Notice2024-16760
Notice Inviting Guaranty Agencies To Submit Requests To Participate in a Voluntary Flexible Agreement
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Published
July 30, 2024
Issuing agencies
Education Department
Abstract
The Secretary invites 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 ultimately agree to the VFA through a separate process will operate under the requirements of the VFA in lieu of the guaranty agency agreements established under the HEA. The Secretary intends 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 (IDR) plans available under the Direct Loan program, and ensure stability in the FFEL Program as the number of outstanding loans continues to decline over the coming years.
Full Text
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<title>Federal Register, Volume 89 Issue 146 (Tuesday, July 30, 2024)</title>
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[Federal Register Volume 89, Number 146 (Tuesday, July 30, 2024)]
[Notices]
[Pages 61102-61103]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16760]
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DEPARTMENT OF EDUCATION
Notice Inviting Guaranty Agencies To Submit Requests To
Participate in a Voluntary Flexible Agreement
AGENCY: Office of the Under Secretary, U.S. Department of Education.
ACTION: Notice.
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SUMMARY: The Secretary invites 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 ultimately agree to the VFA
through a separate process will operate under the requirements of the
VFA in lieu of the guaranty agency agreements established under the
HEA. The Secretary intends 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
(IDR) plans available under the Direct Loan program, and ensure
stability in the FFEL Program as the number of outstanding loans
continues to decline over the coming years.
DATES: Deadline for submission of interest in a VFA: August 20, 2024.
ADDRESSES: An indication of interest in a VFA must be submitted via
email to <a href="/cdn-cgi/l/email-protection#207666617445414d6045440e474f56"><span class="__cf_email__" data-cfemail="5e08181f0a3b3f331e3b3a70393128">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Jerry Wallace, U.S. Department of
Education. Telephone: (202) 453-6605. Email: <a href="/cdn-cgi/l/email-protection#e58f8097979ccb92848989848680a58081cb828a93"><span class="__cf_email__" data-cfemail="bfd5dacdcdc691c8ded3d3dedcdaffdadb91d8d0c9">[email protected]</span></a>.
If you are deaf, hard of hearing, or have a speech disability and
wish to access telecommunications relay services, please dial 7-1-1.
SUPPLEMENTARY INFORMATION:
Background
Under section 428(b) and (c) of the HEA, guaranty agencies perform
certain roles in the FFEL Program pursuant to agreements with the
Secretary. Section 428A of the HEA authorizes the Secretary to enter
into VFAs with guaranty agencies in lieu of the agreements entered into
under section 428(b) and (c) of the HEA. This authority allows the
Secretary to work with guaranty agencies to develop, utilize, and
evaluate alternate ways of ensuring that the responsibilities of the
guaranty agencies are fulfilled in the most cost-effective and
efficient manner possible. A VFA may provide that the guaranty agency
will earn revenues and fees in a manner different than that provided
under the regular guaranty agency agreements under section 428(b) and
(c) of the HEA.
As part of a VFA with a guaranty agency, the Secretary may waive or
modify statutory and regulatory requirements as necessary, except that
the Secretary may not waive any statutory requirements related to the
terms and conditions attached to student loans or to default claim
amounts paid to FFEL Program lenders.
A VFA will also specify the circumstances under which it may be
terminated by the Secretary in advance of any established termination
date and any other provisions the Secretary believes are necessary to
protect the United States from unreasonable risk of loss.
Reasons for This Expression of Interest
It has been 14 years since the last new FFEL Program loan was made.
As the number of outstanding FFEL loans continues to steadily decline,
the revenues available to guaranty agencies to fund operational budgets
are also decreasing. The Secretary expects that over the next several
years many guaranty agencies may struggle to continue providing stable
services for borrowers, lenders, and the Department under the existing
compensation structure. The continued decline of the number of
outstanding FFEL loans and the loss of associated revenue means it will
likely be harder for guaranty agencies to maintain the systems and
staff needed to provide quality services for vulnerable borrowers,
which creates an unacceptable risk of loss to the Department and
Federal taxpayers.
The Secretary believes that a structured and predictable
compensation model for guaranty agencies will help protect the
integrity of the outstanding FFEL Program loan portfolio as the number
of loans and guaranty agencies continues to decline. This model
presents an opportunity for the Department and guaranty agencies to
better serve borrowers by aligning financial incentives with helping
borrowers avoid or exit student loan default. The model will also
leverage operational procedures established during the Fresh Start
period that provide borrowers efficient and direct access to more
affordable IDR plans, which feature enhanced borrower benefits and will
best support their long-term repayment success. Additionally,
transferring more defaulted FFEL loans to the Department that are not
otherwise resolved will assist borrowers and provide long-term benefits
to the Department by improving the opportunities for resolution of the
loan.
Scope of the VFAs
The Department expects that VFAs entered into will address the
compensation structures, outreach activities, loan transfer schedules,
and future planning for guaranty agencies.
Compensation
A VFA may provide that a guaranty agency will earn revenues and
fees differently than it would under agreements pursuant to section
428(b) and (c) of the HEA. The Department expects that the revised
schedule of revenues and fees will be common to all VFA-participating
guaranty agencies.
The Department expects that the VFAs will include a replacement for
all compensation paid to guaranty agencies, with the exception of the
account maintenance fee and reimbursement into the Federal fund for
claims paid to lenders. The replaced compensation includes the default
aversion fee, refunds of the default aversion fee, and revenues from
collections on defaulted loans usually charged to borrowers in the form
of fees. Instead of this revenue, guaranty agencies would receive two
forms of compensation:
(1) A special account maintenance fee (SAMF). The SAMF would be
calculated based on the guaranty agency's outstanding net guarantees
using the same formula as the Account Maintenance Fee (AMF) as defined
in section 428(h) of the HEA and 34 CFR 682.404(h). It would be paid in
equal quarterly installments.
(2) A successful resolution fee (SRF). This fee would be paid when
a borrower with at least one loan in default at a guaranty agency
successfully consolidates all their defaulted loans at that guaranty
agency into the Direct Loan program. This fee would be the lesser of a
set dollar amount or a percentage of the amount of the outstanding
loans being resolved. This fee would be paid quarterly.
The Secretary expects that increasing the number of defaulted loans
that are quickly returned to good standing or otherwise transferred to
the Department will result in financial savings for the Department and
better long-term performance for borrowers. Guaranty agencies will have
guarantees of minimum quarterly income through the SAMF to ensure
stability in the program and strong incentives to assist defaulted
borrowers quickly to earn an SRF payment.
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Outreach Activities
The Department expects that, in addition to continuing their
current default aversion assistance work, under a VFA, guaranty
agencies will focus their efforts on borrower outreach and counseling,
with a focus on options that will help borrowers return to good
standing and access repayment programs and benefits that will promote
successful long-term repayment on their loans. This will also include
targeted outreach campaigns mutually agreed upon with the Department.
Loan Transfers
To ensure that the guaranty agency can focus its efforts on loan
counseling and consolidation, under the VFA guaranty agencies will
adopt a schedule for transferring defaulted loans to the Department.
The oldest loans will be transferred to the Department immediately
after the effective date of the VFA, while newer defaults will be
transferred after a set period if they are not otherwise successfully
resolved, such as through consolidation, discharge, or pay off.
Future Planning
To ensure long-term success and stability for the FFEL Program, all
guaranty agencies that enter into a VFA with the Department will map
their loan data and systems to at least one other guaranty agency
acceptable to the Department. The goal is to ensure that a successor
agency is ready to perform the agency's functions if the agency
participating in the VFA becomes unable to meet its responsibilities.
Each guaranty agency will also agree to keep the Department apprised of
any significant changes in personnel or finances so that if a guaranty
agency chooses to exit the program there is minimal disruption for
borrowers and long-term loan servicing activities.
The terms of any VFA will be subject to applicable Federal, State,
Local, and U.S. Territory laws and regulations, including any changes
in the HEA (or other applicable laws) and the Department's regulations,
unless waived or modified by the Secretary, and to any applicable
administrative actions of the Secretary.
Duration of the VFA
The Secretary expects that the VFAs will have a term of two years,
subject to year-to-year renewals if the parties agree. The VFA will
also provide that either party may terminate the agreement at any time
by providing written notice to the other party, with provisions for
sufficient notice before the effective date of termination.
Agency Demonstrated Performance
The Secretary will select the agencies with which to enter into a
VFA by identifying agencies that d have the managerial and operational
capacity to assume the responsibilities of the VFA. The Department
expects to enter into VFAs with all or the vast majority of guaranty
agencies.
A guaranty agency that ultimately enters into a VFA with the
Secretary must have the capability to:
<bullet> Conduct meaningful high-touch borrower outreach.
<bullet> Successfully transfer defaulted loans to the Secretary
within set periods.
<bullet> Map systems to a potential successor guaranty agency.
Secretary's Oversight
The Secretary will conduct oversight and monitoring of the
activities of guaranty agencies participating in the FFEL Program under
a VFA to assess each agency's continuing financial viability and
operational capacity to properly perform all FFEL Program guaranty
agency responsibilities in accordance with the VFA. The Secretary will
also conduct oversight and monitoring of the borrower outreach work and
the transfer of defaulted loans. This oversight will include, at a
minimum, requirements that the guaranty agency submit operational
status reports, financial reports, and performance metrics on its loan
portfolio.
Letters of Request for a VFA
Guaranty agencies with agreements with the Secretary under section
428(b) and (c) of the HEA that wish to enter into a VFA under the terms
outlined in this notice must submit an email indicating interest to
<a href="/cdn-cgi/l/email-protection#207666617445414d6045440e474f56"><span class="__cf_email__" data-cfemail="a6f0e0e7f2c3c7cbe6c3c288c1c9d0">[email protected]</span></a> by the deadline in the DATES section of this notice.
The expression of interest notice must be submitted by the chief
executive officer of the guaranty agency. The Secretary may request
that the agency provide supporting or other documentation to assist the
Secretary in making a decision regarding the agency's possible
participation in a VFA.
Accessible Format: On request to the program contact person listed
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities
can obtain this document in an accessible format. The Department will
provide the requestor with an accessible format that may include Rich
Text Format (RTF) or text format (txt), a thumb drive, an MP3 file,
braille, large print, audiotape, compact disc, or other accessible
format.
Electronic Access to This Document: The official version of this
document is the document published in the Federal Register. You may
access the official edition of the Federal Register and the Code of
Federal Regulations at <a href="http://www.govinfo.gov">www.govinfo.gov</a>. At this site you can view this
document, as well as all other Department documents published in the
Federal Register, in text or Adobe Portable Document Format (PDF). To
use PDF, you must have Adobe Acrobat Reader, which is available free at
the site.
You also may access Department documents published in the Federal
Register by using the article search feature at
<a href="http://www.federalregister.gov">www.federalregister.gov</a>. Specifically, through the advanced search
feature at this site, you can limit your search to documents published
by the Department.
Program Authority: 20 U.S.C. 1078-1.
James Kvaal,
Under Secretary, Office of the Under Secretary.
[FR Doc. 2024-16760 Filed 7-29-24; 8:45 am]
BILLING CODE 4000-01-P
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