Quarter: June 30, 2009
Posted Date:July 16, 2009
Subject: Federal Family Education Loan Program Special Allowance Rates for the Quarter Ending June 30, 2009
In calculating quarterly Special Allowance rates, the Department is required, under section 438(b)(2)(I)(i)(I) of the Higher Education Act (HEA), to determine “the average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates in effect for each of the days in such quarter as reported by the Federal Reserve in Publication H-15 (or its successor) for such 3-month period.”
To address the lack of a CP rate for 33 business days during the fourth quarter of 2008 and to meet its obligations under section 438 of the HEA for the quarter, the Department used, in its calculations, the “3-month nonfinancial or financial [rate] posted by CPFF . . . with surcharge” which is found under the “Commercial Paper” heading of Publication H-15. This CPFF rate was used for those business days during the fourth quarter of 2008, on or after October 27, when no “3-month financial” CP rate was published (as indicated by “n.a.” in Publication H-15).
However, in 2009 the sale of commercial paper has stabilized and the Department has reverted to the previous method of determining the average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates. For days when a rate is unavailable, the Department used the previous available rate. Therefore, for the quarter ending June 30, 2009 the average rate used to compute special allowance will be 0.41 percent.
Calculations Under the Master Participation Agreement(s) for 2008-2009 Loans
Pursuant to the Master Participation Agreement(s) under the Department’s loan participation purchase program for 2008-2009 loans, the 0.41 percent rate is also used to determine the Participant Yield (i.e., yield owed the Department). The calculated Participation Yield rate will be formally communicated to program participants via an Electronic Announcement on the Department’s Ensuring Continued Access to Student Loans website (http://www.federalstudentaid.ed.gov/ffelp).
Treasury Bill Rate
For some loans, pursuant to section 438, the Special Allowance rate is calculated by using the average of the bond equivalent rates of the ninety-one day Treasury bills as published by the Department of the Treasury. For the quarter ending June 30, 2009, the average of the rates is 0.18 percent.
Attachments A, B & C contain the quarterly special allowance rates computed pursuant to section 438. Attachment D contains the bond equivalent rates of the 91-day Treasury Bills auctioned during the quarter.
Office of the Chief Financial Officer