Sallie Mae 2011 Annual Report Download - page 203

APPENDIX A
FEDERAL FAMILY EDUCATION LOAN PROGRAM (“FFELP”)
Note: On March 30, 2010, the President signed into law the Health Care and Education Reconciliation Act of
2010 (“HCERA”) which terminated the FFELP as of July 1, 2010. This appendix presents an abbreviated
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 or the credit support related thereto. For a more
fulsome discussion and history of some of the topics described herein, see Appendix A to our Annual Report on
Form 10-K for the year ended December 31, 2010 (the “2010 Form 10-K”).
This appendix describes or summarizes the material provisions of Title IV of the Higher Education Act
(“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 has 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.
General
The FFELP, under Title IV of HEA, provided for loans to students who were enrolled in eligible institutions,
or to parents of dependent students who were enrolled in eligible institutions, to finance their educational costs.
Payment of principal and interest on the student loans to the holders of the loans is insured by a state or not-for-
profit guaranty 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.
Claims are paid from federal assets, known as “federal student loan reserve funds,” which are maintained and
administered by state and not-for-profit guaranty agencies. In addition the holders of student loans are 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 were authorized under the HEA:
• Subsidized Federal Stafford Loans to students who demonstrated requisite financial need;
• Unsubsidized Federal Stafford Loans to students who either did 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.
Legislative Matters
The federal student loan programs are subject to frequent statutory and regulatory changes. The most
significant change to FFELP was with the enactment of the HCERA, which terminated FFELP as of July 1, 2010.
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