NASFAA President and CEO Dr. Philip Day sent a letter to U.S. Department of Education Secretary Margaret Spellings urging her to rethink recent guidance by the Department on the lender of last resort program. In the letter, Day notes that the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA) allows for institution-wide LLR certification to designate entire student populations as eligible for LLR. This would take the burden of demonstrating eligibility for the program off of students and shift it to schools and guarantors. However, the guidance for an institution-wide designation is so complicated and the loan denial percentage standard is so extraordinarily strict, that schools contemplating the use of LLR will likely abandon the effort and revert back to a borrower-by-borrower loan denial process.
"It appears students are not in any better position than they were in before H.R. 5715’s implementation," Day writes.
Day recommends three steps the Department should take to ensure that LLR effectively serves the needs of students.
- Lower the threshold used to determine institution-wide LLR certification below the Department’s current 80 percent requirement.
- Provide schools with a formal response about their institution-wide LLR designation within five business days and have funds ready for disbursement within 10 business days from the time the school turns in all of its documentation.
- Provide clear guidance on the type of documentation that will be required to prove that a sufficient number of students have been unable to secure a traditional FFELP loan and trigger eligibility for LLR.
Day writes, "As you know, the schools most likely to be affected by lender shortages are the ones that serve disproportionate numbers of low-income, minority, and first-generation students. We have a shared responsibility to ensure those students are not locked out of our higher education facilities."
He further explains, "It is our hope that no students will need to rely on LLR. But schools need this information now so they are not left scrambling to help students if the bottom falls out of the student loan market or if the Department’s liquidity plan falls short of meeting the needs of lenders and the Direct Loan program is unable to absorb greater than expected loan volume."
The complete letter has been posted to the NASFAA Web site.
Posted 06-23/08 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
