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<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2> FYI:
THIS IS ALL MY OWN PERSONAL OPINION. </FONT></SPAN></DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2>First, let me say up
front that I think the entire Zero Fee feeding frenzy that started in the last
year is a blatant ploy by the big players in the market to squeeze out the
small ones. Whatever it may be gaining our students in the short run
in cash flow, it will have an impact on the structure of this industry for
many years to come. That restructuring may be
financially beneficial to the shareholders in some corporations, but I
don't think it is a good thing long term for our students.
</FONT></SPAN></DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2>As Mary Mowdy and
Larry Hollingsworth clarified, unlike past years when guarantors could
"waive" the insurance fee if they could afford to forego the revenue, the new
"default aversion fee" (lovingly called the "D" fee in the industry) is required
to be deposited in the federally-owned reserve
fund. </FONT></SPAN></DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2> I
compare paying the D fee to tuition waivers used at the public schools or
tuition remission at a private school....waiving a fee isn't "real money", but
depositing money requires "real cash money" as my grandfather called it.
I don't know about your personal budget, but in my house, it's one thing
to tighten my belt and another thing entirely to carve some cash out of
the monthly budget and go deposit it somewhere. If I suddenly
told OU to cough up the $16+ million annual tuition waiver budget in real
cash money instead, there would be some choking going on...and I'm not talking
about winning basketball games by 1 point in the last few seconds. I'm
talking hara-kiri in the Controllers office.
</FONT></SPAN></DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2>This is separate
from the origination fee ( the "O" fee). When the O fee is waived,
the lender simply doesn't get paid as much from ED as they would have....it gets
deducted from the interest and special allowance payments the lender gets.
Lenders don't have to produce cash to pay the O fee.
</FONT></SPAN></DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2> </FONT></SPAN><SPAN class=622592614-02032006><FONT face=Arial
size=2>How can guarantors afford to pay the fee? Well, by collecting
it from somewhere else (getting the lender or servicer to pay it) or carving it
out of their own operating funds. <SPAN class=622592614-02032006><FONT
face=Arial size=2>So, somebody somewhere has to pay some real cash money for the
"D" Fee. Don't get me wrong, <SPAN
class=622592614-02032006><FONT face=Arial size=2>I'd love it every guarantor
could afford to pay the D fee for their students and every lender could
afford to waive the O fee. Unfortunately, I live in the real
world.</FONT></SPAN></FONT></SPAN></FONT></SPAN></DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2>I wonder why
Congress decided the D fee needed to be deposited into the reserve fund?
To quote the NY HESC press release of 3/1/06, <FONT face="Times New Roman"
size=3>"</FONT></FONT></SPAN><SPAN class=622592614-02032006>This ensures that
the federal funds held by guarantors are sufficient to cover the ongoing
default-related costs of the program and support essential services that avert
defaults when borrowers become delinquent on their loan payments." <FONT
face=Arial size=2>Maybe somebody in Washington thinks all the pressure to waive
fees is causing guarantors to cut things a little too close to the bone to
be able to fulfill their role adequately? </FONT></SPAN><SPAN
class=622592614-02032006></DIV></SPAN>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2>The BIG question is,
what are we willing to lose (services, technology, support) that
guarantors or lenders are currently providing in order to divert their
funds to pay the D or waive the O fee? </FONT><FONT face=Arial
size=2>AND, if we switch around to different guarantors every other year, what
will that cost our students in the long run? Not just the 1% fee, I'm
talking higher default rates, servicing problems AND the degradation OUR
services to them will suffer if we're changing flows every year. Not to
mention the impact on our state economy as billions of dollars in investments
flows out of state. </FONT></SPAN></DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2>To date, only the
New York guarantor (HESC) has announced they will pay the D fee for
students. I expect TG will announce as soon as it is legal for them to do
so. <SPAN class=622592614-02032006><FONT face=Arial size=2>BUT,
FOR HOW LONG AND AT WHAT COST (monetary and otherwise)? You know,
you can only gnaw off your own body parts for so long before the body quits
entirely........ </FONT></SPAN></FONT></SPAN></DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial
size=2></FONT></SPAN> </DIV>
<DIV><SPAN class=622592614-02032006><FONT face=Arial size=2>OGSLP, USAF, NELA,
and NSLP have announced they will begin charging students the fee on July
1. CSAC/EDFUND (California) announced today they will begin charging
the fee on October 1 (guarantors like EDFUND that have Voluntary Flexible
Agreements-VFAs are not required to start charging the fee until Oct 1, the
start of the federal fiscal year). They did that out of consideration for
us so we could plan accordingly for our students, not to gain market
share. I applaud them for their fortitude.
</FONT></SPAN></DIV>
<DIV align=left><FONT face=Arial size=2>
<P align=left><FONT face=Arial size=2>Pam McConahay</FONT> <BR><FONT face=Arial
size=2>Assoc. Dir., Compliance, Training & Lender Relations</FONT> <BR><FONT
face=Arial size=2>University of Oklahoma Financial Aid Services</FONT> <BR><FONT
face=Arial size=2>1000 Asp Avenue, Room 216 </FONT><FONT face=Arial
size=2>Norman OK 73019-4078</FONT><BR><FONT face=Arial size=2>(405)
325-4617 Fax (405) 325-7608</FONT> <BR><FONT face=Arial size=2><A
href="mailto:pmcconahay@ou.edu">pmcconahay@ou.edu</A> </FONT></P>
<P><FONT face=Arial size=1><SPAN class=622592614-02032006><FONT face=Arial
size=2>(Note to Bill......governing boards really don't like it when you
publicly admit they are just a rubber stamp, they like to pretend they are
really in charge and that they're not colluding on a vote before the official
meeting.....but we're your friends so we won't tell anyone you said that.)
</FONT></SPAN></FONT></P>
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