U.S. Secretary of Education Margaret Spellings announced Friday that the U.S. Department of Education would take further action to purchase Federal Family Education Loan (FFEL) Program loans to ensure students have continued access to Federal student loans. The Department will use its existing authority to purchase 2007-2008 academic year FFEL loans. The purchase program is designed to minimize potential disruption in student lending until the conduit program becomes operational.
"I remain committed to making sure students and their families continue to have access to Federal loans for this school year and beyond," said Secretary Spellings. "Today I am using the authority granted by Congress to protect students and their families during the unprecedented current market conditions and taking necessary steps to help ensure continued, successful disbursements of student loans."
The U.S. Department of Education has been working to ensure uninterrupted and timely access to Federal student loans by taking steps to maintain stability in student lending through both the FFEL Program and Direct Loan Program. As part of these efforts, the Department announced on November 8, 2008, that it would provide liquidity support to one or more conforming Asset-Based Commercial Paper (ABCP) conduit(s). The conduit(s) will purchase FFEL Program loans, providing longer-term stability to the marketplace. The Department, in turn, will serve as a potential buyer of last resort or backstop to the conduit(s).
The Department will take the additional step of using existing authority to purchase certain 2007-2008 academic year FFEL Program loans. This will be a short-term program designed to act as a mechanism to minimize disruptions in the interim until the conduit(s) are operational, or until February 28, 2009, whichever occurs first. The Department will purchase loans at 97 percent of the principal interest coincidental with the standard guaranty rate for these loans. The Department anticipates purchasing up to $500 million in loans each week, up to an aggregate of $6.5 billion during the designated time-period. While we believe the price and the types of eligible loans will not change, some other terms may need to be adjusted to ensure cost neutrality.
The current action underscores the Administration`s commitment to work on behalf of America`s students and their families to ensure that Federal funds continue to be available to help pay for higher education and better prepare our students for today`s competitive global economy.
For more information on this program, please visit:http://www.ed.gov/students/college/aid/ffelp-facts.html