The Department continues to work with the lending community to refine terms and conditions under which they will provide lenders with additional liquidity to meet upcoming loan demand. Already hundreds of lenders have signaled their intent to participate in the loan purchase programs authorized by the Ensuring Continued Access to Student Loans Act (ECASLA), according to a letter from the Department to financial aid administrators sent last Thursday.
In the letter, acting chief operating officer Larry Warder asked aid administrators to contact the Department at ffelinfo@ed.gov if they believe that some or all of their students will have trouble obtaining loans in the 2008-09 academic year.
This most recent correspondence comes only days after NASFAA released survey results showing that nearly half of all aid administrators surveyed are very concerned about the student loan crunch with another 45 percent somewhat concerned. While many aid administrators think that ECASLA will help ease the student loan crunch, more than half of those surveyed believe that the legislation will not be enough and additional long-term solutions should be implemented.
Despite those lingering concerns, Warder's letter underscored an important point: no student has yet been denied access to a federal student loan.
In a July 1, Federal Register, the Department provided two ways for lenders to obtain liquidity from the government. First, under the "Loan Purchase Commitment Program," the Department will purchase loans directly from lenders at a price that would total the value of the loan and the origination fees paid by the lender to the Department, plus a $75 per loan flat fee to cover origination and servicing costs. Second, under the "Loan Participation Purchase Program," the Department will lend money to loan providers, which would allow lenders to continue making loans by using their own loan portfolios as collateral. Student loan providers would have until September 2009 to either pay off the Department's loan and retain the student loan asset or allow the Department to take possession of the loan asset entirely.
Last week, the Department also held Webinars to further explain the terms and conditions under which these two programs would operate. Last Tuesday, Department officials spent two hours discussing the terms and conditions of the Loan Participation Purchase Program and on Thursday they discussed the Master Loan Sale Agreement. Another Department Webinar is planned for Friday, August 1 at 2:00 PM about operational details of the Loan Participation Purchase Program. All of the presentation materials, including the PowerPoint presentation slides and all correspondence from the Secretary, can be downloaded at www.federalstudentaid.ed.gov/ffelp.
By Justin Draeger
NASFAA Associate Director for Communications
Posted 07/28/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
