Summary: Provisions of the Higher Education Amendments of 1998 (Pub.L. 105-244) that relate to the Loan Processing and Issuance Fee paid to guaranty agencies in the Federal Family Education Loan Program
SUBJECT: Provisions of the Higher Education Amendments of 1998 (Pub. L. 105-244) that relate to the Loan Processing and Issuance Fee paid to guaranty agencies in the Federal Family Education Loan Program.
REFERENCE: Section 428 (f) of the Higher Education Act
Dear Guaranty Agency Director:
The Higher Education Act of 1965 (HEA) as amended by the Higher Education Amendments of 1998
(Pub. L. 105-244) authorizes the payment toguaranty agencies of Loan Processing and Issuance Fee (Processing Fee) equal to 0.65 percent of the total principal amount of loans originated during fiscal years beginningon or after October 1, 1998 and before October 1, 2003 on which the agency has issued insurance. Beginning with fiscal year 2004, the fee drops to 0.40 percent of the principal amount of theloans. Due to this change, the U. S. Department of Education (Department) hasreevaluated the plannedFY 1999 Administrative Cost Allowance (ACA) Pilot. The Department has decidedthat the FY 1999 ACA Pilot, as originally planned, will not be implemented. The Secretary has decided to calculate this fee based on disbursements (Amount of Disbursements) reported to the National Student Loan Data System (NSLDS).
Beginning in Fiscal Year 1999, for the first three quarters the Department will pay guaranty agencies the Processing Fee based on net guarantees reported (Amount of Guarantees minus Amount of All Cancellations) to NSLDS. The fourth quarter (ending September 30, 1999) will be used to reconcile the Processing Fee paid in the first three quarters to the amount of disbursements reported to NSLDS for loans guaranteed in FY 1999. Therefore, the fourth quarters payment will equal 0.65 percent times the total amount of disbursements reported to NSLDS for loans guaranteed in FY 1999 minus the sum of the payments advanced to the guaranty agency during the first three quarters.
Should you have further questions regarding this letter, please contact Frank Ramos, of the Loans Financial Management Division, at (202) 205-3799.
Linda L. Paulsen, Director
Accounting and Financial Management