Transcript Loan Participation
Ensuring Continued Access to Student Loans Act (ECASLA) of 2008
Bonnie Brinkley Assistant Vice President TG Guarantee, Support and Reporting [email protected]
Carol Lindsey Vice President TG Policy and Compliance [email protected]
ECASLA of 2008 (P.L. 110-227)
• Ensuring Continued Access to Student Loans Act (ECASLA) of 2008 (P.L. 110-227) – Enacted May 7, 2008 • President signed a one-year extension (H.R. 6889) – October 7, 2008 • Programs enacted to combat lack of liquidity in financial markets – Supports FFELP as a successful private/public partnership – Protects taxpayer interests at no additional cost to the government • Due (in part) to ECASLA: – No lender-of-last-resort loans (LLR) have been made – No FFELP borrowers have been denied a loan
ECASLA programs
• Loan Participation Purchase Program (Participation or Liquidity) • Loan Purchase Commitment Program (Put) • Short-Term Put Program • Asset-Backed Commercial Paper (ABCP) Conduit Program (Conduit)
Eligibility requirements for Participation and Put programs • Eligible loan types: – Subsidized and unsubsidized Stafford loans – Parent PLUS and Grad PLUS loans • Eligible loan periods/academic years (AY): – AY 2008–09 – AY 2009–10
Eligibility requirements for Participation and Put programs • •
AY 2008 –09
– Loan periods that include, or begin on or after, July 1, 2008 – Loans first disbursed on or after May 1, 2008, but no later than July 1, 2009, and to be fully disbursed no later than September 30, 2009
AY 2009 –10
– Loan periods that include, or begin on or after, July 1, 2009 – Loans first disbursed on or after May 1, 2009, but no later than July 1, 2010, and to be fully disbursed no later than September 30, 2010
Eligibility requirements for Participation and Put programs •
Not eligible:
– Consolidation loans – LLR loans – Loans in default or other claim-filed status – Borrower benefits,
except as follows:
• Up-front borrower fee payments other than federal default fee (FDF) and origination (O) fee • 0.25 percent interest rate reduction for auto-payment
Loan Participation Purchase Program
(Participation) • Allows ED to purchase participation interests for eligible loans made for AY 2008 – 09 and AY 2009 – 10 – ED holds interest no later than September 30, 2009 (AY 2008 – 09) – ED holds interest no later than September 30, 2010 (AY 2009 – 10) • Lender funds first disbursement, then places loans into “participation facility” under control of custodian, who: – Holds legal title and controls bank account – Cannot be affiliated with sponsor – Protects federal government and taxpayer interests
Loan Participation Purchase Program
(Participation) • One-to-one relationship and Lender Identification Number (LID) Custodian Sponsor • Custodian has separate LID for each sponsor • Sponsor has only one custodian
Loan Participation Purchase Program
(Participation) • •
Lender/servicer reporting to guarantor
– Partially disbursed • Loan continues to be reported under sponsor/lender LID – Fully disbursed • Loan reported under custodial LID after final disbursement
Lender/servicer reporting to ED
– LaRS (799) reporting • Must be reported under custodial LID after first disbursement
Loan Participation Purchase Program
(Participation) • • •
Sponsor options:
– Can hold or sell loans, repaying ED’s participation interest – Can Put loans to ED
School impacts:
– Lender, servicer, and guarantor remain the same • LID changes from sponsor to custodian after full disbursement for federal reporting purposes (does not impact servicing) • LID changes from custodian to sponsor or lender if lender redeems loan – If lender Puts the loan, all Put impacts apply
Borrower impacts:
– None unless loan is Put
Loan Purchase Commitment Program (Put)
• • •
AY 2008
–
09
– No later than September 30, 2009, ED purchases eligible, fully disbursed loans
AY 2009
–
10
– No later than September 30, 2010, ED purchases eligible, fully disbursed loans
Upon sale to ED (Put)
– Loans are serviced by ED’s servicer – Guarantee ends, since no claims will be filed • DAARs will be closed • Collection responsibility transfers to ED
Loan Purchase Commitment Program (Put)
Day 1 45 (calendar days) Final sale date 70 (approx.) +2 Lender sends payments received just prior to final sale to ED servicer +1 ED servicer sends welcome letter to borrower -9 No balance increases (reissues, reinstatements, loan increases, reallocations) Transfer reported to guarantor
Customer impact — Put program
• Nine business days prior to Put, limited monetary changes allowed on the loans through date of sale to ED: – No reissues, reinstatements, loan increases or reallocations – No late or post-withdrawal disbursements – Lenders continue to process borrower payments and school return of loan funds, to be reported to ED servicer • School certifies a new loan if borrower requests additional loan funds
Note: ED is considering school certification of new loan after loan period ends (currently not permitted)
Loan Purchase Commitment Program (Put)
• •
Loan Status AE: ED LID:
Transferred out 899577 •
ED Guarantor Code:
577 •
ED Servicer Code:
700577
Short-Term Put Program
• Designed to minimize disruption in student lending prior to Asset-Backed Commercial Paper conduit • Program ended when conduit began operating, or on February 28, 2009 — whichever came first • Covers loans for AY 2007 – 08: – Loan periods that included, or began on or after, July 1, 2007 – Loan periods that ended on or before August 31, 2008 – First disbursed on or after May 1, 2007
Short-Term Put Program
• Eligible loans – Subsidized and unsubsidized Stafford loans – Parent PLUS and Grad PLUS loans – Loans Put to ED included all eligible AY 2007 – 08 Stafford and PLUS loans held by the lender for a borrower – For more information regarding eligible borrower benefits, visit http://federalstudentaid.ed.gov/ffelp
Short-Term Put Program
• Loan purchases by ED – Lender requests (offers) could be submitted weekly – Total purchases by ED could reach $6.5 billion – More details provided in
Federal Register
(December 2, 2008)
Short-Term Put Program
• Not eligible: – Consolidation loans – LLR loans – Loans 210 or more days delinquent at sale – Loans in default or other claim-filed status – Loans with encumbrances, liens, security interests, or other prior commitments
Short-Term Put Program
• •
Loan Status AE: ED LID:
Transferred out 898577 •
ED Guarantor Code:
577 •
ED Servicer Code:
700577
Electronic solutions
• NCHELP committee work – Flat File – CommonLine and CR:C – Return of Funds
Electronic solutions
Electronic solutions
• Flat File – URL: www.tgslc.org/ecasla/index.cfm
– To receive a notification file from TG, contact the TG Product Support Group at (800) 332-1455 or e-mail [email protected]
Electronic solutions
• CommonLine and CR:C – CL4 Fields: 42 = Current servicer 58 = Adjustment cut-off date 59 = Anticipated Put date – CL5 Fields: 42 = Current servicer 58 = Adjustment cut-off date 58a = Anticipated Put date – Error Code 220 for CL4 and CL5 has changed to: “Loan identified is canceled or transferred on database” – CR:C: Still under review • Return of Funds
Participation and Put Program comparison
Loan Participation
• Provides liquidity as disbursements are made • Lender, servicer, and guarantor intact • Lender funds first disbursement, ED buys participation interests • ED provides funds to lender for immediate liquidity • Loans must be bought back or Put by September 30 of applicable year
Loan Purchase (Put)
• Provides liquidity after fully disbursed • Lender funds, holds, and services loan until Put to ED • Guarantor holds guarantee until Put
Asset-Backed Commercial Paper (ABCP) Conduit Program
• Private market financing vehicle • Provides liquidity support to one or more eligible conduits to purchase FFELP loans – Creates longer-term stability for private investors in FFELP marketplace • Loans placed in the Conduit generally remain with lender, servicer, and guarantor
Asset-Backed Commercial Paper (ABCP) Conduit Program
• Eligible Lender Trustee (ELT) creates Conduit • Other lenders transfer loans into Conduit • Conduit issues student loan-backed commercial paper • Private investors purchase commercial paper • Lenders are paid for loans with funds received from private investors • ED willing to purchase loans from Conduit at pre-arranged price – If commercial paper cannot be reissued at maturity to repay investors • A Conduit-held loan will be Put to ED if the loan becomes at least 210 days delinquent
Asset-Backed Commercial Paper (ABCP) Conduit Program
• Covers AY 2003–04 through AY 2008–09 • Eligible loans: – All fully disbursed, non-Consolidation loans with first disbursement dates on or after October 1, 2003 but no later than June 30, 2009 – Fully disbursed by September 30, 2009 • Loans can be placed in Conduit no later than June 30, 2010 • Put option for Conduit loans expires: – On the fifth anniversary of the date of the Put agreement, – No later than September 30, 2014