# Presentation: 075181

## FFEL Loan Participation Program

- Participation Operations – Part 3
- August 15, 2008

## Presenters

- Jeff Baker
- Director Policy Liaison & Implementation
- Federal Student Aid
- U.S. Department of Education
- Jay Hurt
- Chief Financial Officer
- Federal Student Aid
- U.S. Department of Education

## 
Introduction

Jeff Baker
Director Policy Liaison & Implementation
Federal Student Aid
U.S. Department of Education

- Introduction
- Jeff Baker
- Director Policy Liaison & Implementation
- Federal Student Aid
- U.S. Department of Education

## Logistics

- Title: Loan Participation Program
- Participation Operations – Part 3
- Date:  August 15, 2008
- To Participate You Must –
- Logon at URL provided in registration confirmation email; and
- Dial in to 1-888-324-6476 Confirmation number:  MGERHARD
- Additional information on the Loan Purchase Programs at:  www.federalstudentaid.ed.gov/ffelp

## Webinar Objectives

- Purpose: To answer questions from Participation Operations Webinars – Part 1 and Part 2
- Target Audience: Personnel at servicers, lenders and custodians who are responsible for record keeping
- Limitations:  Will not include matters concerning the Loan Purchase (PUT) Commitment Program.  This information will be provided in other formats, including in subsequent Webinars
- Loan Purchase (PUT) Commitment Program Webinar -  part 1 will be held on August 22, 2008

## Legal Authorities

- Ensuring Continuing Access to Student Loans Act of 2008 (P.L. 110-227)
- HR 5715
- Signed by the President on May 7, 2008
- Strengthened GA Lender of Last Resort Program
- Provided Secretary authority to purchase FFEL loans.
- Cannot provide advanced funding to lenders
- Federal Register Notice
- Required by statute
- Draft Posted to IFAP on June 24, 2008
- Official Publication July 1, 2008

## Program Objectives

- Ensure that eligible students and parents receive federal student loans for the 2008-2009 academic year
- Support the FFEL Program as a successful private/public partnership
- Ensure no net cost to the federal government
- No statutory authority to provide advance funding

## Two Programmatic Components

- Loan Purchase Commitment Program
- Commitment by ED to purchase eligible 2008-2009 FFEL loans through September 30, 2009
- Called “put”
- Any FFEL lender/holder
- Loans must be fully disbursed to be purchased
- 45 day advance notice of loans to be sold
- ED’s commitment has value in financial markets

## Two Programmatic Components

- Loan Participation Purchase Program
- Commitment by ED to purchase “participation interests” in eligible 2008-2009 FFEL loans through September 30, 2009
- ED’s purchase will provide immediate liquidity
- To terminate ED’s participation interest lender repays ED with defined yield.
- Loans can be re-purchased by lender
- Loans can be sold (put) to ED

## 
Loan Participation Purchase Program 

Topics from Previous Webinars
And Loan.Participation@ed.gov

- Loan Participation Purchase Program
- Topics from Previous Webinars
- And Loan.Participation@ed.gov

## Agenda

- Technical Requirements/ED Policy
- Approval Process, Eligibility, MPN
- Operations
- 799, LIDs, Loan Modifications, Participant’s Yield, Monthly Reporting
- GA Matters
- Guarantee terms, LIDs, Reporting
- New Questions

## Approval Process

- Certificate of Good Standing
- Office of the Comptroller of the Currency issued "Certificate of Corporate Existence" is acceptable for National Banks
- Certificate of Incorporation
- OCC Charter Certificate is acceptable for National Banks
- An ELT affiliated with a Sponsor cannot serve as Custodian for that Sponsor

## Loan Eligibility

- Borrower Benefits
- An unconditional upfront borrower fee reduction that is made prior to or at the time of the final disbursement on the loan.
- Reductions in interest rates of not more than 0.25 percent, contingent on the borrower’s use of automatic payment process.
- No other benefits associated in any way with the loan at the time of participation are permitted.

## Loan Eligibility

- Notice of Intent to Participate
- All historical holders of a loan do not need to submit the NOI, only the originating lender and current holder who is the Sponsor.

## Master Promissory Notes

- True and exact copies are acceptable documentation
- Original MPNs do not need to be provided.
- The requirement that the Sponsor place all of a borrower's Stafford loans that it holds only applies to those loans that meet the definition of an "Eligible Loan" as defined in the Master Participation Agreement

## Form 799

- When loan fully disbursed prior to Sponsor placing loan into the Participation
- Report under Sponsor LID (including all disbursements) up to day of title transfer
-  Custodian LID from day of title transfer.
- Normal Process -- Net amounts are owed when amounts on 799 offset.

## LENDER IDs

- Custodians will receive inactive LIDs during pre-approval phase once the Initial Approval Package is submitted
- LID will be activated upon approval
- LIDs will be in the 6 character series, padded at the end to reach 8 characters
- LIDs will expire at the end of the Participation
- Custodians will receive a unique LID for each Custodian/Sponsor relationship

## Loan Adjustments

- Any loan adjustments to upcoming disbursements may be changed, but need to be updated in all applicable fields of the Loan Schedule
- Example: school cancels a second/final disbursement
- Loan will be shown as fully disbursed on next loan schedule
- GA/NSLDS reporting will change to “Custodian LID”

## Cancellations

- Disbursement Cancellation Prior to Placement
- When cancellation on a disbursement occurs prior to participation, treat as though there was no earlier disbursement.
- Example -- Loan with two scheduled disbursements but first is canceled prior to placement of loan into participation
- First disbursement date reported upon participation is the disbursement that was made and not cancelled.
- Number of disbursements reported is 1

## Cancellations

- Disbursement Cancellation After Placement
- When cancellation on a disbursement occurs after participation, original disbursement information must remain and funds returned to Sponsor must be remitted to the Custodian for month-end “sweep”
- Example – After first disbursement of a two disbursement loan, the first is disbursement is canceled.
- First disbursement date reported to ED remains the original first disbursement date that ED purchased.
- Number of disbursements remains at 2.
- Returned funds remitted to Custodian for sweep.

## Disbursement Re-Issues

- Disbursement Cancellation and Re-Issue
- See prior slide example for the cancellation.
- Re-Issue is treated as a “subsequent” disbursement.
- Example, first disbursement cancelled after placement in participation then re-issued
- First disbursement date reported to ED remains the original first disbursement date that ED purchased.
- Re-issued disbursement is new disbursement with its own date.
- Number of disbursements will be three.

## Monthly Reporting

- First monthly reporting period will begin with the September 30, 2008 as of date
- Monthly Rolling Forecast must still be submitted to ED prior to funding the initial request
- Monthly Settlement Date Report will have Servicer detail in the Loan Schedule, but not in the summary report
- Monthly Rolling Forecast
- Amount Disbursed should be the gross amount of the disbursement (not cash disbursed to the student as described in the instructions)

## Monthly Reporting

- Updated monthly reporting instructions will provide additional guidance relating to Loan Adjustments
- Updates will be announced prior to the first monthly reporting date

## Participant’s Yield

- Department’s “Participant yield” accrues daily on a simple, non-compounded basis using ending daily participation certificate balances
- Available cash at the custodian is swept monthly
- Department’s Participant Yield might not be paid in full each month, but will continue to accrue using the methodology described above (without compounding)

## Loan Guarantee

- The guarantee 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.
- Amendments to the Guarantee Agreements between the Lender/Sponsor and the original Guaranty Agency may be required as required by the Guaranty Agency.
- When removed via a repurchase by the Sponsor, the guaranty remains;
- When removed by a put to ED, the guarantee ends.

## Guaranty Agencies

- Reporting
- After loan fully disbursed, the Sponsor/Custodian reports loan to lender’s original GA under “Custodian’s LID”.
- GA’s report loans to NSLDS under “Custodian’s LID” after final disbursement.

## Questions

- Questions may be asked now or submitted to the following e-mail address for consideration
- _[Loan.Participation@ed.gov](mailto:Loan.Participation@ed.gov)_
- Please include your contact information with your e-mail
**Name**
**Phone Number**