Sallie Mae 2007 Annual Report Download - page 210
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Special Allowance Payments
The HEA provides for quarterly special allowance payments to be made by ED to holders of student
loans to the extent necessary to ensure that they receive at least specified market interest rates of return. The
rates for special allowance payments depend on formulas that vary according to the type of loan, the date the
loan was made and the type of funds, tax-exempt or taxable, used to finance the loan. ED makes a special
allowance payment for each calendar quarter.
The special allowance payment equals the average unpaid principal balance, including interest which has
been capitalized, of all eligible loans held by a holder during the quarterly period multiplied by the special
allowance percentage.
For student loans disbursed before January 1, 2000, the special allowance percentage is computed by:
(1) determining the average of the bond equivalent rates of 91-day Treasury bills auctioned for that
quarter;
(2) subtracting the applicable borrower interest rate;
(3) adding the applicable special allowance margin described in the table below; and
(4) dividing the resultant percentage by 4.
If the result is negative, the special allowance payment is zero.
Date of First Disbursement Special Allowance Margin
Before 10/17/86 ............................ 3.50%
From 10/17/86 through 09/30/92 . ............... 3.25%
From 10/01/92 through 06/30/95 . ............... 3.10%
From 07/01/95 through 06/30/98 . ............... 2.50% for Stafford Loans that are in In-School, Grace
or Deferment 3.10% for Stafford Loans that are in
Repayment and all other loans
From 07/01/98 through 12/31/99 . ............... 2.20% for Stafford Loans that are in In-School, Grace
or Deferment 2.80% for Stafford Loans that are in
Repayment 3.10% for PLUS, SLS and FFELP
Consolidation Loans
For student loans disbursed on or after January 1, 2000, the special allowance percentage is computed by:
(1) determining the average of the bond equivalent rates of 3-month commercial paper (financial)
rates quoted for that quarter;
(2) subtracting the applicable borrower interest rate;
(3) adding the applicable special allowance margin described in the table below; and
(4) dividing the resultant percentage by 4.
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