Voluntary Flexible Agreements

On Oct. 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 (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.

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.

On July 28, 1999, the Secretary published a Notice in the Federal Register (64 FR 40859) inviting guaranty agencies participating in the Federal Family Education Loan (FFEL) Program to apply to participate in the FFEL Program under a Voluntary Flexible Agreement (VFA) as authorized by Section 428A of the HEA.

A notice published in the Federal Register  (65 FR 4812) on Feb. 1, 2000, announced the guaranty agencies that were selected as possible participants in VFAs under Section 428A of the HEA.

Nine guaranty agencies submitted timely VFA applications. Eight of the agencies made oral presentations to the Secretary's representatives during September and October. The Secretary evaluated the information provided by the nine agencies in their applications and oral presentations and selected six agencies with which to try to negotiate a VFA. The selected agencies were identified in this notice.

During 2001, the Department entered into agreements with four guaranty agencies (ASA, CSAC, GLHEAC, TGSLC). CSLP entered into a VFA in 2004. The last of those VFAs expired on Sept. 30, 2008.

A notice was published in the Federal Register (76 FR 31312) on May 31, 2011, inviting guaranty agencies with agreements to participate in the FFEL Program to submit proposals to enter into a VFA with the Secretary, as authorized by section 428A of the HEA.

The intent of this invitation was for the Secretary to receive proposals from guaranty agencies or from teams of guaranty agencies, that would lead to the development of VFAs that would enhance the integrity and stability of the FFEL Program, improve services to students, schools, and lenders, and use Federal resources more cost-effectively and efficiently. The Secretary was particularly interested in receiving proposals that eliminated poorly aligned incentives in the current guaranty agency structure as well as the conflicts of interest that may potentially exist when a guaranty agency was responsible for both default prevention and default collections.

22 separate VFA proposals were received by the Aug. 1, 2011 submission deadline date.

The Department did not enter into any VFA agreements based on the May 31, 2011, Federal Register Notice.

A notice was published in the Federal Register (78 FR 49486) on Aug. 14, 2013, inviting guaranty agencies to submit Letters of Request to the Secretary for a VFA as authorized by Section 428A of the HEA. The deadline for a guaranty agency to submit a Letter of Request for a VFA was Sept. 13, 2013.

The Secretary intended to enter into VFAs with a small number of guaranty agencies (likely three or fewer) that would assume responsibility for all or some of the defaulted and non-defaulted FFEL Program loans transferred to it by the Secretary from a guaranty agency whose HEA agreements with the Secretary were terminated. Those agencies would continue to operate under their existing guaranty agency agreements, established under the HEA, for their own FFEL Program Loan portfolios.

The Department did not enter into any VFA agreements based on the Aug. 14, 2013, Federal Register Notice.

On July 30, 2024, the secretary invited guaranty agencies with agreements to participate in the Federal Family Education Loan (FFEL) Program to submit interest in entering into a Voluntary Flexible Agreement (VFA) with the secretary, as authorized by the Higher Education Act of 1965, as amended (HEA). Guaranty agencies who agree to a VFA through a separate process delineated under the law operate under the requirements of the VFA in lieu of the guaranty agency agreements established under the HEA. The secretary intended to enter into VFAs with guaranty agencies to support vulnerable borrowers in resolving their delinquent or defaulted loans quickly, maximize long-term repayment success of borrowers exiting default with immediate enrollment in Income-Driven Repayment plans available under the William D. Ford Federal Direct Loan Program, and ensure stability in the FFEL Program as the number of outstanding loans continues to decline over the coming years.

All 12 guaranty agencies responded to express interest in the Federal Register notice and all signed VFAs that became effective Oct. 1, 2024. The agreements, which covered the two-year period through Sept. 30, 2026, were amended and restated effective Aug. 1, 2026.

As of Oct. 1, 2024, the U.S. Department of Education had the following VFAs in place.