[Lender] New Legislation Mandates Federal Stafford and PLUS Default Fee

[Policy Training and Communications]

As a result of the Deficit Reduction Act of 2005, signed into law on
February 8, 2006, the Oklahoma Guaranteed Student Loan Program (OGSLP)
will be required to collect and deposit a 1.0 percent Federal Default
Fee into our Federal Reserve Fund.  To comply, OGSLP will charge the fee
for all Federal Stafford and PLUS Loans guaranteed on or after July 1,
2006.

The primary purpose of the Federal Reserve Fund is to reimburse lenders
for default claims, but also to support other important activities, such
as default prevention.  The new law prohibits the use of Federal funds
to offset the new 1.0 percent Default Fee.     

Although the new law does permit non-federal resources to be used to pay
this fee, it is important that OGSLP continue to direct the use of
non-federal resources for loan products and services, default prevention
activities, and early assistance and outreach efforts, including
financial literacy programs.  Federal budget officials and many in the
guarantor community have concluded that this Default Fee will strengthen
the Federal Reserve Fund and maintain the stability of the Federal
Family Education Loan Program.
 
Overall, the new legislation will ultimately reduce borrower fees.   The
current origination fee charged by the Department of Education will
decline from 3 percent to 2 percent beginning July 1, 2006.  Further
annual scheduled declines will result in the elimination of the
origination fee by 2010.  

OGSLP appreciates the continuing support from our financial aid
community as we continue to assist Oklahoma families in pursuit of
higher education.  If you have questions regarding this implementation,
please contact Rick Edington at redington at ogslp.org or (405) 234-4333 or
Mary Mowdy at mmowdy at ogslp.org or (405) 234-4310.         




Policy Implementation, Training & Communications
OGSLP
405.234.4440 or 800.247.0420
policytrainingcommunications at ogslp.org 

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