May 29, 2008

Department of Education Releases Plan to Provide Liquidity Options for FFELP Lenders

On May 21, 2008, the Department of Education (ED) issued a letter outlining liquidity options for student loan lenders for the 2008-2009 lending season. The letter includes an option for lenders to sell loans to ED, as well as an option for ED to issue low-interest loans to lenders using their student loan portfolios as collateral. The plan is an outcome of the authority given the Secretary in the Ensuring Continued Access to Student Loans Act of 2008 (H.R. 5715) and continued meetings and negotiations between FFELP community organizations and ED.

The letter summarizes these options as designed to ensure capital is available for loans this year and commits ED to continued discussion of longer-term remedies. OGSLP and others are hopeful that these measures will provide lenders with short-term liquidity options while the FFELP community continues working with ED to develop more comprehensive solutions.

As a reminder, Rep. Kanjorski has also offered two pieces of legislation: the Emergency Student Loan Market Liquidity Act (H.R. 5723), which would allow the Federal Home Loan Bank to invest in student loan securities and make advances for student loan financing; and the Student Loan Access Act of 2008 (H.R. 5914), which would clarify the authority of the Federal Financing Bank to purchase student loans. Many in the industry believe that these types of options are critical to providing long-term financing options for student loan lenders.

OGSLP will continue to monitor and update customers about these important liquidity initiatives and their impact on the federal loan market for the upcoming year.