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NASSGAP Washington Update May 27, 2008 Ron Gambill Chairman, Edsouth

NASSGAP Washington Update May 27, 2008 Ron Gambill Chairman, Edsouth. Financial Crisis Impact How We Got Here State and Local Governments Non-Profit and State Secondary Markets Students and Schools Ensuring Continued Access to Student Loans Act Reauthorization.

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NASSGAP Washington Update May 27, 2008 Ron Gambill Chairman, Edsouth

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  1. NASSGAP Washington Update May 27, 2008 Ron Gambill Chairman, Edsouth

  2. Financial Crisis Impact How We Got Here State and Local Governments Non-Profit and State Secondary Markets Students and Schools Ensuring Continued Access to Student Loans Act Reauthorization

  3. Financial Crisis Impact How We Got Here • Higher Education Reconciliation Act (HERA) • College Cost Reduction And Access Act (CCRAA) • Credit Market Crisis

  4. Financial Crisis Impact Higher Education Reconciliation Act (HERA) • Cuts $18 billion from FFELP • Increased annual loan limits for 1st and 2nd year undergrads and unsubsidized limits for grad/prof • Reduced origination fees on Stafford Loans • Reduced lender insurance from 98% to 97% • Reduced guaranty agency revenue

  5. Financial Crisis Impact College Cost Reduction and Access Act (CCRAA) • Cuts $20 billion from FFELP • Reduced special allowance on new loans disbursed on or after 10-1-2007 • Increased lender paid origination fee • Decreased interest rates on new undergraduate subsidized Stafford loans for 5 years • Further reduction in guaranty agency revenue • Created a PLUS auction program • Expanded need analysis

  6. Financial Crisis Impact Credit Market Crisis • Subprime mortgage issues affect student loans • Loss of liquidity and confidence • Not a credit quality issue • Auction rate bond market devastated

  7. Financial Crisis Impact State and Local Governments • Many municipal bonds are auction rate • Maximum rates impact state revenue • Higher education facility projects by state • Local municipal bond projects

  8. Financial Crisis Impact Non-Profit and State Secondary Markets • Maximum bond rates • Limits by rating agencies on making or purchasing loans • FFELP and private loans affected • Loss of credit lines • Recycling limitations • No Liquidity in markets

  9. Financial Crisis Impact Students and Schools • FFELP provided $60 billion for college costs • Fall processing started • Loss of borrower benefits • Selectivity of schools served due to costs • Consolidation loan program moves to FDSLP • Reduced availability of private loans • Parents ability to use home equity • Loss of need-based scholarships from school as lender

  10. Financial Crisis Impact Ensuring Continued Access to Student Loans Act • Altered repayment and eligibility terms for PLUS loans • Increased annual and aggregate loan limits for unsub loans • Department of Education given temporary authority to purchase FFELP loans from private lenders • Made changes to the lender-of-last-resort program for guaranty agencies

  11. Reauthorization Integrity and Accountability for Student Loan Programs • Requires institutions and lenders to adopt strict codes of conduct • Requires full information about borrowing options, repayment, differences between federal and private loans, and promotes financial literacy • Limits aggressive lender marketing

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