Federal Family Education Loan (FFEL) Lender and Guaranty Agency Provisions

Reduction of Special Allowance Payments

The rate of Special Allowance Payments is a government paid interest rate subsidy to student loan providers. Special Allowance Payments for lenders are determined based on whether or not the lender is not-for-profit. Please note that the definition of a not-for-profit lender is a subject of negotiated rulemaking. Following are the particular characteristics for Special Allowance Payment to providers, organized by loan type:

• – Special Allowance Payments will be reduced for loans disbursed on or after October 1, 2007:
  
  
  • – Stafford loans not in repayment: 55 basis point reduction. Special Allowance Payments reduced from 1.74% to 1.19%
  • – Stafford loans in repayment status: 55 basis point reduction. Special Allowance Payments reduced from 2.34% to 1.79%
  • – PLUS loans: 85 basis point reduction. Special Allowance Payments reduced from 2.64% to 1.79%
  • – Consolidation loans: 55 basis point reduction. Special Allowance Payments reduced from 2.64% to 2.09%
• – Special Allowance Payments for Not-for-Profit lenders will be reduced for all loans disbursed on or after October 1, 2007:
  
  
  • – Stafford loans not in repayment: 40 basis point reduction. Special Allowance Payments reduced from 1.74% to 1.34%
  • – Stafford loans in repayment status: 40 basis point reduction. Special Allowance Payments reduced from 2.34% to 1.94%
  • – PLUS loans: 70 basis point reduction. Special Allowance Payments reduced from 2.64% to 1.94%
  • – Consolidation loans: 40 basis point reduction. Special Allowance Payments reduced from 2.64% to 2.24%

Increased Loan Fees from FFEL Lenders

For all FFEL loans first disbursed on or after October 1, 2007, the loan origination fees that lenders are charged increased from 0.50% to 1.0% of the principal amount of the loan. The borrower cannot be charged this fee.

Lender Insurance Percentages

For loans made on or after October 1, 2012, the rate of insurance paid to a lender on a FFEL loan that defaults will be reduced from 97% to 95% of the unpaid principal.

Exceptional Performer Status

Exceptional Performer Status has been eliminated as of October 1, 2007.

Account Maintenance Fees

Account Maintenance Fees paid to guaranty agencies were reduced from .10% to .06% effective October 1, 2007.

Guaranty Agency Retention of Default Collections

For loans defaulted after October 1, 2007, the amount guarantors can retain from payments on defaulted loans was reduced from 23% to 16%.

Loan Auction Pilot Program for FFEL Parent PLUS Loans
(This program is not finalized)

Parent PLUS loans issued on or after July 1, 2009 will be disbursed through the Department of Education (ED) using an auction method for origination and disbursement. An auction will be held in each state in which lenders can bid to offer Parent PLUS loans, inclusive of all schools within that state. Bids will be confidential and the winning lender will be able to originate loans for parent borrowers until their student leaves school or graduates. If there is no winning bid, a lender of last resort will be selected. More specific information about the implementation and management of this program will be provided once it is available.