ED Begins Week-Long Suspension Of Loan Liquidity Program

Late yesterday, several members contacted NASFAA staff and asked if ED was shutting down it's loan liquidity program through the Ensuring Continued Access to Student Loans Act (ECASLA) next week. The answer is "No, but..."

The Department will be open for business next week. But, the Department plans to accept, but not fulfill funding for "Participation Funding Requests" beginning this week. This affects lenders using the liquidity program until the Department begins fulfilling funding late next week.

This will not affect every FFELP lender because most do not participate in the program and will continue to provide loans to schools. It may not affect disbursement schedules for all lenders participating in the ED liquidity program either. NASFAA continues to get reports from a number of schools of disruptions to students' disbursement schedules. However, no students are being denied federal loans. These loans are sometimes delayed, but not denied.

Private education loans are another story at some schools given higher eligibility requirements including credit scores and co-signers.

Participation Funding Requests are the vehicle that the Department uses to provide liquidity to participating lenders under the program authorized by ECASLA. On September 3, 2008, Larry Warder, Acting Chief Operating Officer for FSA, wrote to FFELP lenders advising them that ED will still receive funding request packages during these periods.

"However," Warder continued, "processing of the Loan Schedule file cannot occur during these periods of unavailability." This means funding requests can be made, but funds will not be released during the blackout dates.

Why is ED doing this?

"The purpose of this announcement is to alert program participants to month-end, government fiscal year-end, and system conversion timeframes that will make the Department's payment processing system unavailable," Warder wrote in a Sept. 3 Dear Colleague Letter.

NASFAA was unable to reach ED officials for clarification due to the late hour. However, it appears we are in a "month-end, government fiscal year-end" period.

NASFAA will explore this matter and update members with additional, relevant information. NASFAA is aware of how frustrating it is for aid administrators who are trying to meet the needs of their student borrowers when such bureaucratic obstacles thwart your best efforts. And, we are not the only ones affected by the economy's upset stomach.

Mr. Warder's Sept. 3 Dear Colleague Letter is reproduced below.

LOAN PURCHASE PROGRAMS ELECTRONIC ANNOUNCEMENT #24

Date: September 3, 2008

To: FFEL Program Community

From: Larry Warder, Acting Chief Operating Officer Federal Student Aid

Subject: Periods of Unavailability to Process Participation Funding Requests

The Department has committed to provide funding to custodians within seven business days of the submission of completed funding request packages. In the first three weeks of processing Participation Funding Requests, the Department has averaged 2-3 business days to process submissions and transfer funds into custodians' accounts.

The purpose of this announcement is to alert program participants to month-end, government fiscal year-end, and system conversion timeframes that will make the Department's payment processing system unavailable. We will still be open to receive funding request packages (see Electronic Announcement #16) during the periods listed below. However, processing of the Loan Schedule file cannot occur during these periods of unavailability. We are posting these timeframes so that program participants may plan accordingly.

Despite these periods of unavailability, the Department will continue to commit to a seven-business day payment. The list below makes explicit the business days when the Department will not be able to process Participation Funding Request Loan Schedule files.

2008 Dates

September 2 - September 3, 2008
September 26, 2008
September 29 - October 2, 2008
November 3 - November 4, 2008
November 24 - November 26, 2008
November 28, 2008
December 1 - December 2, 2008

2009 Dates

January 2, 2009
January 5, 2009
February 2 - February 3, 2009
March 2 - March 3, 2009
April 1 - April 2, 2009
May 1, 2009
May 4, 2009
June 1 - June 2, 2009
July 1 - July 2, 2009
August 3 - August 4, 2009
September 1 - September 2, 2009
September 28 - October 2, 2009

Please note that dates listed above only apply to funding requests for the Loan Participation Purchase Program. Although it is anticipated that many of the same periods of unavailability will apply to the Loan Purchase Commitment Program, a future announcement will provide additional guidance regarding periods of unavailability for processing loans sold to the Department under the Loan Purchase Commitment Program.

By Larry Zaglaniczny
NASFAA Vice President for Governmental Relations

Posted 09/26/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.