Summary: Implementation of Blanket Certificate of Loan Guaranty Pilot Program
August 2, 1999
SUBJECT: Implementation of Blanket Certificate of Loan Guaranty Pilot Program
REFERENCE: Section 428(n) of the HEA.
Section 428(n) of the Higher Education Act of 1965, as amended, authorizes a pilot program for fiscal years 1999 and 2000 in which the Secretary may permit a limited number of guaranty agencies to offer blanket certificates of guaranty in the Federal Family Education Loan (FFEL) Program. This letter provides guidance to guaranty agencies on the process for requesting participation in the pilot program during fiscal years 1999 and 2000.
Guaranty agencies interested in participating in the pilot program must submit a request that contains the following information:
1. A description of the proposed blanket certificate program;
2. The anticipated benefits to be derived under the blanket certificate program;
3. The guaranty agencys plans to monitor participation in the program; and
4. The guaranty agencys plans to analyze the impact of its blanket certificate program in terms of program efficiency and integrity.
Each guaranty agency approved for participation in the blanket certificate program will have substantial discretion and flexibility in designing and implementing its program. The Department will carefully evaluate the guaranty agencies that request participation in the pilot program to ensure that their participation will not increase the Federal financial exposure. Thus, the number of loans that are reported on the agencys ED Form 1130 as compared to the number of loans contained in the National Student Loan Data System (NSLDS) for the agency will be considered in reviewing the requests. A request to participate in the pilot program will not be approved if the number contained in NSLDS is substantially lower than the number reported on the agencys ED Form 1130.
Blanket certificates of guaranty allow a lender to disburse loan proceeds prior to submitting data concerning the loan to the guaranty agency. The Secretary anticipates that, subsequent to the loan being disbursed, information may become available that indicates the borrower was not eligible for the loan. The rules described in 34 C.F.R. 682.412 address the lenders required actions in this situation. Provided the lender did not know or have reason to know that the borrower did not qualify for the loan, reinsurance coverage will remain in effect on the loan.
Requests and supporting documentation to participate in the blanket certificate program may be sent to Katrina Turner, U.S. Department of Education; 7th and D Sts. S.W., (Rob 3, Room 4616); Washington, D.C. 20202. If you have questions, she may be reached at area code 202-401-2280.
Chief Operating Officer