[Federal Register: March 3, 2009 (Volume 74, Number 40)]
[Notices]
[Page 9232-9234]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03mr09-39]
-----------------------------------------------------------------------
DEPARTMENT OF EDUCATION
Office of Postsecondary Education; Title IV, Part I, Section 499
of the Higher Education Act of 1965, as Amended--Competitive Loan
Auction Pilot Program
AGENCY: Office of Postsecondary Education, U.S. Department of
Education.
ACTION: Notice inviting eligible lenders to participate in the
Competitive Loan Auction Pilot Program for the right to originate PLUS
loans to parent borrowers under the Federal Family Education Loan
(FFEL) Program.
-----------------------------------------------------------------------
SUMMARY: Through this notice, the Secretary of Education (the
Secretary) invites eligible lenders to participate in the Competitive
Loan Auction Pilot Program (Auction Program) for the rights to
originate PLUS loans to parent borrowers under the FFEL Program.
Through the Competitive Loan Auction (Auction), the Secretary will
award the rights to originate PLUS loans to new parent borrowers under
the Federal PLUS Program authorized by section 428B of Title IV of the
Higher Education Act of 1965, as amended (HEA), for loan periods
beginning on or after July 1, 2009 and ending June 30, 2011. This
notice establishes the dates for submission of information to
participate in the Auction, describes the information that lenders must
submit and the auction process, and describes the statutory
requirements a lender must meet if it is selected as a winning bidder
in the Auction.
DATES: Deadline for Submission of Pre-Qualification Information: FFEL
Program eligible lenders that wish to bid in the Auction must submit
the required prequalification information to the Secretary at the
address provided in the ADDRESSES section of this notice by April 1,
2009.
Deadline for Submission of PLUS Lender of Last Resort Applications:
FFEL Program eligible lenders interested in serving as a PLUS lender of
last resort must submit their applications to the Secretary at the
address provided in the ADDRESSES section of this notice by April 1,
2009.
Date of Auction: The Auction will be conducted on April 15, 2009.
Bids for origination rights must be submitted on the date of the
Auction to the Secretary at the address provided in the ADDRESSES
section of this notice. Bids will only be accepted during the time
period the Auction is open on that date, as designated by the
Secretary. The time period the Auction will be open will be included in
an Auction Information Sheet that will be sent to those eligible
lenders meeting the prequalification requirements to participate in the
Auction. The Auction Information Sheet will: (1) Describe the
procedures for submitting bids, (2) provide the Web address of the on-
line Auction, and (3) assign eligible bidders a password to submit a
bid during the period the Auction is open. When the Auction is
complete, the Secretary will notify winning bidders and announce the
winning bidders for each State no later than April 24, 2009. Further
information on the Auction procedures is in the SUPPLEMENTARY
INFORMATION section of this notice.
ADDRESSES: Pre-qualification information, PLUS Lender of Last Resort
applications, and bids should be sent by e-mail to: plus-
auction@ed.gov.
FOR FURTHER INFORMATION CONTACT: For information about the Auction
Program go to http://www.ed.gov/ope/plus-auction or contact: Donald
Conner, U.S. Department of Education, 1990 K Street, NW., room 8030,
Washington, DC 20006. Telephone (202) 502-7818, or by fax to (202) 502-
7873. You may also e-mail your questions about the Auction to:
donald.conner@ed.gov.
If you use a telecommunications device for the deaf (TDD), call the
Federal Relay Service (FRS), toll free, at 1-800-877-8339.
Individuals with disabilities can obtain this document in an
accessible format (e.g., braille, large print, audiotape, or computer
diskette) by contacting the program contact person listed in this
section.
SUPPLEMENTARY INFORMATION: The Secretary announces his intention to
conduct and invites eligible FFEL lenders to participate in the Auction
for the rights to originate PLUS loans to parent borrowers under the
FFEL Program. Through the Auction, the Secretary will award the rights
to originate PLUS loans to new parent borrowers under the Federal PLUS
Program authorized by section 428B of Title IV of the HEA, for loan
periods beginning on or after July 1, 2009 and ending June 30, 2011.
The right to originate PLUS loans to parent borrowers under the Federal
PLUS Program will be determined through a competitive, sealed bid, one-
round auction to be conducted for each State, the District of Columbia,
Guam, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana
Islands, and Puerto Rico (State). Loans to borrowers attending schools
outside of these areas are not included in the Auction Program and may
be made by any eligible FFEL Program lender.
Two winning bidders will be identified for each State and will be
the only eligible lenders authorized to originate Federal PLUS loans to
parent borrowers who are borrowing on behalf of a dependent student who
will be enrolled in an eligible postsecondary educational institution
in that State and who are new borrowers on or after July 1, 2009.
Parents currently borrowing on behalf of a dependent student enrolled
prior to July 1, 2009 may continue with their current lender or secure
a loan from another eligible FFEL Program lender. Loans to graduate and
professional student borrowers under the PLUS Program are not included
in the Auction process.
All eligible Federal PLUS Program loans originated under the
Auction will be insured by a guaranty agency against losses. The
insurance rate shall be in an amount equal to 99 percent of the unpaid
principal and interest due on the loan. The Secretary will not collect
a loan fee with respect to eligible Federal PLUS Program loans
originated under this program.
To see a listing of the PLUS loan volume by State for Award Years
2006-07 and 2007-08, go to: http://www.ed.gov/ope/plus-auction/.
Auction Requirements
Prequalification Requirements
All eligible FFEL Program lenders that want to participate in the
Auction for PLUS loans to parent borrowers in a State under the Federal
PLUS Program must meet the following prequalification requirements:
Required Agreement: A lender with a winning bid is obligated to
enter into an agreement with the Secretary in accordance with section
499(b)(3)(G)(i) of the HEA, to make PLUS loans to all
[[Page 9233]]
eligible new parent borrowers in the State(s) for which it has the
winning bid.
Borrower Benefits: The statute requires the Secretary to establish
the borrower benefits lenders must provide to participate in the
Auction Program. The only permitted borrower benefit for PLUS loans to
parents made under the Auction Program is a reduction in interest rate
of 0.25 percent that is contingent on the borrower's use of an
automatic payment process for any payments due. This benefit is
required to be offered to all parent PLUS borrowers whose loans are
made under the Auction Program in all States for which the lender is
the winning bidder.
States in which a bid will be made: An eligible lender
participating in the FFEL Program must identify the State(s) in which
the lender intends to bid. The listing of a particular State(s) does
not limit the lender's ability to bid in an additional State(s) and it
does not bind the lender to bid in the State(s) indicated. The listing
will provide the Secretary with information necessary to assess the
ability of the lender to originate, service and raise the capital
necessary to make PLUS Loans in the State(s) in which the lender has
indicated an interest in bidding.
Origination of PLUS Loans: The lender must describe its capacity to
originate loans in compliance with existing FFEL Program requirements
in the State(s) for which it intends to bid. A lender must explain and
provide any supporting documentation that demonstrates its ability to
originate the number and dollar volume of loans in each State based on
the number and volume of new PLUS loans to parents made in that State
in the last complete award year for which data is available.
Note: As the winning bidder, a lender will be one of only two
lenders originating all new PLUS loans to parents in each State. The
lender should provide any relevant information to assist the
Department in determining its capacity to originate loans timely and
efficiently in the State(s) for which it intends to bid, including
the technological compatibility with the institutions in the
State(s) and, the State-designated or other guaranty agency with
which the lender may not have previously participated.
Servicing of PLUS Loans: The lender must describe its loan
servicing capability for the PLUS loans to parents to be originated in
the State(s) for which the lender intends to bid. The lender may
provide any supporting documentation that demonstrates that capability.
The lender should advise the Department of any outstanding adverse
audit findings, or other compliance or performance issues that may
negatively affect the lender's ability to originate or service PLUS
loans to parents originated in the State(s) for which it intends to
bid. If the lender uses a third-party servicer to originate and/or to
provide ongoing servicing of loans, please also provide this
information for that servicer(s) and include the organization's name,
address, and contact information.
Capital to Make PLUS Loans: The lender must provide any supporting
documentation necessary to demonstrate that the lender will have or be
able to raise, as necessary, the capital required to provide for the
origination and full disbursement of the anticipated new volume of PLUS
Loans to parents for the period covered by the Auction Program in the
State(s) for which the lender intends to bid.
Auction Procedures
Eligible lenders that meet the prequalification requirements will
be permitted to submit a sealed and confidential bid in a one-round
auction. A bid must consist of the amount of the special allowance
payment (SAP), as defined in section 438 of the HEA, that a lender
proposes to accept from the Secretary for the eligible Federal PLUS
Program loans that the lender will make pursuant to this program.
Bids must be submitted on the Auction Date during the time period
the Auction will be open as designated by the Secretary. The Secretary
will announce the time period during which the Auction will be open in
an Auction Information Sheet that will be sent to eligible lenders
after their prequalification information has been reviewed and
approved. The Auction Information Sheet will (1) describe the
procedures for submitting bids, (2) provide the address to which the
bid must be submitted, and (3) assign eligible bidders a password to
use to submit the bid during the period the Auction is open. When the
Auction is complete, the Secretary will post the results of the
Auction, including the winning bidders for each State, at http://
www.ed.gov/ope/plus-auction/ no later than April 24, 2009. The winning
bidders will be the two eligible lenders that submit bids that offer to
accept the lowest and second lowest SAP from the Secretary on the
Federal PLUS loans made pursuant to the Auction. The winning bidders
within each State will be the only FFEL Program lenders permitted to
originate loans under the Federal PLUS Program for first time borrower
parents of dependent students at institutions within that State until
those students are no longer enrolled at an institution in that State
or they graduate from those institutions.
Eligible lender bids will remain confidential even after the
announcement of the winning bidders.
Winning Bidder Requirements
Each winning bidder in the Auction must enter into an agreement
with the Secretary under which the eligible lender agrees to originate
eligible Federal PLUS Program loans to each eligible parent borrower
that: (1) Seeks an eligible Federal PLUS Program loan to enable a
dependent student to attend an institution of higher education within
that State, (2) is eligible for a Federal PLUS Program loan, and (3)
elects to borrow from the eligible lender. Each winning bidder for a
State also must agree to accept a SAP from the Secretary for eligible
loans originated in the amount proposed in the second lowest winning
bid.
If a winning bidder fails to enter into the agreement with the
Secretary as required, or fails to comply with the terms of such
agreement, the Secretary may sanction the eligible lender in one or
more of the following ways:
(1) The Secretary may assess a penalty for any eligible Federal
PLUS Program loan that such eligible lender fails to originate in
accordance with the agreement with the Secretary;
(2) The Secretary may prohibit that lender from bidding in other
auctions under section 499 of the HEA;
(3) The Secretary may limit, suspend, or terminate the lender's
participation in the FFEL Programs; or
(4) The Secretary may take any other enforcement action authorized
under Title IV, Part B, of the HEA. Should the Secretary decide to levy
a penalty on a lender, the collection of those penalties may be sought
by reducing the amount of any payments otherwise due to the eligible
lender from the Secretary by the amount of the penalty or by requesting
that any other Federal agency reduce the amount of any payments due to
the eligible lender from that agency by the amount of the penalty.
Plus Lender of Last Resort
In the event that there are not two winning bids in a given State,
borrowers and institutions of higher education in that State will be
served by a PLUS Loan Lender of Last Resort (PLUS-LLR), as determined
by the Secretary, in accordance with section 499 of the HEA.
Eligible lenders that wish to be considered as the PLUS-LLR for a
given State(s) must (1) prequalify by submitting the prequalification
material described in this notice, (2) submit a letter not less than 14
days prior to the
[[Page 9234]]
start of the Auction indicating that they want to be considered as a
PLUS-LLR and list the State(s) they will service, and (3) commit to
making PLUS loans to all eligible new parent borrowers in the State(s)
they have indicated until the dependent student graduates or is no
longer attending an institution in that State. The Secretary will not
identify the PLUS-LLR for a State until after the Auction is completed
and only if needed. A prequalified lender that requests to be a PLUS-
LLR may still participate as a regular eligible lender in the Auction.
The Secretary is authorized to set a SAP payable to a PLUS-LLR for
a State. That SAP will be kept confidential, both before and after the
announcement of the winning bidders. To determine the SAP payment to a
PLUS-LLR the Secretary will take into account the lowest bid that was
submitted in the auction for the State and the lowest bid that was
submitted in a similar State in terms of PLUS dollar volume and number
of loans.
Additional Auction Program Information
All eligible Federal PLUS Program loans originated under the
Auction Program will be insured by a guaranty agency with which the
lender currently has an agreement against losses. The insurance on
default claims on these loans will be in an amount equal to 99 percent
of the unpaid principal and interest due on the loan.
The Secretary will not collect a loan fee with respect to eligible
Federal PLUS Program loans originated under this program.
If the parent borrower with FFEL PLUS loans made under the Auction
Program requests to consolidate those loans, the FFEL Program eligible
lender who made those loans may consolidate the borrower's Federal PLUS
Program loans made under this program into one loan under certain
conditions, as described in section 499(L)(i)-(iii) of the HEA.
Similarly, an eligible lender with a winning bid may consolidate a
Federal Direct PLUS Program loan or a loan made to the parent borrower
under section 428B of the HEA under conditions described in section
499(L)(iv)(I) and (II) of the HEA. For Federal Direct PLUS Program
loans, the Auction Program eligible lender must agree within 10 days to
match the terms and conditions available under the Federal Direct
Consolidation Loan Program.
The SAP paid to Auction Program eligible lenders on FFEL Program
Consolidation loans is the lesser of the weighted average of the SAP on
the loans consolidated (excluding Federal Direct PLUS Program loans) or
the average of the bond equivalent rates of the quotes of the 3-month
average commercial paper rate plus 1.59 percent.
An Auction Program lender who consolidates a PLUS Program loan
under this program is not required to pay the interest payment rebate
fee on the Consolidation loan under Section 428C(f) of the HEA.
Electronic Access to This Document: You can view this document, as
well as all other documents of this Department published in the Federal
Register, in text or Adobe Portable Document Format (PDF), on the
Internet at the following site: http://www.ed.gov/news/fedregister. To
use PDF, you must have Adobe Acrobat Reader, which is available free at
this site. If you have questions about using PDF, call the U.S.
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in
the Washington, DC area at (202) 512-1530.
Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at: http://www.gpoaccess.gov/
nara/index.html.
Delegation of Authority: The Secretary of Education has delegated
authority to Daniel T. Madzelan, Director, Forecasting and Policy
Analysis for the Office of Postsecondary Education to perform the
functions of the Assistant Secretary for Postsecondary Education.
Dated: February 25, 2009.
Daniel T. Madzelan,
Director, Forecasting and Policy Analysis.
[FR Doc. E9-4447 Filed 3-2-09; 8:45 am]
BILLING CODE 4000-01-P