United States General Accounting Office

GAO Report to the Chairman and Ranking

Minority Member, Committee on

Economic and Educational Opportunities

House of Representatives

February 1995 GUARANTEED

STUDENT LOANS

Actions to Ensure

Continued Student

Access to Subsidized

Loans

GAO/HEHS-95-64

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-254781 

February 24, 1995

The Honorable William F. Goodling

Chairman, Committee on Economic and

 Educational Opportunities

House of Representatives

The Honorable William L. Clay

Ranking Minority Member

Committee on Economic and

 Educational Opportunities

House of Representatives

Each year millions of students needing financial assistance to attend

postsecondary institutions rely on private lenders to provide federally

subsidized Stafford loans through the Federal Family Education Loan

Program (FFELP) (formerly the Guaranteed Student Loan Program).1

 In

fiscal year 1994 lender commitments for subsidized Stafford loans,

accounting for most FFELP loans, totaled about $14.8 billion. You asked us

to study the availability of federally subsidized Stafford student loans for

postsecondary education in light of recent legislated changes. The Higher

Education Amendments of 1992 and the Student Loan Reform Act of 1993

authorized the Federal Direct Student Loan Program (FDSLP) and brought

changes to FFELP including decreases in the interest rates lenders may

charge for Stafford loans and the rate at which lenders receive

reimbursement if borrowers fail to repay the loans. These changes have

raised concerns about whether lenders will continue to make these loans.

As agreed with your offices, our objectives were to determine (1) how

guaranty agency and lender representatives, Department of Education

officials, and others perceive the risk that eligible borrowers will have

difficulty obtaining subsidized Stafford loans; (2) what arrangements

guaranty agencies have in place or are adopting to provide loans to eligible

borrowers that may have difficulty; and (3) what the Department is doing

to ensure continued access to subsidized Stafford loans.

To address these objectives, we sent a questionnaire to each guaranty

agency inquiring about access to subsidized Stafford loans through fiscal

1

Subsidized Stafford loans are made to financially needy students, and the federal government pays the

interest while students are in school. Students not qualified for a subsidized loan may obtain an

unsubsidized Stafford loan, but they will be responsible for the interest beginning when the loan is

made.

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B-254781 

year 1995 and their “lender-of-last-resort” (LLR) programs and plans.2 Of

the 45 guaranty agencies making new guarantees at that time, 43

responded to the survey. See the appendix for a copy of the questionnaire

with summary results. We did not verify agencies’ responses to the

questionnaire.

To supplement the questionnaire results, we reviewed guaranty agency LLR

plans that had been approved by the Department. We discussed LLR

programs, contingency plans, and agency monitoring efforts with officials

from the Department; representatives at the Student Loan Marketing

Association (Sallie Mae), a government-sponsored enterprise that

purchases student loans from lenders; and with student loan interest

groups including the Consumer Bankers Association, which provided us a

written reply to questions based on responses from several of its members

that lend to students.

Results in Brief Recent changes to FFELP, as well as the introduction of FDSLP, have raised

concerns about whether eligible borrowers will continue to have access to

subsidized loans. Many lenders and guaranty agencies expect some

eligible students to have difficulty obtaining subsidized Stafford loans over

the next few years. Guaranty agencies generally have arrangements to

provide loans to these students. If a guaranty agency is unable to provide

loans to a student, the Department has arrangements with Sallie Mae to

make loans. The Department has also made arrangements with a new

agency to serve as a guarantor of last resort if existing guaranty agencies

are unable to provide guarantees to lenders. It is difficult to predict how

well these arrangements will ensure access to loans after fiscal year 1995,

and the issue may need to be reexamined at a later time.

Background FFELP is the largest source of federal financial assistance to students

attending postsecondary institutions. In fiscal year 1994 students received

about $23 billion in FFELP loan commitments, including about $14.8 billion

in subsidized Stafford loans.3

 The Department of Education pays interest

to lenders on the behalf of subsidized Stafford loan borrowers while they

are in school and during a subsequent 6-month grace period. This interest

benefit is not available to borrowers for other FFELP loans. The private

2

Through LLR programs guaranty agencies, or lenders that they designate, provide Stafford loans to

eligible students who are otherwise unable to obtain them.

3

The other FFELP loans were unsubsidized Stafford loans, Parent Loans for Undergraduate Students

(PLUS), and Supplemental Loans for Students (SLS). The SLS program was terminated July 1, 1994,

and merged into the unsubsidized Stafford loan program.

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lenders that provide these loans may not discriminate on the basis of race,

national origin, religion, sex, marital status, age, or handicapped status

but, according to a Department policy official, may deny loans to eligible

borrowers who do not meet their lending standards. Lenders may, for

example, deny loans to students attending proprietary (for profit, typically

trade and vocational) institutions or schools with high loan default rates.

They may also withdraw from the program.

Guaranty agencies, designated state or private not-for-profit entities, help

administer FFELP by, for example, reimbursing lenders if borrowers fail to

repay their loans. If an eligible borrower experiences difficulty obtaining a

subsidized Stafford loan, guaranty agencies are required to provide one.

The agencies may do so either directly or through a lender authorized to

make LLR loans. Guaranty agencies must provide subsidized Stafford LLR

loans to eligible students that have been denied a loan by two or more

participating lenders. This requirement does not apply to unsubsidized

Stafford loans.

Several major changes to the subsidized loan program may influence the

availability of loans. The 1992 amendments, for example, reduced the

interest revenue lenders can receive from subsidized loans, and the 1993

Student Loan Reform Act reduced the rate at which guaranty agencies

generally reimburse lenders if borrowers fail to repay their loans.4

 In

addition, the 1993 act established FDSLP to provide loans to students from

the Department of Education rather than from private lenders. This

program is expected to provide at least 60 percent of federal student loans

by the 1998-99 academic year. Such reductions in student loan revenue

and competition from the direct student loan program could reduce the

profitability of student loans and reduce lenders’ willingness to offer new

loans to students.

Principal Findings In response to our questionnaire and in discussions with us, participants in

the subsidized Stafford loan program expressed differing views on the risk

that eligible students could be denied loans through the end of fiscal year

1995. Most but not all guaranty agencies have arrangements in place to

provide loans to students that have difficulty obtaining loans. The

Department has several options for ensuring access if guaranty agencies

are not able to do so without assistance.

4

Lenders that make Stafford LLR loans are eligible for 100-percent reimbursement for defaulted loans

versus 98-percent reimbursement under most other circumstances.

Page 3 GAO/HEHS-95-64 Access to Student Loans
B-254781 

Perceived Risk of Loan

Access Problems

As some lenders become selective in making Stafford loans or stop

participating in the program, many lenders and guaranty agencies expect

some eligible subsidized Stafford loan borrowers to be denied loans by

one or more lenders.

We asked program participants to describe the risk that 5 percent or more

of eligible borrowers will be refused a subsidized Stafford loan by one or

more lenders through the end of fiscal year 1995. Department officials with

whom we spoke foresaw little or no risk that lender refusals to make loans

would be widespread. Sallie Mae officials also doubted that as many as

5 percent of eligible borrowers would be denied a loan. The President of

the Consumer Bankers Association said that there is “some” risk that

5 percent or more would be denied a loan.

The guaranty agencies that responded to our questionnaire had a wide

range of views on this question. (See fig. 1.) Thirteen of these agencies

rated the risk “moderate,” “great,” or “very great,” while 16 agencies said

that there is “little or no risk.” The remaining 13 agencies indicated “some

risk.” One responded that it did not know.

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B-254781 

Figure 1: Agencies’ Assessments of

Whether 5 Percent or More of Eligible

Borrowers Could Be Denied a

Subsidized Stafford Loan

31% • Some Risk (13)

• 10%

Moderate Risk (4)

•

10%

Great Risk (4)

12%•

Very Great Risk (5)

•38%

Little or No Risk (16 agencies)

Note: Percentages do not add to 100 because of rounding.

Concerns that some students will have difficulty obtaining access to loans

evolve from lenders’ deciding to leave the program or to become selective

in making student loans. Additional departures of lenders from FFELP

would represent a continuation of a trend begun in the mid-1980s. For

example, during fiscal years 1984-1986, between 11,000 and 12,000 lenders

participated in FFELP. The number of participating lenders has declined

each year since, in part reflecting the general trend of mergers and

consolidations in the financial community. By fiscal year 1993 the

Department counted fewer than 7,500 active lenders. In response to our

questionnaire, 28 agencies said that one or more of their lenders—lenders

whose loans they guarantee—had indicated they plan to stop making

subsidized Stafford loans sometime in the future. Six agencies said that

this included one of their five largest loan volume lenders. Three of these

agencies referred to the same lender.

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B-254781 

In addition to lenders that may stop making loans, concerns about loan

access may arise if lenders choose to become more selective about making

loans. Twenty agencies responded that one or more of their lenders

planned to stop making loans to students attending institutions with

student loan default rates that they—the lenders—consider too high. Most

of these agencies said that 5 or fewer lenders would stop making loans,

but one agency said that more than 200 lenders would stop.

Guaranty Agency

Arrangements for

Providing LLR Loans

Most guaranty agencies—40 of the 43 respondents—had arrangements to

provide LLR loans to eligible students. These arrangements included

agreements with state secondary markets or other participating lenders to

provide loans. Through September 30, 1993, the volume of loans provided

through these arrangements had been small. More than half of the

agencies said that they did not guarantee any LLR loans in fiscal years 1992

or 1993. The 16 agencies that provided data on LLR loans they made in

fiscal year 1993 had an aggregate LLR loan volume of $32 million—about

0.3 percent of the $12.5 billion of subsidized Stafford loans made in fiscal

year 1993.

Twenty-six of the responding guaranty agencies responded to our question

concerning the estimated capacity of their LLR arrangements. Twenty-two

agencies estimated that they could have provided about $1.8 billion in LLR

loans in fiscal year 1994. This represents an amount that is more than 50

times the total LLR loan volume for fiscal year 1993, and about one-eighth

of total subsidized Stafford loan volume in fiscal year 1994. Three agencies

cited “unlimited” LLR capacity. The largest guaranty agency, United Student

Aid Funds, Inc., said that it has no set maximum on its LLR capacity.

Nearly all of the agencies indicated they had LLR arrangements, and

two-thirds had plans that the Department had approved. Department

officials said that six agencies had not submitted plans for approval. Plans

from the remaining agencies were either pending approval, or the plans

submitted had been denied approval and the agencies had not resubmitted

their plans. (See table 1.)

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B-254781 

Table 1: Status of Department of

Education’s Approval of Guaranty

Agency LLR Plans as of

December 1994

Plan status

Number of

plans

No plan submitted 6

Plan submitted: Department review pending 2

Plan submitted: Department approved 29

Plan submitted: Department disapproved, not resubmitted 8

Thirty-one guaranty agencies responded that they had agreements with

lenders to provide LLR loans, but only 20 agencies had such agreements in

writing. All LLR agreements but one either allow lenders to withdraw from

their LLR commitments at any time or do not specify withdrawal terms.

Four agreements specified that the arrangements applied for a specific

time period, ranging from 12 to 18 months.

Department’s Plans to

Ensure Access to Loans

Department officials told us they have several tools to help ensure that

eligible borrowers have access to guaranteed student loans. They can

• assist guaranty agencies in recruiting lenders to provide LLR loans,

• direct Sallie Mae to make the loans,

• provide federal advances (interest-free loans) to guaranty agencies to

enable them to make LLR loans, or

• make loans through the direct loan program.

The Department is also developing a data reporting mechanism that,

according to Department officials, will improve its monitoring of guaranty

agencies’ financial posture. It has proposed requiring each agency to

submit annual 5-year financial projections.

The Department recognizes that with the implementation of FDSLP, FFELP

will require fewer guaranty agencies as the number of direct loans

increases in relation to the number of guaranteed loans. Therefore, the

Department is—and plans to continue—encouraging consolidation among

guaranty agencies through mergers and takeovers in the belief that greater

efficiency can be achieved through economies of scale. During the process

of this consolidation, lenders could be left without guarantee services

being available. In anticipation that such a condition may materialize, in

1994 the Department contracted with the private, nonprofit Transitional

Guaranty Agency to provide loan guarantee functions, as the Department

determines necessary.

Page 7 GAO/HEHS-95-64 Access to Student Loans
B-254781 

For those guaranty agencies having difficulty getting lenders to make

student loans, particularly LLR loans, Department officials told us they can

assist the agencies to recruit lenders or seek commitments from current

LLR lenders to make more LLR loans. As of November 1, 1994, the

Department had assisted one agency. According to Department and

agency officials, it helped the California Student Aid Commission identify

lenders to provide LLR loans to eligible borrowers at certain schools.

The Department and Sallie Mae signed an agreement through which Sallie

Mae could provide up to $200 million of LLR loans through fiscal year 1995.

This amount can be increased by mutual written agreement between the

Department and Sallie Mae. As of December 6, 1994, Sallie Mae made 149

unsubsidized Stafford LLR loans and 62 subsidized Stafford loans that were

guaranteed by the Texas guaranty agency.

Through the Higher Education Act of 1965, as amended, the Department

can make federal advances to guaranty agencies to provide loan capital

needed to make LLR loans. The statute also provides authority for Sallie

Mae to make advances to guaranty agencies to enable them to make LLR

loans. In addition, with the implementation of FDSLP, the Department has

the option of making direct loans to students if guaranteed loans are

unavailable.

Many uncertainties make predictions about the availability of loans in

future years very difficult. For example, it is unclear whether guaranty

agencies’ LLR arrangements will ensure access because many agencies’ LLR

agreements allow lenders to withdraw at any time. It is also unclear to

what extent postsecondary institutions will increase their participation in

FDSLP. As institutions elect to participate in FDSLP, the demand for FFELP

loans will decline, which may in turn encourage additional lenders to

withdraw from the program or become more selective in making loans. On

the other hand, the demand for LLR loans may decline if schools whose

students are obtaining LLR loans switch to FDSLP. It is also uncertain how

the actions of the 104th Congress, whose leadership has pledged to

constrain federal spending, might affect federal student loan programs and

the Department’s ability to ensure access.

Conclusions Generally FFELP administrators foresaw little or no risk of widespread loan

access problems through fiscal year 1995, the period covered by our

review. However, several respondents to our questionnaire foresaw more

risk. Guaranty agencies have arrangements to provide LLR loans to eligible

Page 8 GAO/HEHS-95-64 Access to Student Loans
B-254781 

students that encounter difficulties in obtaining a loan, although most of

them allow lenders to discontinue their commitments with little or no

advance notice. However, if such arrangements prove inadequate, the

Department has several options to ensure students’ access to subsidized

loans, which have proved adequate in the few instances in which they

were used. It is too early to know with certainty if lenders will continue to

provide subsidized loans to eligible borrowers, and this issue may need to

be reevaluated in the future.

We did our review from March 1994 through January 1995 in accordance

with generally accepted government auditing standards. As arranged with

your offices, we did not obtain agency comments on this report, although

we did discuss its contents with Department program officials. These

officials generally agreed with the information presented in the report.

They did offer some technical suggestions, which we incorporated where

appropriate.

We are sending copies of this report to the Secretary of Education,

appropriate congressional committees, and other interested parties.

Please call me at (202) 512-7014 if you or your staff have any questions

regarding this report. Major contributors include Joseph J. Eglin, Jr.,

Assistant Director, (202) 512-7009; Charles M. Novak; Benjamin P. Pfeiffer;

Dianne L. Whitman; and Aaron C. Chin.

Linda G. Morra

Director, Education

 and Employment Issues

Page 9 GAO/HEHS-95-64 Access to Student Loans
Appendix 

Questionnaire Results

U.S. GENERAL ACCOUNTING OFFICE

Questionnaire to Guaranty Agencies Regarding

Lender Participation and Lender-of-Last-Resort (LLR) Loans

______________________________________________________________________________________________________________________________________

Results in bold italics

INTRODUCTION

The U.S. General Accounting Office (GAO) is conducting a congressionally

requested study on the availability of guaranteed student loans to borrowers.

As part of this study, we are asking all guaranty agencies to complete this

questionnaire. Specifically, we are asking your agency to provide

information about the extent of lenders’ willingness to continue providing

subsidized Stafford student loans and your agency’s lender-of-last-resort

(LLR) program.

INSTRUCTIONS

This questionnaire should be completed by the person who is most

knowledgeable about lender participation and lender-of-last-resort programs.

If this person is unable to respond to all of the questions, he or she may

wish to seek the help of others in completing this questionnaire.

This questionnaire asks for information related to only subsidized Stafford

loans and by federal fiscal year (FFY). Please include all guarantee activity

for these loans by your agency, except guarantees for which your agency

provides guarantee services on behalf of another agency.

If you have any questions, please feel free to call collect either Dianne

Whitman at (206) 287-4822 or Ben Pfeiffer at

(206) 287-4832.

Please return your completed questionnaire within 5 days of receipt, in the

enclosed preaddresssed business reply envelope or by FAX. If the envelope

is misplaced, please send your questionnaire to the address shown below.

Dianne Whitman

U.S. General Accounting Office

Jackson Federal Building, Room 1992

915 Second Avenue

Seattle, WA 98174

FAX: (206) 287-4872

Please provide the following information about the person responsible for

completing this questionnaire, so that we will know who to call to clarify

information, if necessary.

Name:

Title:

Agency:

Telephone

Number: ( )

LENDER PARTICIPATION

1.Consider all of your agency’s guarantee activity, except guarantees for

which your agency provides guarantee services on behalf of another agency.

In total, about how many lenders either originated or purchased subsidized

Stafford loans guaranteed by your agency during federal fiscal year (FFY)

1993 (October 1, 1992, through September 30, 1993)? (ENTER NUMBER)

__________ lenders

n=43 range: 1-3,700 mean=263 median=87

2. About how many of these lenders, if any, have informed your agency

that they will stop providing subsidized Stafford loans sometime in

the future? (ENTER NUMBER; IF NONE, ENTER ’0’)

_____________ lenders

n=42 range: 0-500 mean=19 median=2

3. How many of your agency’s five largest volume lenders in FFY

1993, if any, have indicated that they will stop providing subsidized

Stafford loans? (ENTER NUMBER; IF NONE, ENTER ’0’)

____________ of top 5 lenders

n=43 range: 0-1 median=0

6 agencies indicated 1 lender

37 agencies indicated 0 lenders

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Appendix 

Questionnaire Results

4. Have any lenders informed your agency that, by the end of FFY

1995 (September 30, 1995), they will no longer be providing

subsidized Stafford loans to students attending post-secondary

institutions with default rates that the lenders regard as too high?

(CHECK ONE; IF YES, ENTER NUMBER)

1. [20] Yes --> How many lenders? (ENTER NUMBER)

________ lenders

n=18 range: 1-200

mean=21 median=4

2. [23] No

5. What is your opinion of the risk, if any, that 5 percent or more of

eligible borrowers who seek a subsidized Stafford loan will be

refused by at least one of your lenders, between now and the end of

FFY 1995? (CHECK ONE)

1. [16] Little or no risk

2. [13] Some risk

3. [ 4] Moderate risk

4. [ 4] Great risk

5. [ 5] Very great risk

6. [ 1] Don’t know

____________________________________________________________________________________________________________

6. In your opinion, is each of the following factors listed below a major reason, minor reason, or not a reason why your lenders may either stop providing or

provide fewer subsidized Stafford loans? (CHECK ONE FOR EACH FACTOR)

FACTOR

Major

Reason

Minor

Reason

Not a

Reason

Don’t

Know/No

Opinion

1. Extent of change in the program 26 11 3 2

2. Increased complexity of the program 28 11 3 1

3. Dissatisfaction with the Department of Education’s management of the

program 15 14 5 8

4. Reduced interest rate and special allowance payments from the Department

of Education 28 12 2 1

5. Reduced interest rate paid by new borrowers 10 14 15 4

6. The 0.50 percent loan fee paid by lenders 22 18 1 2

7. Reduction in claims reimbursement rate from 100 to 98 percent (except for

LLR and exceptional performance loans) 22 17 2 2

8. Competition from other lenders 1 9 30 3

9. Concern about implications of the Federal Trade Commission (FTC) holder

rule 6 22 11 4

10. Expectations that lenders’ market share will decline due to direct lending

14 15 9 5

11. Concern about "windfall" profits provision 14 16 7 5

12. Concern about audits of lenders and resulting liabilities 6 19 13 5

13. Other (PLEASE SPECIFY)

_________________________________________________ 8 0 0 1

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Appendix 

Questionnaire Results

INSURING ACCESS TO LOANS

7. Regardless of whether or not the Department of Education has

approved your LLR plan, what arrangements, if any, does your

agency currently have in place for ensuring that eligible borrowers

who have been denied a subsidized Stafford loan will receive a loan?

(CHECK ALL THAT APPLY)

1. [ 4] We make these loans and hold them as lender-of-lastresort.

2. [ 2] We make these loans as a lender-of-last-resort and sell

them to the state secondary market.

3. [ 1] We make these loans and sell them to a secondary

market other than the state secondary market.

4. [12] We have or arrangement(s) with the state or a state

secondary market which makes these loans.

5. [19] We have arrangement(s) with lenders other than those

mentioned above who make these loans. --> How many

lenders?

_________ lenders

n=17 range: 1-14

mean=3 median=3

6. [14] We refer borrowers to lenders willing to make the loans

without a lender-of-last-resort designation.

7. [ 4] We have other arrangements. (PLEASE SPECIFY)

________________________________

8. [ 3] We currently have no arrangements in place.

8. Does your agency plan to change its arrangements for insuring access

to loans? (CHECK ONE)

1. [18] Yes (CONTINUE)

2. [25] No (GO TO QUESTION 10)

9. Please indicate if your agency plans to make each of the following

changes to its arrangements for insuring access to loans? (CHECK

YES OR NO FOR EACH)

The guaranty agency plans to ...

YES NO

1. solicit additional lenders currently not

participating in the LLR program. 15 3

2. arrange for commitment by lender(s) currently

participating in the LLR program to increase the

amount of LLR loans it is (they are) willing to

make. 7 9

3. increase the capacity of the guaranty agency to

make LLR loans. 6 9

4. turn our LLR responsibilities over to the

Department of Education or another entity.

2 12

5. do something else. (PLEASE SPECIFY)

___________________________

4 5

10. Did your agency provide guarantees for any lender-of-last-resort

loans originated during either FFY 1992 or FFY 1993? (CHECK

ONE)

1. [19] Both FFY 1992 and

FFY 1993

2. [ 1] FFY 1992 only (CONTINUE)

3. [ 0] FFY 1993 only

4. [22] Neither FFY 1992 nor FFY 1993 (GO TO QUESTION

12)

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Appendix 

Questionnaire Results

11. What was the original gross principal dollar amount of lender-of-last resort loans that your agency guaranteed during FFY 1992 and during FFY 1993? If

you cannot provide the data by federal fiscal year, please enter the dollar amount and the annual time period for which you do have information.

(ENTER DOLLAR AMOUNT; IF NONE, ENTER ’O’)

Original Gross Principal Dollar

Amount of LLR Loans

1. FFY 1992 $ __________ [ 4] Can only provide for different time period, which is ____________________

n=17 range: $0-$9,206,288

mean=$1,078,043 median=$184,800

sum=20,482,810 [ 2] Data not available for any time period

2. FFY 1993 $ ___________ [ 4] Can only provide for different time period, which is_____________________

n=16 range: $0-$14,026,992

mean=$1,763,254 median=$172,847

sum=31,738,576 [ 2] Data not available for any time period

12. What is the projected gross dollar amount of your agency’s

subsidized Stafford loan guarantees during FFY 1994? (ENTER

DOLLAR AMOUNT)

$ ________________

n=41 range: $1,450,000-$1,200,000,000

mean=$239,761,649 median=$137,500,000

sum=$9,830,227,591

13. Consider your agency’s projected FFY 1994 dollar amount for

subsidized Stafford loans. What is the maximum amount that could

be handled through your agency’s current LLR loan arrangements?

(ENTER DOLLAR AMOUNT; IF NONE, ENTER ’0’)

$ ______________

n=26 range: $120,000-$1,200,000,000

mean=$83,260,670 median=$20,500,000

sum=$1,831,734,729

Also 3 agencies indicated "unlimited"

and one indicated "no set maximum"

[17] Don’t know

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Appendix 

Questionnaire Results

14. If the dollar amount of LLR loans were to become greater than could be handled through your agency’s current arrangements, please indicate if your agency

would take each of the actions below and if yes, how likely it is, or not, that this action would succeed in increasing access to loans.

(CHECK ONE

FOR EACH)

Take Action?

(IF YES, CHECK ONE FOR EACH ACTION)

Likelihood That Action Would Increase Access

ACTION

Yes No N/A

If

Yes

-->

Very Likely Somewhat

Likely

Not

Likely

Don’t Know

1. Solicit additional lenders not currently in LLR

program to provide loans

35 4 2

If Yes

-->

22 7 5 1

2. Seek additional guaranty agency funding from

non-federal sources to make loans directly

9 25 3

If Yes

-->

1 7 1 0

3. Request that the state secondary market seek

additional funding to enable it to either make

LLR loans or purchase them from the guaranty

agency

24 9 8

If Yes

-->

11 12 0 0

4. Ask the Department of Education to advance

funds to enable the guaranty agency to make

these loans

15 20 2

If Yes

-->

6 1 4 3

5. Ask the Department of Education to request

that Sallie Mae make these loans

22 17 1

If Yes

-->

11 9 1 1

6. Ask the Department of Education to make the

loans directly

6 27 3

If Yes

-->

2 3 1 0

7. Ask the Department of Education for other

forms of assistance (PLEASE SPECIFY)

_______________________

2 24 7

If Yes

-->

1 1 0 0

8. Make other arrangement(s): (PLEASE

SPECIFY)

________________________

0 14 9

If Yes

-->

0 0 0 0

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Appendix 

Questionnaire Results

15. Does your agency currently have any verbal (informal) or written

(either informal or formal) agreements for LLR loans with

participating lenders? (CHECK ONE)

1. [11] Verbal only (GO TO QUESTION 21)

2. [ 6] Written only (CONTINUE)

3. [14] Written and verbal (CONTINUE)

4. [11] Neither (GO TO QUESTION 21)

16. With how many participating lenders does your agency have written

agreements for lender-of-last-resort loans? (ENTER NUMBER)

_____________ lenders

n=19 range: 1-14 mean=2 median=1

[ 0] Check here if this is an estimate

[ 1] Data not available

17. Do the terms of any of these written agreements allow the lenders to

withdraw from the agreements at any time? (CHECK ONE)

1. [13] Yes, in all cases

2. [ 0] Yes, in some cases

3. [ 1] No, may not withdraw

4. [ 6] Withdrawal terms not specified

18. Do any of these written agreements specify a length of time to which

the terms apply? (CHECK ONE)

1. [ 4] Yes--> What proportion specify a length of time?

(ENTER PERCENTAGE)

2 indicated 100%

2. [16] No (GO TO QUESTION 20)

19. For what length of time do most of these written agreements apply?

(ENTER NUMBER OF YEARS)

_________ Years

n=4; 3 indicated 1 and 1 indicated 1.5

(104754)

20. In any of these written agreements, can your lenders refuse to make a

lender-of-last-resort loan to an eligible borrower: (CHECK ONE

FOR EACH; IF NOT SPECIFIED, CHECK ’N/S’)

YES NO N/S

1. ... when the loan amount is below a

minimum level? 13 7 0

2. ... when the loan would cause the lender

to exceed a limit on the maximum number

of loans? 2 14 3

3. ... when the loan would cause the lender

to exceed maximum amount of lender-oflast-resort loans it will make?

5 13 1

4. ... under an other condition? (PLEASE

SPECIFY)

_________________________

3 6 3

COMMENTS

21. Please provide below any comments that you have about this study,

this questionnaire, or the LLR program.

THANK YOU FOR YOUR HELP!

(104754) Page 15 GAO/HEHS-95-64 Access to Student Loans
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