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THE GUARANTOR FLOW

THE GUARANTOR FLOW. NASSGAP FALL CONFERENCE October 7, 2008 New Orleans, LA Melanie Amrhein Louisiana Office of Student Financial Assistance. WHAT IS A GUARANTOR?. One size does NOT fit all State agency Quasi- State agency Private not for profit Dual Agencies Lending Authority

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THE GUARANTOR FLOW

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  1. THE GUARANTOR FLOW NASSGAP FALL CONFERENCE October 7, 2008 New Orleans, LA Melanie Amrhein Louisiana Office of Student Financial Assistance

  2. WHAT IS A GUARANTOR? • One size does NOT fit all • State agency • Quasi- State agency • Private not for profit • Dual Agencies • Lending Authority • Secondary Market • Servicer • Disbursing Agents

  3. Louisiana Office of Student Financial Assistance • One of 35 Guarantors in the US • One of 21 Guarantors that also functions as the state scholarship/grant administrator • One of eight (8) Guarantors that administers the state scholarship/grant programs AND the state 529 college savings plan.

  4. What Do Guarantors Do? • Partner with lenders to originate (guarantee) loans under the Federal Family Education Loan Program. • Provide Insurance to lenders through partnership with the USDE that removes the risk of lending to borrowers with little or no credit history. • Assist lenders when borrowers become delinquent to bring them back to a non-delinquent status. • Advise borrowers on options such as deferments, forbearance, consolidation and payment plans. • Perform lender and school audits for compliance

  5. What Do Guarantors Do? • Pay default claims to lenders when borrower has become 270 days delinquent. • Utilize various techniques in collecting defaulted student loans • Regular repayment plans • Rehabilitation and Consolidation • Administrative Wage Garnishment • Federal Tax Offsets • Outside Collection Agencies

  6. Is that all Guarantors Do? Are you kidding me? No way! The College Access Initiative, included in the Deficit Reduction Act of 2005, formalized a foundational role of guaranty agencies in promoting access to postsecondary education and requires the development of a comprehensive listing of the postsecondary education opportunities, programs, publications and other services available in their designated states

  7. Is THAT All?Nope! Outreach services to students and families Provide Financial Literacy Education Training for school personnel Training to Lenders Provide Debt Management Training Provide Entrance/Exit Counseling College and Career Planning

  8. Federal Family Education Loan Program (FFELP) Guaranty Agency Cash Flow Sources Fund Uses Federal Reimbursement Claims Payment Federal Default Fee Federal Fund Collection Complement Default Aversion Fee Interest Earnings Default Aversion Fee (1%) Loan Processing & Issuance Fee (.40%) Agency Operating Fund Operating Expenses Account Maintenance Fee (.10%) Collections ((16%)* Surplus Funds to State Aid Programs *10/1/07 Agency share of collections was reduced in Federal Budget Reconciliation Act of 2007 from 23% to 16%. Interest Earnings Other

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