FFELP Guide

 Federal government.  Borrower.  School.  Lender.  Guarantor.  Servicer.  Secondary market. Seven Major Players in FFELP 2

 Federal Government.  U.S. Citizens and Residents.  Taxpayers.  Congress.  U.S. Department of Education. FFELP Players 2

 Federal Government.  U.S. Citizens and Residents.  Beneficiaries.  Taxpayers.  Source of funds. FFELP Players 2

 Borrower.  Student/parent who borrows money for post-secondary education.  Must apply for the loan.  Understand terms.  Sign promissory note.  Repay the loan. 3

 Educational institutions.  Determine borrower’s eligiblity.  Award federal aid.  Process application files.  Certify loan applications.  Process loan proceeds.  Monitors borrower’s enrollment status.  Reconcile student accounts. FFELP Players 3

 Lender.  Must comply with ED’s lending regulations.  Sets institutional policy.  Provides capital.  Provides loan servicing or work with a servicer.  Interaction with guarantors. FFELP Players 3

 Guarantor.  Provides guarantee for lender.  Maintains reserve fund to pay lender claims.  Monitors compliance with federal regulations and guarantor policies.  Provides administrative support services.  Issues Notice of Loan Guarantee and Disclosure Statement.  Provides reports.  Processes default claims.  Pursues collection of defaults. FFELP Players 4

 Servicer.  Manages loans on behalf of the owner.  Lender remains owner of loan.  Lender remains responsible for loan. FFELP Players 5

 Secondary Market.  Buys loans from lenders.  Frees-up funds for new loans.  All responsibility for the loan is transferred to the secondary market. FFELP Players 5

FFEL Program Parameters 6

Federal Loan Program Parameters  Federal Stafford Loan Program.  Definition and eligibility formulas.  Subsidized Federal Stafford Loans.  Unsubsidized Federal Stafford Loans. 6

Federal Loan Program Parameters  Subsidized Federal Stafford Loan.  Eligibility based on financial need.  Schools may reduce eligibility.  Schools may decline to certify a loan for less than $200.  Review chart for loan limits. 6

Federal Loan Program Parameters  Unsubsidized Federal Stafford Loan.  Eligibility not based on financial need.  Interest rate same as subsidized Stafford.  May receive subsidized and unsubsidized loans for the same loan period. 7

Federal Loan Program Parameters  Student eligibility.  List of requirements on page 8.  Fixed interest rate of 6.8% as of July 1,

Federal Loan Program Parameters  Stafford-loan guarantee and origination fees.  Guarantee fee is paid by the lender to the guarantor.  Origination fee is paid to ED by the lender.  Grace period for federal Stafford loans.  Stafford-loan repayment terms.  Standard.  Graduated.  Income-sensitive.  Extended

Federal Loan Program Parameters  Borrowing limits. 13

Federal Loan Program Parameters  Aggregate loan limits. 14

Federal Loan Program Parameters  Federal PLUS for parents.  Available for parents without adverse credit.  EFC is not considered in determining PLUS loan eligibility.  Parent must be natural or adoptive parent of the student. 16

Federal Loan Program Parameters  Graduate-student eligibility.  Beginning July 1, 2006, graduate and professional students who qualify for federal financial aid and have no adverse credit will be eligible to borrow through the PLUS-loan program. 16

Federal Loan Program Parameters  Federal PLUS.  Loan Limits.  Annual = COA - Other Aid  Interest Rate.  Begins day loan is disbursed.  PLUS rates page  Repayment.  Begins day after the last disbursement

Federal Loan Program Parameters  Loan Proration.  Student is enrolled in a program less than one academic year.  Student is enrolled in a program equal to or longer than the statutory minimum for an academic year, but completing a period shorter than a year. 20

Federal Loan Program Parameters  Loan Proration.  Proration Method 1.  Proration Method

Federal Stafford-loan Certification Case Study 24

Federal Loan Program Parameters  Life of a Stafford loan.  Life of a PLUS loan

Test Your Knowledge with these case studies! 29-30

FFELP Guide

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