Sallie Mae 2005 Annual Report Download - page 199

A-1
APPENDIX A
FEDERAL FAMILY EDUCATION LOAN PROGRAM
General
The Federal Family Education Loan Program, known as FFELP, under Title IV of the Higher
Education Act, provides for loans to students who are enrolled in eligible institutions, or to parents of
dependent students, to finance their educational costs. As further described below, payment of principal
and interest on the student loans is guaranteed by a state or not-for-profit guarantee agency against:
•default of the borrower;
•the death, bankruptcy or permanent, total disability of the borrower;
•closing of the borrower’s school prior to the end of the academic period;
•false certification by the borrower’s school of his eligibility for the loan; and
•an unpaid school refund.
Subject to conditions, a program of federal reinsurance under the Higher Education Act entitles
guarantee agencies to reimbursement from the Department of Education for between 75 percent and 100
percent of the amount of each guarantee payment. In addition to the guarantee, the holder of student
loans is entitled to receive interest subsidy payments and special allowance payments from the U.S.
Department of Education on eligible student loans. Special allowance payments raise the yield to student
loan lenders when the statutory borrower interest rate is below an indexed market value.
Four types of FFELP student loans are currently authorized under the Higher Education Act:
•Subsidized Federal Stafford Loans to students who demonstrate requisite financial need;
•Unsubsidized Federal Stafford Loans to students who either do not demonstrate financial need or
require additional loans to supplement their Subsidized Stafford Loans;
•Federal PLUS Loans to graduate or professional students (effective July 1, 2006) or parents of
dependent students whose estimated costs of attending school exceed other available financial aid;
and
•Consolidation Loans, which consolidate into a single loan a borrower’s obligations under various
federally authorized student loan programs.
Before July 1, 1994, the Higher Education Act also authorized loans called “Supplemental Loans to
Students” or “SLS Loans” to independent students and, under some circumstances, dependent
undergraduate students, to supplement their Subsidized Stafford Loans. The SLS program was replaced by
the Unsubsidized Stafford Loan program.
This appendix describes or summarizes the material provisions of Title IV of the Higher Education
Act, the FFELP and related statutes and regulations. It, however, is not complete and is qualified in its
entirety by reference to each actual statute and regulation. Both the Higher Education Act and the related
regulations have been the subject of extensive amendments over the years. The Company cannot predict
whether future amendments or modifications might materially change any of the programs described in
this appendix or the statutes and regulations that implement them.