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Ensuring Continued Access to Student Loans Act (ECASLA) of 2008
Bonnie BrinkleyAssistant Vice PresidentTG Guarantee, Support and [email protected]
Carol LindseyVice PresidentTG Policy and [email protected]
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• 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 of 2008 (P.L. 110-227)
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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)
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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
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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
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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
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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
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• 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)
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• 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)
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• 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 Participation Purchase Program(Participation)
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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
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Day1
-9
45 (calendar days)Final sale date
70 (approx.)
No balance increases (reissues, reinstatements, loan increases, reallocations)
Transferreported toguarantor
+1ED servicer sends welcome letter to borrower
+2Lender sends payments received just prior to final sale to ED servicer
Loan Purchase Commitment Program (Put)C
alen
dar
Bus
ine
ss
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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)
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Loan Purchase Commitment Program (Put)
• Loan Status AE: Transferred out
• ED LID: 899577
• ED Guarantor Code: 577
• ED Servicer Code: 700577
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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
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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
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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)
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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
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Short-Term Put Program
• Loan Status AE: Transferred out
• ED LID: 898577
• ED Guarantor Code: 577
• ED Servicer Code: 700577
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Electronic solutions
• NCHELP committee work– Flat File
– CommonLine and CR:C
– Return of Funds
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Electronic solutions
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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]
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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
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Participation and Put Program comparison
Loan Participation• Provides liquidity as
disbursements are made
• Lender, servicer, and guarantor intact
• Lender funds first disbursement, ED buysparticipation 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
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• 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
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• 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
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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
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Questions?