The U.S. Department of Education today announced $19 million in awards to help loan servicers in the Federal Family Education Loan (FFEL) Program retrain and redeploy workers for new jobs. This program was authorized by SAFRA, part of the Health Care and Education Reconciliation Act of 2010.
SAFRA eliminated new loan originations under the bank-run FFEL program. All federal student loans are now being made through the federal Direct Loan Program, which has operated since the early '90s. By eliminating subsidies for financial institutions under FFEL, the Department has made education more affordable and accessible for millions of college students.
"Schools are making a seamless transition to the Direct Loan Program, we've increased Pell Grants by over $40 billion, and this Administration is investing over $2 billion in college access and completion efforts not to mention returning billions to the U.S. Treasury," said U.S. Secretary of Education Arne Duncan. "SAFRA was a huge win for students and taxpayers."
The passage of SAFRA was a key component of President Obama's higher education agenda and critical for achieving the goal for the U.S. to lead the world in college completion by 2020. SAFRA saves the federal government $68 billion over the next decade, according to the Congressional Budget Office, and invests those savings in programs to help students succeed in school. All students will have reliable access to affordable federal student loans with flexible repayment plans; millions of low-income students and families will benefit from an increased Pell Grant value, which will be tied to inflation; states are seeing more than a doubling of federal investment in college access efforts; and community colleges will have access to unprecedented resources to identify effective programs that guide students toward certificates, degrees and skilled jobs.
Congress anticipated these benefits to be accompanied by the potential for some job losses once FFEL loans could no longer be issued by lenders. The Department has structured this job retention program to help workers in the toughest situations prepare for new careers in jobs that will last. These awards, made to 27 loan servicers applying on behalf of 42 locations in the U.S., range in size from $6,000 to nearly $5 million. They will provide employees with training and other services to continue working in a new role with their current employer or to prepare for successful employment with another entity.
The Department computed the award amount for each eligible applicant using a formula that takes into account the location's payroll for employees engaged in originating FFEL loans and factors in the local employment rate. Through this formula, the Department has sent the most dollars to locations where employees will have the hardest time finding new work if they are laid off.
While Congress appropriated $25 million for this program for each of fiscal year 2010 and fiscal year 2011, eligible applicants only submitted budgets totaling $19 million for fiscal year 2010. The Department was encouraged to hear that employees at some FFEL servicers have already been transitioned to new roles in jobs that are not at risk of being lost. To continue helping servicers transition their employees, the Department will carry over the remaining fiscal year 2010 funds to the next fiscal year, combining it with the $25 million Congress appropriated for fiscal year 2011 to make new job retention awards next year.
The Department is in the process of developing the funding formula for next year and will likely broaden the focus to FFEL employees not covered by funds this year.Background
Since July 1, 2010, loans previously made under the FFEL program have been issued under the Direct Loan Program, in which students borrow directly from the Education Department instead of banks. In total, the switch to the less-costly Direct Loan Program will save taxpayers an estimated $61 billion over the next 10 years, reducing the federal budget deficit by at least $10 billion in that time.
While banks and other lenders are no longer able to originate federal student loans, the Direct Loan Program operates as a public-private partnership, leveraging the federal government's lower cost of capital with the expertise of the private sector. The Department of Education provides the capital for all new Direct Loans, with private sector partners disbursing, servicing and collecting the loans.
There are about nine private contractors for every employee working at the office of Federal Student Aid (FSA), which manages the loan program. To ease the workload, the Department is in the process of phasing in four new loan servicers. These institutions will help handle the growing number of federal student loans and will be contracting with non-profit organizations, which will service a portion of the Direct Loan portfolio.
FSA has been working closely with higher education institutions to prepare for and complete the transition to the Direct Loan Program. In the past year, FSA has provided training to over 10,000 financial aid professionals from schools around the world participating in the federal student loan programs.
Today, schools representing 99 percent of the domestic federal student loan volume are participating in the Direct Loan Program. The remaining schools, most of which operate on alternative academic schedules and may not originate their first loan for several months, continue to transition on schedule and will continue to do so through the remainder of the year.
Note to editors: A list of loan servicers, locations and the amounts awarded follow.
Kentucky Higher Education Student Loan Corporation, Montgomery: $48,546
Edfinancial Services LLC, Little Rock: $ 6,302
ACS Education Services Inc., Long Beach: $455,934 ALL Management Corporation, Los Angeles: $524,518
Nelnet, Inc. & Subsidiaries, Aurora: $292,872
Access Group Inc., Wilmington: $880,088
Edfinancial Services LLC, Jacksonville: $6,965
Sallie Mae Inc., Lynn Haven: $4,900,437
Graduate Leverage LLC, Tampa: $153,269
National Education Servicing LLC, Chicago: $601,131
Illinois Designated Account Purchase Program, Deerfield: $826,131
Sallie Mae Inc., Fishers: $1,471,083
Iowa Student Loan Liquidity Corporation, West Des Moines: $113,180
ISL Service Corporation, West Des Moines: $27,913
Kentucky Higher Education Student Loan Corporation, Louisville: $975,758
Graduate Leverage LLC, Waltham: $108,264
Great Lakes Educational Loan Services Inc., St. Paul: $427,852
Education Service Foundation, Jackson: $313,074
Student Assistance Foundation, Helena: $98,348
Nelnet, Inc. & Subsidiaries, Lincoln: $645,517
Granite State Management & Resources (GSM&R), Concord: $50,312
New Mexico Educational Assistance Foundation, Albuquerque: $182,074
College Foundation Inc., Raleigh: $80,455
Oklahoma Student Loan Authority, Oklahoma City: $49,987
Pennsylvania Higher Education Assistance Agency (PHEAA), Harrisburg: $285,648
Rhode Island Student Loan Authority, Warwick: $116,615
South Carolina Student Loan Corporation, Columbia: $139,456
Great Lakes Educational Loan Services Inc., Aberdeen: $255,338
Edfinancial Services LLC, Knoxville: $137,729
Higher Education Servicing Corporation, Arlington: $ 147,550
Higher Education Servicing Corporation, Austin: $12,791
ACS Education Services Inc., Canyon: $52,387 Graduate Leverage LLC, College Station: $58,008
Higher Education Servicing Corporation, College Station: $14,597
Council for South Texas Economic Progress (COSTEP), Edinburg: $278,795
Sallie Mae Inc., Killeen: $1,225,116
Council for South Texas Economic Progress (COSTEP), San Antonio: $12,836
Utah Higher Education Assistance Authority (UHEAA), Salt Lake City: $401,000
Vermont Student Assistance Corporation, Winooski: $228,893
Great Lakes Educational Loan Services Inc., Eau Claire: $201,177
Great Lakes Educational Loan Services Inc., Madison: $2,141,011
Western States Learning Corporation, Cheyenne: $79,050