Notice to guaranty agencies of invitation to participate in Voluntary Flexible Agreements. Deadline for submission of application's is August 27, 1999.

[Federal Register: July 28, 1999 (Volume 64, Number 144)]

[Notices]               

[Page 40859-40860]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr28jy99-63]                         



[[Page 40859]]


-----------------------------------------------------------------------


DEPARTMENT OF EDUCATION



Federal Family Education Loan Program


AGENCY: Department of Education.


ACTION: Notice to guaranty agencies of invitation to participate in 

Voluntary Flexible Agreements.


-----------------------------------------------------------------------


SUMMARY: The Secretary invites Federal Family Education Loan (FFEL) 

guaranty agencies to submit an application to participate under a 

Voluntary Flexible Agreement. This notice specifies the criteria that 

the Secretary will use to select not more than six guaranty agencies 

(initial guaranty agencies) that will be invited to negotiate a 

Voluntary Flexible Agreement (VFA). Although the Higher Education Act 

limits the Secretary to entering into not more than six VFAs, a 

guaranty agency with which the Secretary has a VFA may provide the 

benefits derived through that agreement to other guaranty agencies. The 

Secretary encourages a guaranty agency submitting a VFA proposal to 

identify, in its application, other guaranty agencies that may benefit 

from the agreement. In addition, a guaranty agency is urged to consult 

with schools and lenders that participate in its program in developing 

its proposal.


DEADLINE FOR TRANSMITTAL OF APPLICATIONS: August 27, 1999.


ADDRESSES: All guaranty agencies are invited to apply. Applications may 

be sent to: Mr. George Harris, U.S. Department of Education, 400 

Maryland Avenue, SW., room 3045, ROB-3, Washington, DC 20202-5449. If 

you use a telecommunications device for the deaf (TDD) you may call the 

Federal Information Relay Service (FIRS) at 1-800-877-8339.


SUPPLEMENTARY INFORMATION:


Background


    On October 7, 1998, President Clinton signed the Higher Education 

Amendments of 1998 (Pub. L. 105-244, referred to as the ``1998 

Amendments''), which amended the Higher Education Act of 1965 (the 

``HEA''). The 1998 Amendments added a new section 428A to the HEA, 

authorizing the Secretary to enter into VFAs during fiscal years 1999, 

2000, and 2001 with up to six guaranty agencies. Beginning in fiscal 

year 2002, any guaranty agency or consortium thereof may enter into a 

VFA with the Secretary.


Scope of the VFA


    A VFA incorporates and modifies the guaranty agreements under 

sections 428 (b) and (c) of the HEA, and is intended to enhance program 

integrity, increase cost efficiencies, and improve the availability and 

delivery of student financial aid. Each VFA will be developed by the 

Secretary, in consultation with the agency, on a case-by-case basis, 

and, in accordance with the HEA, may include provisions concerning--

    <bullet> The issuance of insurance on FFEL loans;

    <bullet> Monitoring FFEL insurance commitments;

    <bullet> Default aversion activities;

    <bullet> Review of default claims from lenders;

    <bullet> Payment of default claims;

    <bullet> Collection of defaulted loans;

    <bullet> Adoption of internal systems of accounting and auditing, 

and reporting the result thereof to the Secretary in a timely manner, 

and on an accurate, and auditable basis;

    <bullet> Timely and accurate collection and reporting of such other 

data as the Secretary may require to carry out the purposes of the 

Title IV programs;

    <bullet> Monitoring schools and lenders participating in the FFEL 

Program;

    <bullet> Informational outreach to schools and students in support 

of access to higher education; and

    <bullet> Such other provisions as the Secretary may determine to be 

necessary to protect the United States from the risk of unreasonable 

loss and to promote the purposes of the FFEL Program.

    It is not the intent of the Secretary to use VFAs to redistribute 

market share among guaranty agencies or lenders. Accordingly, the 

Secretary would have serious reservations about a proposal where a 

redistribution of market share appears to be the primary goal.


Information To Be Included With the Application


    An agency wishing to enter into a VFA with the Secretary should 

submit a short (not to exceed 10 pages) written application that 

describes the substance of the proposal and addresses the following 

criteria:

    <bullet> Transferability--Explain how the agency's proposed VFA 

could be extrapolated and easily used by other FFEL participants.

    <bullet> Customer/partner benefits--Explain how the proposal would 

improve the ``system'' for delivery and servicing of loans for 

borrowers and schools. What impact would it have on delinquencies and 

defaults? Who would benefit from the proposal and how?

    <bullet> New technology--Explain if and how the proposal uses new 

technology.

    <bullet> Efficiency--Explain the impact the proposal would have on 

overall operating costs for the agency and its partners, including the 

Department. Would the proposed VFA encourage standardization? How would 

efficiency and customer satisfaction be measured?

    <bullet> Inducements waiver--Include a description of any proposed 

waiver of the prohibited inducement restrictions contained in section 

428(b)(3) of the HEA.


Other Information That the Secretary Will Consider


    Based upon an evaluation of the applications received, the 

Secretary will select the initial guaranty agencies with which to 

negotiate VFAs. Those negotiations will include:

    <bullet> The fees the Secretary will pay, in lieu of revenues that 

the agency may otherwise receive, and other funds that the agency may 

receive or retain under the VFA.

    <bullet> The use of net revenues for other activities in support of 

postsecondary education.

    <bullet> The standards by which the agency's performance of the 

agency's responsibilities under the VFA will be assessed, and the 

consequences for an agency's failure to achieve a specified level of 

performance on one or more performance standards.

    <bullet> The circumstances in which an agency's VFA may be ended in 

advance of its expiration date.

    <bullet> The involvement of other businesses, previously purchased 

or developed with reserve funds, that relate to the FFEL Program, and 

in which the Secretary permits the agency to engage.

    <bullet> The uniform ability of lenders to participate in the 

agency's program.

    <bullet> The ability for borrowers to select a lender of their 

choice, subject to the prohibitions and restrictions under the HEA.

    <bullet> Other provisions that the Secretary may determine to be 

necessary to protect the United States from the risk of unreasonable 

loss and to promote the purposes of the FFEL Program.


Outline of Planned Evaluation and Selection Process


    The following outline identifies the general sequence of activities 

and projected target dates that will be followed by the Department in 

negotiating agreements:

    <bullet> By September 10, 1999: Evaluate proposals received in 

response to this notice and invite promising candidates to make oral 

presentations to a Department of Education evaluation panel. (Guaranty 

agencies are encouraged to include school and lender representatives, 

and other parties in support of their proposals). After the oral 

presentations, up to six VFA


[[Page 40860]]


proposals will be selected for further development.

    <bullet> September 10 to October 1, 1999: Negotiate tentative 

agreements with the six initial agencies and publish the tentative 

agreements on the Department's web site for two weeks.

    <bullet> By November 1, 1999: Modify agreements as necessary to 

reflect public comments and notify congressional committees of proposed 

agreements.

    <bullet> December 1, 1999: Sign agreements.

    If the Secretary and an initial guaranty agency are unable to reach 

agreement on the terms and conditions of a VFA, the Secretary may 

select another guaranty agency with which to enter negotiations.


FOR FURTHER INFORMATION CONTACT: Mr. George Harris at the address 

listed in the ADDRESSES section of this notice. Telephone: (202) 708-

8242.

    Individuals with disabilities may obtain this document in an 

alternate format (e.g., Braille, large print, audiotape, or computer 

diskette) on request to the contact person listed in the ADDRESSES 

section of this notice.


Electronic Access to This Document


    You may view this document in text or Adobe Portable Document 

Format (PDF) on the Internet at the following sites:


http://ocfo.ed.gov/fedreg.htm

http://ifap.ed.gov/csb__html/fedlreg.htm


    To use the PDF, you must have the Adobe Acrobat Reader Program with 

Search, which is available free at the first of the previous sites. If 

you have questions about using the PDF, call the U.S. Government 

Printing Office (GPO), toll free, at 1-888-293-6498; or in the 

Washington, DC area at (202) 512-1530.


    Note: The official version of this document is the document 

published in the Federal Register. Free Internet access to the 

official edition of the Federal Register and the Code of Federal 

Regulations is available on GPO Access at: http://

www.access.gpo.gov/nara/index.html


(Catalog of Federal Domestic Assistance Number 84.032 Federal Family 

Education Loan Program)


List of Subjects in 34 CFR Part 682


    Administrative practice and procedure, Colleges and universities, 

Education, Loan programs--education, Reporting and recordkeeping 

requirements, Student aid, Vocational education.


    Dated: July 22, 1999.

Richard W. Riley,

Secretary of Education.

[FR Doc. 99-19116 Filed 7-27-99; 8:45 am]

BILLING CODE 4000-01-P