FFEL Program
Financing
NCHELP Program Operations
Update
May 26, 2009
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Discussion Topics
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FFELP’s Commitment
Legislation Overview
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PUT Program
Participation Program
Conduit Program
Talking Points and Q&As
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FFELP’s Commitment
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FFELP providers are committed to providing
students, families, and schools uninterrupted
student loan services during these challenging
economic times.
The FFELP community is committed to working
diligently with the U.S. Department of Education to
make the programs as easy and smooth as possible
for you and your student and parent borrowers.
FFELP providers are rapidly utilizing the new
legislative tools (Participation program, PUT
program, and Asset-backed Commercial Paper
conduit) in order to provide continued financing to
our shared customers: students and their families.
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FFELP’s Commitment
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Utilization of the legislative tools provides a
short-term solution to create liquidity for
lenders in the current financial markets. It is
the FFELP community’s intent to cease using
the programs as soon as the financial
markets stabilize.
FFELP community will continue to
communicate specifics of this initiative as
they become available.
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Legislation Overview
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Situation
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Lack of liquidity in financial markets impacting ability
of FFEL Program lenders and secondary markets to
find cost effective financing.
Goals
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Ensure that eligible students and parents continue to
receive FFEL Program loans.
Support the FFEL Program as a successful
private/public partnership.
Protect taxpayer interests - no additional cost to the
government
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Legislation Overview
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Solution
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ECASLA signed by President on May 7, 2008
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Extension signed by President on October 8, 2008
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Covers the 2008/09 academic year
Covers the 2009/10 academic year
Does not authorize the Department to make
advances or to otherwise “lend” money to FFEL
lenders.
Resource link
http://federalstudentaid.ed.gov/ffelp
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Legislation Overview
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Response
Three Funding Programs –
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Loan Purchase Commitment Program (PUT)
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Expansion of PUT program to include 2007/08 loans
announced November 21, 2008 as stop-gap solution
before conduit is up and running
Loan Participation Purchase Program
Conduit Program announced November 10, 2008
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Eligible Loans
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Stafford (subsidized and unsubsidized), PLUS
and Grad PLUS program
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Excludes LLR loans from Participation and PUT
programs
Excludes consolidation loans
Excludes loans 210 days or more delinquent
Borrower benefit limitations in some cases
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Eligible Time Periods
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Four Independent Time Periods
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Academic Year 2008/09
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Loan period includes or begins on or after July 1, 2008
First disbursement on or after May 1, 2008 and no later than
July 1, 2009
Will be fully disbursed no later than September 30, 2009
Must be redeemed or Put to ED by September 30, 2009
Academic Year 2009/10
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Loan period includes or begins on or after July 1, 2009
First disbursement on or after May 1, 2009 and no later than
July 1, 2010
Will be fully disbursed no later than September 30, 2010
Must be redeemed or Put to ED by September 30
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Eligible Time Periods
(con.)
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Academic Year 2007/08 included in Short-Term PUT
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Loan period includes or begins on or after July 1, 2007
First disbursement on or after May 1, 2007 and no later than July 1,
2008
Must be Put to ED by February 28, 2009
(http://www.nchelp.org/initiatives/ECASLA/Pages%20from%20db112
0.pdf)
Conduit Only: “Loans made between October 1, 2003 and
July 1, 2009
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First disbursement on or after October 1, 2003 and no later than July
1, 2009
Fully disbursed by September 30, 2009
Conveyed to conduit by June 30, 2010
Loans may be PUT to Department by conduit through September 30,
2014
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Programs Comparison
Loan Purchase (PUT)
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Provides liquidity after fully
disbursed
Lender funds and holds the
loan until sold (PUT)
Guarantor holds guarantee
until sold (PUT)
FFELP loans sold to the
Dept.
All FFEL lenders eligible,
regardless of size
Holder, servicer and
guaranty moved to Dept.
when PUT
Loan Participation
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Provides liquidity as
disbursements are made
Lender, servicer and
guarantor intact
Lender funds first
disbursement, requests
Dept. to participate in loan
Dept. provides funds to
lender for immediate
liquidity
Loans must be bought back
or PUT by Sept. 30 of
applicable year
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PUT Program
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How it Works
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9-day freeze on loan adjustments before PUT date
Optional: Lender notifies schools and/or guarantor at
least 9-days before PUT
PUT loans sent to the original guarantor and NSLDS
within 30-days after PUT date by Department Servicer


Sent as a loan transfer file with LID 899577 or 898577 for
Short-Term PUT; Servicer 700577; and Guarantor 577
Guarantor transfers the guarantee to the Department
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PUT Program Procedures
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Department’s Servicer processes the sale on
the required loan purchase date
Ownership of loans transfers to the
Department as of purchase date
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Department’s Servicer assumes servicing of all
loans included in sale
Department’s Servicer notifies borrower,
guarantor and NSLDS
Payment is deposited in lender’s account
Lender forwards any post sale adjustments to
Department’s Servicer
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PUT Program Assisting Schools
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Plan of Action to Assist School:
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Communication of loan changes to DL servicer on PUT
loans
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Lender and/or guarantor will communication those loans that are
PUT
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Lender and/or guarantor will work with the school to ensure that
during the 9-day freeze that certain loan changes do not occur
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(specifics provided by lender and/or guarantor)
(specifics provided by lender and/or guarantor)
Re-certification of PUT loan to reinstate guaranty and/or increase
loan amount
Lender and/or guarantor will work with the school to provide
resources/tools to address borrower questions about PUT loans
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PUT Program Communications to
Schools
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Options:
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NCHELP Trading Partner Notification of ECASLA PUT File
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CommonLine Response File
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Published November 21, 2008
Sent by lender at least 9-days before PUT date
Used to notify guarantors, originators and others of loans that
may be PUT
Published November 25, 2008
Sent by lender at least 9-days before PUT date
Used to notify schools of loans that may be PUT
Lender, servicer and guarantor may have specific
communication tools
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PUT Program Assisting Borrowers
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Develop Plan of Action to Assist Borrowers:
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Split servicing: In School
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Assist school to communicate to borrower PUT loans and provide
general information and direction on split servicing loans
Set up a communication system with ED servicer to ensure all loans
are updated correctly
Split servicing: In Repayment
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Facilitate communication between the borrower and ED servicer
Work to assist borrower in addressing all FFELP loans, even PUT
loans
Extend Default Prevention and Financial Literacy programs to PUT
serviced loans
Encourage the use of industry products to locate all loans (NSLDS.
Meteor, etc.)
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Participation Program
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Terminology:
Sponsor – Originating lender
Custodian – Lender managing the participation requests to
the Department and “holding” the loan disbursements
Facility – The “place” where the Department’s participation
interests are held
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Holder, servicer and guarantee retained by the Sponsor and
original guarantor
Redeem – The Sponsor buys back from the Department, its
participation in the loan that is held in the facility
PUT – The loan asset is transferred to the Department if
the Sponsor does not redeem it from the facility

Holder is now the Department, servicer is the Department’s
Servicer
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Participation Program
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How it works:
Sponsor enters into an agreement with an
eligible custodian
Custodian receives a LID from the Department
Sponsor originates loan and makes first
disbursement
Sponsor notifies custodian to request the
disbursement amount
Sponsor transfers the first disbursement to the
facility
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Participation Program
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How it works (cont.):
Sponsor continues to make subsequent
disbursements and participates each until fully
disbursed
Sponsor transfers LID to custodian once fully
disbursed
NSLDS reflects new custodian LID
Sponsor, servicer and guarantor remain intact,
as normal
Sponsor redeems or PUTs loan by Sept. 30 of
the applicable year
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Participation Program School and Borrower Impact
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School Impacts:
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Lender, servicer and guarantor remain the same
LID transfer to the custodian after full disbursement is
for federal reporting purposes and does not impact
servicing
If lender redeems the loan, LID will transfer from
custodian back to sponsor
If lender PUTs the loan, all PUT impacts apply
Borrower Impacts:

None unless loan is PUT
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Conduit Program –
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What We Know:
Announced in a letter from the Secretary of
Education on November 10, 2008
Created to provide longer-term stability to
FFELP
Conduit will be private sector based
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Conduit Program –
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What We Know (cont.):
Department of Education will be the “safety
net” (purchaser of last resort if needed)
Guarantee stays with the original guarantor
and servicing remains with the
holder/servicer while in the conduit
Guarantor and servicer changes only if/when
the Department of Education purchases the
loans
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Conduit Program –
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Eligible Loans:
Loans eligible for the conduit include Stafford
and PLUS loans
First disbursement on or after October 1,
2003 and no later than July 1, 2009
Fully disbursed by September 30, 2009
Conveyed to conduit by June 30, 2010
Loans may be PUT to Department by conduit
through September 30, 2014
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Conduit Program –
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How it Works:
Third party administrator creates a conduit to
which other lenders transfer ownership of their
loans
Conduit issues funding notes to sell, backed by
the loans in the conduit
Private investors purchase the funding notes
Lenders would pledge loans to the conduit and
the conduit pays the lenders from amounts
received from investors
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Conduit Program –
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How it Works (cont.):
Federal Financing Bank provides liquidity to
investors; reimbursed by the Department of
Education
Department of Education promises to
purchase the loans if the commercial paper
that has been issued by the conduit cannot
be reissued and the conduit doesn’t have
sufficient cash to repay the investors
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Program General
Overview and Q&As

Key Messages and Questions and Answers
posted on NCHELP web site at
http://www.nchelp.org/pages/page.cfm?id=1
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Questions?

http://federalstudentaid.ed.gov/ffelp

http://www.nchelp.org/
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