Guarantor Industry Insights and Voluntary Flexible Agreements

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• Guarantor Industry Insights and Voluntary
  Flexible Agreements

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Presented by

• Randy HeesackerExecutive Vice PresidentNational
  Student Loan Program (NSLP)
• Mike RothmanVice President of Finance, Admin.
  CFOEDFUND

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Federal Student Loan Reserve Fund

• net asset ownership federal government
• investments restricted to low risk instruments
• uses of funds restricted to those prescribed in
  statute and regulation
• minimum reserve requirement must maintain
  reserve fund level equal to .25 of outstanding
  guaranty obligations

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Agency Operating Fund

• net asset ownership guaranty agency
• investments at guaranty agency discretion
• uses of funds
• all costs of agency FFELP operations
• may be used to cover the obligations of the
  Federal Student Loan Reserve Fund
• provide other student financial aid activities
• minimum reserve requirement no requirement

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(No Transcript)
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Value-Added Services

• financial aid planning information
• borrower education and loan counseling
• financial management tools
• school support
• sponsor and help with FAA conferences, activities
• advocate for higher education financing issues
• key role in creating industry standards

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Questions and Discussion
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VFA Background

• Voluntary Flexible Agreements were authorized
  during 1998 Reauthorization of the Higher
  Education Act of 1965 ( 428A)
• a VFA is a contract between USDE and a guarantee
  agency which modifies some of the programmatic
  and financial terms of the typical guarantee
  agency structure

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VFA Background

• the intent is to use the VFA as an opportunity
  for innovation
• discover best practices
• enhance competencies in
• collections
• loan counseling
• delinquency prevention
• borrower communications
• treat the borrower as a customer

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Opportunity for Innovation
A pessimist sees the difficulty in every
opportunity and an optimist sees the opportunity
in every difficulty. Winston Churchill
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Opportunity for Innovation
Take a method and try it. If it fails, admit it
frankly and try another. But by all means, try
something. Franklin Roosevelt
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VFA Landscape February 2005

• approved VFAs
• CSAC/EDFUND
• American Student Assistance (ASA)
• Great Lakes
• Texas Guaranteed (TG)
• applications pending with the USED
• Colorado
• Missouri
• NSLP and EAC (South Dakota)
• ECMC
• USAF

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CSAC/EdFunds VFA

• CSAC/EDFUND VFA was published for public comment
  in November 2000
• CSAC/EDFUND VFA was signed by U.S. Education
  Secretary Rod Paige in March 2001
• a majority of CSAC/EDFUND VFA projects were
  initially implemented by October 2001

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Vision

• partner with the U.S. Department of Education to
  develop a new business model for guarantee
  agencies based on rewarding success in default
  aversion and prevention
• experiment with new default aversion and loan
  collection methodologies
• rebalance the guaranty agency revenue stream to
  reduce reliance on collection income and increase
  financial incentives for successful repayment

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Questions and Discussion
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Randy Heesacker Executive Vice President National
Student Loan Program 1300 O Street Lincoln, NE
68508 phone [phone], ext. 6638 fax
402-479-6628 e-mail randyh_at_nslp.org
www.nslp.org
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Mike Rothman Vice President of Finance, Admin.
CFO EDFUND P.O. Box 419038 Rancho Cordova, CA
95741-9038 phone [phone] fax
916-526-7331 e-mail mrothman_at_edfund.org
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• Guarantor Industry Insights and Voluntary
  Flexible Agreements