Sallie Mae 2008 Annual Report Download - page 219

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 (“HEA”), 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 student’s school prior to the end of the academic period;
• false certification of the borrower’s eligibility for the loan by the school; and
• an unpaid school refund.
Subject to conditions, a program of federal reinsurance under the HEA entitles guarantee agencies to
reimbursement from the U.S. Department of Education (“ED”) 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 ED 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 HEA:
• 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
• FFELP Consolidation Loans, which consolidate into a single loan a borrower’s obligations under
various federally authorized student loan programs.
Before July 1, 1994, the HEA 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 HEA, 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 HEA 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.
Legislative Matters
The FFELP is subject to comprehensive reauthorization at least every 5 years and to frequent statutory
and regulatory changes. The most recent reauthorization was the Higher Education Opportunity Act of 2008
(“HEOA 2008”), Public Law 110-315, which the President signed into law August 14, 2008.
Other recent amendments since the program was previously reauthorized by the Higher Education
Reconciliation Act of 2005 (“HERA 2005”), which was signed into law February 8, 2006, as part of the
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