[Lender] 2003 Interest Rate Measure Introduced

[Edington, Rick]

Congressman Howard "Buck" McKeon, R-Calif., has introduced H.R. 2781- Access
to Student Loans Act .  The Act is designed to fix the 2003 student loan
interest rate problem by providing for a ten-year extension of the current
provisions for calculation of interest rates and lender returns.    

The current methodology, created by a bi-partisan solution on July 1, 1998,
by Rep. Kildee (D-MI) and Rep. McKeon (R-CA), allows for calculation of
student interest rates based on the 91-Day T-bill rate plus 1.74% for
in-school periods and 2.34% respectively.  Lender rates are based on the
90-day Commercial Paper rate plus 1.74% for in-school periods and 2.34% for
repayment periods.  Higher Education Associations have praised this method
for resulting in continued lender access and the lowest borrower interest
rates in the history of the program.   

The methodology currently set to be implemented in July 2003, would entail a
calculation based on "securities of a comparable maturity plus one percent."
Lenders have argued strongly that returns from this method would not be
sufficient to secure financing for FFELP loans.  This makes support for HR
2781 or any comparable legislation vitally important to the health and
longevity of our program!  

At our last OLAC meeting, we discussed the need to write to our
congressional representatives encouraging them to support any measures
designed to fix the 2003 interest rate issue.  I have had a couple of
volunteers to help draft such a letter.  This new measure creates an even
better opportunity to ask for support of something tangible, HR 2781.
Please let me know if you are interested in participating in a short term
OLAC workgroup to draft the letter.  Thanks!  Rick  

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Rick Edington, Associate Director                                        
Oklahoma Guaranteed Student Loan Program
Claims, Lender & Accounting Services                                      
redington at ogslp.org         
(800) 247-0420; (405) 234-4333
Fax:  (405) 234-4391

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