1. FFEL Program Financing NCHELP Program Operations Update May 26, 2009 1

2. Discussion Topics FFELPs Commitment Legislation Overview PUT Program Participation Program Conduit Program Talking Points and Q&As 2

3. FFELPs Commitment 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. 3

4. FFELPs Commitment Utilization of the legislative tools provides a short-term solution to create liquidity for lenders in the current financial markets. It is the FFELP communitys 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. 4

5. Legislation Overview Situation Lack of liquidity in financial markets impacting ability of FFEL Program lenders and secondary markets to find cost effective financing. Goals 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 5

6. Legislation Overview Solution ECASLA signed by President on May 7, 2008 Covers the 2008/09 academic year Extension signed by President on October 8, 2008 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 http://federalstudentaid.ed.gov/ffelp 6

7. Legislation Overview Response Three Funding Programs – Loan Purchase Commitment Program (PUT) 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 7

8. Eligible Loans Stafford (subsidized and unsubsidized), PLUS and Grad PLUS program Excludes LLR loans from Participation and PUT programs Excludes consolidation loans Excludes loans 210 days or more delinquent Borrower benefit limitations in some cases 8

9. Eligible Time Periods Four Independent Time Periods Academic Year 2008/09 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 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 9

10. Eligible Time Periods (con.) Academic Year 2007/08 included in Short-Term PUT 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)http://www.nchelp.org/initiatives/ECASLA/Pages%20from%20db112 0.pdf Conduit Only: Loans made between October 1, 2003 and July 1, 2009 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 10

11. Programs Comparison Loan Purchase (PUT) 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 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 11

12. PUT Program How it Works 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 12

13. PUT Program Procedures Departments Servicer processes the sale on the required loan purchase date Ownership of loans transfers to the Department as of purchase date Departments Servicer assumes servicing of all loans included in sale Departments Servicer notifies borrower, guarantor and NSLDS Payment is deposited in lenders account Lender forwards any post sale adjustments to Departments Servicer 13

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15. PUT Program - Assisting Schools Plan of Action to Assist School: Communication of loan changes to DL servicer on PUT loans Lender and/or guarantor will communication those loans that are PUT (specifics provided by lender and/or guarantor) Lender and/or guarantor will work with the school to ensure that during the 9-day freeze that certain loan changes do not occur (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 15

16. PUT Program - Communications to Schools Options: NCHELP Trading Partner Notification of ECASLA PUT File 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 CommonLine Response File 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 16

17. PUT Program - Assisting Borrowers Develop Plan of Action to Assist Borrowers: Split servicing: In School 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 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.) 17

18. Participation Program Terminology: Sponsor – Originating lender Custodian – Lender managing the participation requests to the Department and holding the loan disbursements Facility – The place where the Departments participation interests are held 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 Departments Servicer 18

19. Participation Program 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 19

20. Participation Program 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 20

21. Participation Program - School and Borrower Impact School Impacts: 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 21

22. Conduit Program – 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 22

23. Conduit Program – 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 23

24. Conduit Program – 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 24

25. Conduit Program – 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 25

26. Conduit Program – 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 doesnt have sufficient cash to repay the investors 26

27. 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 36 http://www.nchelp.org/pages/page.cfm?id=1 36 27

28. Questions? http://federalstudentaid.ed.gov/ffelp http://www.nchelp.org/ 28