Summary: SFA RELEASES FIRST VFA PROPOSAL
Author: SFA Communications Team
Posted on: August 28, 2000
August 22, 2000 For more info: Cameron Ishaq
SFA Financial Partners Channel
Student Financial Assistance (SFA) of the U.S. Department of Education today released for public comment the first of six proposed Voluntary Flexible Agreements (VFAs) intended as innovative pilot projects for improving the delivery of student aid.
The first proposal to move forward is from Great Lakes Higher Education Guaranty Corporation of Wisconsin. A draft of the proposed agreement is available online at http://sfa-vfa.ed.gov. The community is invited to present comment via the feedback function on the Website, and all public comment is due by September 5, 2000.
The proposal would move Great Lakes closer to a "performance based" contract model. For example:
· Great Lakes would implement a true fee-for-service payment structure, which could become a model for future guaranty agencies.
· The company would return all federal funds to the U.S. Treasury and receive a single fee for all the guaranty agency services delivered - rather than the current guaranty agency model of drawing fees down from the federal fund.
· The companys fee would increase or decrease based on how well it prevents defaults on student loans and how well it "cures" loans already in default.
SFA received VFA proposals from Great Lakes Higher Education Guaranty Corporation, American Student Assistance, the California Student Aid Commission, the Colorado Student Loan Program, the Pennsylvania Higher Education Assistance Agency, and Texas Guaranteed Student Loan Corporation. Other VFA proposals are expected to be released this fall.
These flexible agreements were made possible by amendments to the Higher Education Act of 1998. The purpose is to pilot and test creative, innovative lending community approaches to the delivery of student aid.