[Federal Register: July 28, 1999 (Volume 64, Number 144)]
[Page 40859-40860]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[[Page 40859]]



Federal Family Education Loan Program

AGENCY: Department of Education.

ACTION: Notice to guaranty agencies of invitation to participate in 
Voluntary Flexible Agreements.


SUMMARY: The Secretary invites Federal Family Education Loan (FFEL) 
guaranty agencies to submit an application to participate under a 
Voluntary Flexible Agreement. This notice specifies the criteria that 
the Secretary will use to select not more than six guaranty agencies 
(initial guaranty agencies) that will be invited to negotiate a 
Voluntary Flexible Agreement (VFA). Although the Higher Education Act 
limits the Secretary to entering into not more than six VFAs, a 
guaranty agency with which the Secretary has a VFA may provide the 
benefits derived through that agreement to other guaranty agencies. The 
Secretary encourages a guaranty agency submitting a VFA proposal to 
identify, in its application, other guaranty agencies that may benefit 
from the agreement. In addition, a guaranty agency is urged to consult 
with schools and lenders that participate in its program in developing 
its proposal.


ADDRESSES: All guaranty agencies are invited to apply. Applications may 
be sent to: Mr. George Harris, U.S. Department of Education, 400 
Maryland Avenue, SW., room 3045, ROB-3, Washington, DC 20202-5449. If 
you use a telecommunications device for the deaf (TDD) you may call the 
Federal Information Relay Service (FIRS) at 1-800-877-8339.



    On October 7, 1998, President Clinton signed the Higher Education 
Amendments of 1998 (Pub. L. 105-244, referred to as the ``1998 
Amendments''), which amended the Higher Education Act of 1965 (the 
``HEA''). The 1998 Amendments added a new section 428A to the HEA, 
authorizing the Secretary to enter into VFAs during fiscal years 1999, 
2000, and 2001 with up to six guaranty agencies. Beginning in fiscal 
year 2002, any guaranty agency or consortium thereof may enter into a 
VFA with the Secretary.

Scope of the VFA

    A VFA incorporates and modifies the guaranty agreements under 
sections 428 (b) and (c) of the HEA, and is intended to enhance program 
integrity, increase cost efficiencies, and improve the availability and 
delivery of student financial aid. Each VFA will be developed by the 
Secretary, in consultation with the agency, on a case-by-case basis, 
and, in accordance with the HEA, may include provisions concerning--
    * The issuance of insurance on FFEL loans;
    * Monitoring FFEL insurance commitments;
    * Default aversion activities;
    * Review of default claims from lenders;
    * Payment of default claims;
    * Collection of defaulted loans;
    * Adoption of internal systems of accounting and auditing, 
and reporting the result thereof to the Secretary in a timely manner, 
and on an accurate, and auditable basis;
    * Timely and accurate collection and reporting of such other 
data as the Secretary may require to carry out the purposes of the 
Title IV programs;
    * Monitoring schools and lenders participating in the FFEL 
    * Informational outreach to schools and students in support 
of access to higher education; and
    * Such other provisions as the Secretary may determine to be 
necessary to protect the United States from the risk of unreasonable 
loss and to promote the purposes of the FFEL Program.
    It is not the intent of the Secretary to use VFAs to redistribute 
market share among guaranty agencies or lenders. Accordingly, the 
Secretary would have serious reservations about a proposal where a 
redistribution of market share appears to be the primary goal.

Information To Be Included With the Application

    An agency wishing to enter into a VFA with the Secretary should 
submit a short (not to exceed 10 pages) written application that 
describes the substance of the proposal and addresses the following 
    * Transferability--Explain how the agency's proposed VFA 
could be extrapolated and easily used by other FFEL participants.
    * Customer/partner benefits--Explain how the proposal would 
improve the ``system'' for delivery and servicing of loans for 
borrowers and schools. What impact would it have on delinquencies and 
defaults? Who would benefit from the proposal and how?
    * New technology--Explain if and how the proposal uses new 
    * Efficiency--Explain the impact the proposal would have on 
overall operating costs for the agency and its partners, including the 
Department. Would the proposed VFA encourage standardization? How would 
efficiency and customer satisfaction be measured?
    * Inducements waiver--Include a description of any proposed 
waiver of the prohibited inducement restrictions contained in section 
428(b)(3) of the HEA.

Other Information That the Secretary Will Consider

    Based upon an evaluation of the applications received, the 
Secretary will select the initial guaranty agencies with which to 
negotiate VFAs. Those negotiations will include:
    * The fees the Secretary will pay, in lieu of revenues that 
the agency may otherwise receive, and other funds that the agency may 
receive or retain under the VFA.
    * The use of net revenues for other activities in support of 
postsecondary education.
    * The standards by which the agency's performance of the 
agency's responsibilities under the VFA will be assessed, and the 
consequences for an agency's failure to achieve a specified level of 
performance on one or more performance standards.
    * The circumstances in which an agency's VFA may be ended in 
advance of its expiration date.
    * The involvement of other businesses, previously purchased 
or developed with reserve funds, that relate to the FFEL Program, and 
in which the Secretary permits the agency to engage.
    * The uniform ability of lenders to participate in the 
agency's program.
    * The ability for borrowers to select a lender of their 
choice, subject to the prohibitions and restrictions under the HEA.
    * Other provisions that the Secretary may determine to be 
necessary to protect the United States from the risk of unreasonable 
loss and to promote the purposes of the FFEL Program.

Outline of Planned Evaluation and Selection Process

    The following outline identifies the general sequence of activities 
and projected target dates that will be followed by the Department in 
negotiating agreements:
    * By September 10, 1999: Evaluate proposals received in 
response to this notice and invite promising candidates to make oral 
presentations to a Department of Education evaluation panel. (Guaranty 
agencies are encouraged to include school and lender representatives, 
and other parties in support of their proposals). After the oral 
presentations, up to six VFA

[[Page 40860]]

proposals will be selected for further development.
    * September 10 to October 1, 1999: Negotiate tentative 
agreements with the six initial agencies and publish the tentative 
agreements on the Department's web site for two weeks.
    * By November 1, 1999: Modify agreements as necessary to 
reflect public comments and notify congressional committees of proposed 
    * December 1, 1999: Sign agreements.
    If the Secretary and an initial guaranty agency are unable to reach 
agreement on the terms and conditions of a VFA, the Secretary may 
select another guaranty agency with which to enter negotiations.

FOR FURTHER INFORMATION CONTACT: Mr. George Harris at the address 
listed in the ADDRESSES section of this notice. Telephone: (202) 708-
    Individuals with disabilities may obtain this document in an 
alternate format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed in the ADDRESSES 
section of this notice.

Electronic Access to This Document

    You may view this document in text or Adobe Portable Document 
Format (PDF) on the Internet at the following sites:


    To use the PDF, you must have the Adobe Acrobat Reader Program with 
Search, which is available free at the first of the previous sites. If 
you have questions about using the 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://

(Catalog of Federal Domestic Assistance Number 84.032 Federal Family 
Education Loan Program)

List of Subjects in 34 CFR Part 682

    Administrative practice and procedure, Colleges and universities, 
Education, Loan programs--education, Reporting and recordkeeping 
requirements, Student aid, Vocational education.

    Dated: July 22, 1999.
Richard W. Riley,
Secretary of Education.
[FR Doc. 99-19116 Filed 7-27-99; 8:45 am]