                                                         rate plus 50 basis points. Upon
                                                                                         expiration, a trust may refinance
                                                                                         the loans in the private financial
                                                                                         market and pay off the
                                                                                         Department’s participation interest
                                                                                         or sell the loans to the Department,
                                                                                         whereby the Department will
                                                                                         subsequently determine servicing
                                                                                         arrangements.




12
     LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES
                                                                                         Additional Guidance/Clarifying
     #                   Summary of Regulatory Change                 Date/Trigger                                              GL Implementation Notes
                                                                                                   Comments

     9   Lender Liquidity Options, Cont’d                                            Component 2: A commitment to           Component 2: See GL notes on
                                                                                     continue working with the FFELP        LLR plan in #8 of this document.
         Department of Education Authority to Purchase FFELP Loans,
                                                                                     community to explore programs that
         Cont’d
                                                                                     might re-engage the capital markets.
                                                                                                                            Component 3: See GL notes on
                                                                                     Component 3: An enhanced lender-of-
                                                                                                                            LLR plan in #8 of this document.
                                                                                     last-resort program to ensure all
                                                                                     students continue to have access to
                                                                                     FFELP loans. See discussion on LLR
                                                                                     Parameters.
                                                                                                                            Component 4: Many schools have
                                                                                     Component 4: The capability of         already opted to, or are
                                                                                     doubling the capacity of the Direct    considering shifting to Direct
                                                                                     Loan program should it be needed.      Loans to ensure continued Title IV
                                                                                                                            loan availability. There are,
                                                                                                                            however, a number of reasons why
                                                                                                                            this may not be a universal or
                                                                                                                            optimal alternative.
                                                                                                                            •   Direct loans has limited
                                                                                                                                capacity to originate and
                                                                                                                                service all Title IV loan
                                                                                                                                volume. The Secretary has
                                                                                                                                stated publicly that DL’s
                                                                                                                                capacity could be doubled
                                                                                                                                from $15 billion to $30
                                                                                                                                billion. This $15 billion
                                                                                                                                capacity increase is
                                                                                                                                significantly less than the
                                                                                                                                potential $25 billion shortfall,
                                                                                                                                and will be further strained by
                                                                                                                                the high likelihood that Direct
                                                                                                                                loans will be the only
                                                                                                                                available consolidation loan
                                                                                                                                option for the expected surge
                                                                                                                                in the consolidation of DL and
                                                                                                                                FFELP variable rate loans that
                                                                                                                                will follow the July 1 interest
                                                                                                                                rate reset.

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     LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES
                                                                                     Additional Guidance/Clarifying
     #                   Summary of Regulatory Change                 Date/Trigger                                        GL Implementation Notes
                                                                                               Comments
                                                                                                                      •   School and borrowers will
     9   Lender Liquidity Options, Cont’d
                                                                                                                          experience a significant
         Department of Education Authority to Purchase FFELP Loans,                                                       qualitative service level
         Cont’d                                                                                                           difference between DL and
                                                                                                                          FFELP, particularly in the
                                                                                                                          areas of delinquency
                                                                                                                          avoidance and default
                                                                                                                          aversion. Split servicing for
                                                                                                                          serial borrowers will cause a
                                                                                                                          separate set of issues, which is
                                                                                                                          expected to result in higher
                                                                                                                          delinquency and default rates.
                                                                                                                      •   The FFELP capital shortfall
                                                                                                                          will not impact all sectors. It
                                                                                                                          will largely be limited to less
                                                                                                                          than 4-year schools and/or
                                                                                                                          schools with high cohort
                                                                                                                          default rates. If there is a
                                                                                                                          limited near term ramp-up
                                                                                                                          capacity in DL, it should be
                                                                                                                          utilized for these most
                                                                                                                          vulnerable cohorts and not for
                                                                                                                          those institutions that can
                                                                                                                          readily find willing FFELP
                                                                                                                          lenders.




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     LENDER OF LAST RESORT AND LENDER LIQUIDITY ISSUES
                                                                                                     Additional Guidance/Clarifying
     #                      Summary of Regulatory Change                          Date/Trigger                                                GL Implementation Notes
                                                                                                               Comments

     10   Department Reporting and Disseminating of LLR Program                  Beginning       To date, the LLR plans and agreements   Great Lakes is prepared to ensure
          Information                                                            July 1, 2008    have not been released.                 compliance with any applicable
                                                                                 through June                                            LLR reporting requirements.
          The legislation instructs the Secretary to review, and as needed,
                                                                                 30, 2009
          revise guarantor inducement regulations and report to the Senate
          and House Committees on the results of the review.
          The Department is directed to disseminate information on the LLR
          program and make plans and agreements available for public
          inspection and report on the activities, including budget estimates.
          The Department reports to Committees starting July 1, 2008 and
          ending June 30, 2009.
                                                         [HEA 428(j)(9)]


     11   Inducements                                                            Within 180      The inducement provisions applicable    Great Lakes is prepared to ensure
                                                                                 days of         to lenders would apply to guarantors’   compliance with all applicable
          Each guarantor or lender that participates in the LLR program is
                                                                                 enactment       LLR programs.                           inducement provisions for loans it
          subject to the prohibited inducement provisions and shall not
                                                                                                                                         makes under the LLR program.
          advertise, market, or promote lender of last resort loans. The only
          exception is for guarantors in communicating with schools
          regarding the program.
                                                          [HEA 428(j)(8)]

Federal guidance issued on Lender of Last Resort and Lender Liquidity issues to date:

March 26, 2008 – Dear Guaranty Agency Director letter GEN-08-03/FP-08-03. Guarantor LLR Plan submission date extended to May 16, 2008.

May 5, 2008 – Dear Guaranty Agency Director letter (includes Q&A document). Department establishes fees to guarantors for LLR loans made with federal
advances. Requires all loans made with advances to be subject to immediate assignment to the Department, where the loans will become Direct Loans.
Department requires guarantors commitment notification.

May 21, 2008 – Dear Colleague letter. Department establishes liquidity plans, allowing federal advances to lenders. Expects to issue details in Federal Register
(expected within two weeks). Also notes that expected to begin accepting applications for guarantor LLR federal advances on June 1, 2008, however unsure of
status of guarantor plan submissions thus far.



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