Loan Purchase and Participation Programs

This is the first in a series of articles to provide information on the loan purchase (PUT) and participation programs developed by the U.S. Department of Education (Department).

The Ensuring Continued Access to Student Loans Act (ECASLA) was signed into law on May 7, 2008. ECASLA provided the Department with new authority to purchase FFELP loans. In DCL GEN-08-08, the Department outlined two programs to address the liquidity concerns for lenders.

So what are these two programs and how do they work? The PUT Program allows the lender to sell loans directly to the Department. In the Participation Program, the Department agrees to buy participation interests in FFELP loans that are placed in a facility.

Below are highlights of the two programs:

PUT Program

Participation Program

provides liquidity after the loan is fully disbursed
lender funds and holds the loan until it is sold or PUT to the Department
guarantor holds the guarantee until the loan is sold or PUT to the Department
FFELP loans are sold or put to the Department
all FFELP lenders are eligible, regardless of size
holder, servicer, and guaranty are moved to the Department once the loan is sold or PUT to the Department

provides liquidity as disbursements are made
lender, servicer, and guarantor remain intact
lender funds first disbursement, requests the Department to participate in the loan
the Department provides funds to lender for immediate liquidity
loans must either be redeemed or PUT to the Department by September 30 of applicable year

SLGFA and its industry partners are committed to providing students, families, and schools with uninterrupted student loan services during the next academic year and years to come.

Look for additional articles in future E-Updates on how these programs will affect you and your students. Also, this topic is on the agenda for the SLGFA Annual Conference scheduled for Tuesday, March 10, 2009.