ED Lays Out Process for Lender of Last Resort Program
May 15, 2008
In a May 6 letter to guaranty agencies, the Department of Education provided guidance on how a modified lender-of-last-resort (LLR) program will be implemented if students have trouble finding willing lenders due to the current turmoil in the financial markets. Under LLR, the guaranty agencies would ensure that funds were available under Federal Family Education Loan (FFEL) program either by finding willing lenders or originating the loans themselves.
A key change in this incarnation of the LLR program is that criteria will be developed to designate all students at a college or university as eligible for LLR loans. Traditionally, the program has operated on a student-by-student basis. Recent statutory changes enable ED to operate the program on an institution-wide basis, which would be crucial to making loans available in a timely manner if there are widespread problems with loan availability.
Although the specific process has yet to be worked out, the Dear Colleague letter calls for an institution to provide to its designated guaranty agency, at a minimum, the following information:
• The number and percentage of the institution’s FFEL loan applicants who are expected to be unable to obtain a conventional FFEL loan;
• The names of the FFEL lender or lenders that provided FFEL loans in the past to students attending the institution (or their parents) and which, based on available information, have indicated that they will no longer provide conventional FFEL loans to these individuals. And for each such lender, an estimate of the number of students who will be impacted by the lender’s decision; and
• The names of other FFEL lenders that the institution or the guarantor contacted to request FFEL loan access for students at the institution for the 2008-2009 academic year.
Check the Student Loans and the Credit Crunch page for regular updates and resources on this constantly changing issue.
NACUBO Contact: Anne Gross, vice president, regulatory affairs, 202.861.2544
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