Lender of Last Resort
Recent challenges in the capital markets, coupled with reductions in the lender yield under the Federal Family Education Loan Program (FFELP) have caused a number of lenders to withdraw or restrict their participation in the program and have created concern among schools, parents, and students about the availability of funds for the upcoming academic year. American Student Assistance® (ASA) is confident that borrowers will continue to have access to FFELP and we are committed to working with our school and lender clients to ensure that borrowers receive the loan funds they need to achieve their educational goals.
In cooperation with the Secretary of Education, ASA recently reviewed and updated our Lender of Last Resort (LLR) procedures. As the designated guarantor for Massachusetts and D.C., described below are the 2 LLR processing options available to our school clients through ASA. In the event that LLR becomes necessary, ASA wants to assure our school clients that FFELP loans will be available and delivered in a timely and efficient manner.
ASA’s LLR Process—Individual Borrowers
ASA’s LLR process is intended to be as simple and straightforward as possible. As the trusted agent, the school’s financial aid office would likely be the first point of contact for a borrower who is denied a conventional Stafford or PLUS loan. If the school is unable to find a lender willing to provide FFELP funding to a particular borrower, the school is encouraged to contact ASA. We may be able to assist the school in locating a lender willing to make conventional Stafford and PLUS loans prior to assisting the school with the LLR program.
If LLR is necessary for a borrower, the documents below should be packaged together and forwarded to ASA all at once to ensure efficient processing:
- – An original Master Promissory Note (MPN) (pdf, 239 KB) with ASA’s LLR code, completed in full by each borrower. ASA’s LLR code will be distributed as needed once the code is approved by the Department of Education (ED).
- – An original School Certification Form (pdf, 84 KB) completed by the school’s financial aid administrator.
- – The LLR Cover Sheet (pdf, 50 KB), which can be used for individual borrowers and groups of borrowers. The cover sheet represents the school verification that the borrower(s) was/were denied by at least 1 lender for a conventional loan and that the school has maintained the denial documentation.
ASA’s LLR Process—Institution-Wide Designation
Recently, the ED released further guidance (DCL GEN-08-08, FP-08-07) about another processing option for schools, which would allow eligible schools to receive institution-wide LLR designation until June 30, 2009. As a LLR designated school, all of the school’s student and parent borrowers could automatically receive a LLR loan, eliminating the need to provide individual borrower documentation.
In order to receive institution-wide LLR designation, the school must provide the following documents to the school’s ASA Client Manager or representative:
- – Written confirmation that 80% or more of the school’s eligible students and parents are unable to obtain conventional Stafford or PLUS loans.
- – Written confirmation that the school has made at least 3 attempts to locate lenders willing to make conventional Stafford or PLUS loans beyond the lenders which have previously lent to the school’s borrowers
If the school is unable to find a lender willing to provide conventional Stafford or PLUS funding to its students, the school is encouraged to contact its ASA Client Manager or representative. ASA may be able to assist the school in locating a conventional lender prior to assisting the school with the LLR program.
Once the documentation is received by ASA, ASA will submit the documentation to the ED for its final decision. Please Note: Even if the school meets the 80% threshold, the ED may direct the school to conventional lenders before the school can receive institution-wide LLR designation. The ED will provide the school and ASA with information about those lenders.
LLR Disbursement
Once ASA receives the completed documents, depending on which option is selected, the loan(s) will be scheduled for disbursement. As a general rule, if all documents are complete and the preferred disbursement dates are not set in the future, the loan(s) could be disbursed in as few as 2, but no more than 8 business days, depending on the school’s disbursement schedule. Upon approval, the borrower will then receive the notice of guarantee and disclosure and the loan will follow the typical “life of the loan” process.
Resources
Please see the Frequently Asked Questions, which may answer some of your questions about LLR. If you have additional questions or any concerns, please contact your ASA representative or ASA’s Call Center at customerservice@amsa.com or at 800.999.9080 and select Option 1. The Call Center's normal hours of operation are Monday through Friday from 8:30 a.m. to 9:00 p.m. ET.
ASA’s LLR Documents
- – School FAQ
- – Cover Sheet (pdf, 50 KB)
Form Links
DCL Links
More information about LLR is available at the links below:
Link to borrower LLR site
Lender of Last Resort—Borrowers
LLR is a guarantor or lender that agrees to make Stafford or PLUS (both graduate and parent) loans to borrowers who are eligible under the program guidelines, but have been denied a conventional Stafford or PLUS loan by at least 1 lender. Generally the guarantor is the LLR for its designated state(s); ASA is the LLR for Massachusetts and D.C. In cooperation with the Secretary of Education, ASA recently reviewed and updated our LLR procedures.
A borrower who has been denied a conventional Stafford of PLUS loan by a lender should contact their school immediately. The school may be able to provide the borrower with lenders who may be willing to lend a conventional loan to them before initiating LLR.
Please see the Frequently Asked Questions document, which may answer some of your questions about LLR. If you have any questions or concerns, please contact ASA’s Call Center at customersupport@amsa.com. The Call Center’s normal hours of operation are Monday through Friday from 8:30 a.m. to 9:00 p.m. ET.
