Sallie Mae 2010 Annual Report Download - page 206

APPENDIX A
FEDERAL FAMILY EDUCATION LOAN PROGRAM (“FFELP”)
Note: On March 30, 2010, President Obama signed into law the Health Care and Education Reconcil-
iation Act of 2010 (“HCERA”) which prohibits new loan originations under the FFELP as of July 1, 2010.
This appendix presents a summary of the program prior to the termination date. The new law does not alter or
affect the terms and conditions of existing FFELP Loans made before July 1, 2010.
General
The 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 who are enrolled in eligible institutions, 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 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. We 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.
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