Iowa Student Loan Announces Changes for Lenders
 Steve W McCollugh
The College Cost Reduction and Access Act, signed into law by President Bush on Sept. 27, 2007, makes cuts in the Federal Family Education Loan Program totaling more than $22 billion over the next five years. The following four changes account for the largest cuts to lenders.
The bill, which took effect on Oct. 1, 2007, reduces special allowance payments to lenders by 0.40 percent. Special allowance payments are part of the yield on student loans.
Prior to this legislation, Iowa Student Loan had been receiving 99 percent of the principal and interest submitted on all defaulted Federal student loans. The College Cost Reduction and Access Act reduces our reinsurance to 95 percent.
In addition, the Lender Paid Origination Fee will increase from 0.50 percent to 1.00 percent.
Also of note are provisions of the bill that will limit the number of lenders who can make Federal PLUS loans to parents. On July 1, 2009, the U.S. Department of Education will implement a pilot program which will allow for a maximum of two Parent PLUS loan lenders per state.
In our last fiscal year, Iowa Student Loan gave back millions of dollars to Iowans. We paid Stafford Loan origination fees and provided interest rate reductions to borrowers. We reached out to over 30,000 students and parents through our Iowa Student Loan College Access Network (ICAN). We also funded and administered loan forgiveness programs for teachers, nurses and nurse educators.
Iowa Student Loan has been the designated student loan secondary market for the State of Iowa since 1981. We are very proud of our longstanding partnership with Iowa financial institutions to help Iowa students achieve their dreams of going to college. It saddens us that Congress has chosen to make such significant cuts to a program that has served students so well for so many years. But we are undaunted in our mission to provide critical funding to deserving Iowans who are pursuing a postsecondary education. We know you feel the same way.
In the weeks ahead, we will be formulating new, lower premiums that we will pay upon the purchase of your loans. This will allow us to preserve more of our benefits to your student customers. We hope you will continue to support your customers by participating in the student loan program as we move into a new era of student loans.
Iowa Student loan thanks you for your support and shared commitment to serving Iowa students and families.
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