Transcript ECASLA Programs - SLGFA: Student Loan Guarantee Foundation

ECASLA Programs
Participation Program
PUT Program
SLGFA Annual Conference
Crowne Plaza Hotel
March 10th, 2009
Wanda Hall
Edfinancial Services
Theresa McDuffee
SLGFA
GOALS
• Ensure that eligible students and parents
continue to receive FFEL Program loans
• Support the FFEL Program as a successful
private/public partnership
• Protect taxpayer interests at no additional cost
to the government
Legislative Overview
• Solution
– ECASLA signed by President on May 7, 2008
• Covers the 2008/2009 academic year
– Extension signed by the President on Oct 8, 2008
• Covers the 2009/2010 academic year
– Does not authorize the Department to make
advances or to otherwise “lend” money to FFEL
lenders
– Resource link http://federalstudentaid.ed.gov/ffelp
Eligible Loans
• Stafford (subsidized and unsubsidized), PLUS
and GradPLUS
– Excludes LLR loans from Participation and PUT
programs
– Excludes consolidation loans
– Excludes loans 210 days or more delinquent
• Borrower benefit limitations in some cases
– 0.25% generally accepted benefit
Eligible Time Periods
• 2008/2009 Academic Year
– Loan period includes or begins on or after July 1,
2008 and ends on or before August 31, 2009
– First disbursement on or after May 1, 2008 and no
later than July 1, 2009
– Will be fully disbursed no later than September
30, 2009
Eligible Time Periods (con)
• 2009/2010 Academic Year
– Loan period includes or begins on or after July 1,
2009 and ends on or before August 31, 2010
– First disbursement on or after May 1, 2009 and no
later than July 1, 2010
– Will be fully disbursed no later than September
30, 2010
Eligible Time Periods (con)
• 2007/2008 Academic Year (Short-Term PUT)
– Loan period includes or begins on or after July 1,
2007 and ends on or before August 31, 2008
– First disbursement on or after May 1, 2007 and no
later than July 1, 2008
– Last date to request Short-Term PUT was
February 25, 2008
Program Comparison
Loan Participation
• Provides liquidity as
disbursements are made
• Lender, servicer and
guarantor intact
• Lender funds first
disbursement, request ED
to participate in loan
• ED provides funds to lender
for immediate liquidity
• Loans must be bought back
or PUT by Sept. 30 of
applicable year
Loan Purchase (PUT)
• Provides liquidity after fully
disbursed
• Lender funds and holds the
loan until sold (PUT)
• Guarantor holds guarantee
until sold (PUT)
• FFELP loans sold to ED
• All FFEL lenders eligible
regardless of size
• Holder, servicer and
guaranty move to ED when
PUT
Participation Program
• Terms
– Sponsor = Originating Lender
– Custodian = Lender managing the participation
requests to ED and “holding” the loan disbursements
– Facility = The “place” where ED’s participation interest
are held
• Holder, Servicer and guarantee retained by the Sponsor and
original guarantor
– Redeem = The Sponsor buys back from ED its
participation in the loan that is held in the facility
Participation Program
How it works:
• Sponsor enters into an agreement with and eligible custodian
• Custodian receives an LID from ED
• Sponsor originates loan and makes first disbursement, as normal
• Sponsor notifies custodian to request the disbursement amount
from ED
• Sponsor transfers the first disbursement to the facility
• Sponsor continues to make subsequent disbursements and
participates each until fully disbursed
• Sponsor transfers LID to custodian once fully disbursed
• NSLDS reflects new custodian LID
• Sponsor, servicer and guarantor remain in tact, as normal
• Sponsor redeems or PUTs loan by Sept. 30 of applicable year
Participation Program –
School and Borrower Impact
School Impacts:
• Lender, servicer and guarantor remain the same
• LID transfer to the custodian after full
disbursement is for Federal reporting purposes
and does not impact servicing
• If lender redeems the loan, LID will transfer from
custodian back to sponsor/lender
• If lender PUTs the loan, all PUT impacts apply
Borrower Impacts:
• None unless loan is PUT
Participation Program –
Guarantor Impact
Guarantor Impacts:
• Loan Guaranty and Agency- the guaranty that was
granted to the lender (now the Sponsor) remains in
effect while the loan is in the Participation Facility,
without regard to the transfer of title to the
Custodian.
– Sponsor-Guaranty Agency relationship is maintained.
– When removed via a repurchase by the Sponsor, the
guaranty remains;
– When removed by a PUT to ED, the guaranty ends.
Participation Program –
Guarantor Impact
Guarantor Impacts:
• Requests for Loan Changes- may be delayed in cases
where a loan has been transferred from the Sponsor
(originating lender) to the Custodian (managing
lender).
– A delay in disbursement can also occur if a loan is
transferred prior to being fully disbursed.
PUT Program
How it Works
• Loan can be PUT anytime after fully disbursed and before Sept. 30 of the
applicable year
– August 14 of applicable year is last date to request to PUT
• Lender submits a 45-day intent to sell notice to ED
• List of loans (deconversion data file) provided to the ED servicer 9 business
days prior to PUT date
• 9 business day freeze on loan adjustments before PUT date
• Optional: Lender notifies schools and/or guarantor approximately 9
business days before PUT
• Notice of PUT loans sent to the original guarantor and NSLDS within 30
days after PUT date by ED servicer
– Sent as a loan transfer file with LID 899577 or 898577 (for Short-Term);
Servicer 700577; and Guarantor 577
• Guarantee is transferred to ED
PUT Program Procedures
• ED Servicer processes the sale on the evening of
the required loan purchase date
• Ownership of loans transfers to ED as of purchase
date
– Department’s servicer assumes servicing of all loans
included in sale
– ED Servicer notifies borrower, guarantor and NSLDS
– Payment is deposited in lender’s account
– Lender/servicer forwards any freeze period and post
sale adjustments to ED Servicer
PUT Program –
Guarantor Impact
Guarantor Impacts:
• Loan Guaranty- the guaranty that was granted
to the lender is transferred to the Department
when loan is PUT.
– Original guarantor will continue to collect the
Federal Default Fee as long as there are unpaid
fees outstanding.
– Post-PUT forms received by the original guarantor
should be forwarded to the ED Servicer
PUT Program –
Guarantor Impact
Guarantor Impacts:
• System Programming Changes- to prevent
certain loan request, loan and/or
disbursement changes against a loan that has
been PUT.
– Also to recognize loans that have been PUT as
related to Aversion efforts.
– Adjustments to Guarantor Reporting
PUT Program –
Guarantor Impact
Guarantor Impacts:
• Guarantee Processing- implications of loan
guarantees being transferred from originating
guarantor’s database:
– System no longer able to support annual, grade
level and/or cumulative limit calculations for
borrowers who have had loans PUT.
PUT Program –
Assisting Schools
Plan of Action to Assist School:
• Communication of loan changes to ED servicer on PUT
loans
– Lender and/or guarantor will communicate those loans
that are PUT
– Lender and/or guarantor will work with the school to
ensure that during the freeze period certain loan changes
do not occur
• Re-certification of PUT loan to reinstate guaranty and/or increase
loan amount, reinstatement, reallocation, etc.
– Lender and/or guarantor will work with the school to
provide resources/tools to address borrower questions
about PUT loans
PUT Program –
Communications to Schools
Options:
• NCHELP Trading Partner Notification of ECASLA PUT File
– Published November 21, 2008
– Sent by lender approximately 9 business days before PUT date
– Used to notify guarantors, originators and others of loans that
may be PUT
• CommonLine Response File
– Published November 25, 2008
– Sent by lender approximately 9 business days before PUT date
– Used to notify schools of loans that may be PUT
• Lender, servicer and guarantor may have specific
communication tools
PUT Program –
Assisting Borrowers
Develop Plan of Action to Assist Borrowers:
• Split servicing: In School
– Assist school in communication to borrower on PUT loans and provide
general information and direction on split servicing loans
– Set up a communication system with ED servicer to ensure all loans
are updated correctly
• Split servicing: In Repayment
– Facilitate communication between the borrower and ED servicer
– Work to assist borrower in addressing all FFELP loans, even PUT loans
– Extend Default Prevention and Financial Literacy programs to PUT
serviced loans
– Encourage the use of industry products to locate all loans (NSLDS,
Meteor, etc.)
QUESTIONS???