Federal Family Education Loan Program (FFELP), 37422-37451 [E8-14820]

Download as PDF 37422 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices Retaliation against an employee or applicant for making a protected disclosure is prohibited by 5 U.S.C. 2302(b)(8). If you believe that you have been the victim of whistleblower retaliation, you may file a written complaint (Form OSC–11) with the U.S. Office of Special Counsel (OSC) at 1730 M Street, NW., Suite 218, Washington, DC 20036–4505 or online through the OSC Web site: http://www.osc.gov. Retaliation for Engaging in Protected Activity A federal agency cannot retaliate against an employee or applicant because that individual exercises his or her rights under any of the Federal antidiscrimination or whistleblower protection laws listed above. If you believe that you are the victim of retaliation for engaging in protected activity, you must follow, as appropriate, the procedures described in Antidiscrimination Laws and Whistleblower Protection Laws or, if applicable, administrative or negotiated grievance procedures in order to pursue any legal remedy. Disciplinary Actions Under the existing laws, each agency retains the right, where appropriate, to discipline a federal employee for conduct that is inconsistent with Federal Antidiscrimination and Whistleblower Protection Laws up to and including removal. If OSC has initiated an investigation under 5 U.S.C. 1214, however, according to 5 U.S.C. 1214(f), agencies must seek approval from the Special Counsel to discipline employees for, among other activities, engaging in prohibited retaliation. Nothing in the No FEAR Act alters existing laws or permits an agency to take unfounded disciplinary action against a federal employee or to violate the procedural rights of a federal employee who has been accused of discrimination. sroberts on PROD1PC70 with NOTICES Additional Information For further information regarding the No FEAR Act regulations, refer to 5 CFR part 724, as well as the Board’s EEO Director or Counselors. Additional information regarding Federal antidiscrimination, whistleblower protection and retaliation laws can be found at the EEOC Web site http:// www.eeoc.gov and the OSC Web site http://www.osc.gov. Existing Rights Unchanged Pursuant to section 205 of the No FEAR Act, neither the Act nor this notice creates, expands or reduces any rights otherwise available to any VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 employee, former employee or applicant under the laws of the United States, including the provisions of law specified in 5 U.S.C. 2302(d). A.J. Eggenberger, Chairman. [FR Doc. E8–14848 Filed 6–30–08; 8:45 am] BILLING CODE 3670–01–P DEPARTMENT OF EDUCATION DEPARTMENT OF THE TREASURY OFFICE OF MANAGEMENT AND BUDGET Federal Family Education Loan Program (FFELP) Department of Education, Department of the Treasury, Office of Management and Budget. ACTION: Notice of terms and conditions of purchase of loans under the Ensuring Continued Access to Student Loans Act of 2008. AGENCY: SUMMARY: Under section 459A of the Higher Education Act of 1965, as amended (‘‘HEA’’), as enacted within the Ensuring Continued Access to Student Loans Act of 2008 (Pub. L. 110– 227), the Department of Education (‘‘Department’’) has the authority to purchase, or enter into forward commitments to purchase, Federal Family Education Loan Program (‘‘FFELP’’) loans made under sections 428 (subsidized Stafford loans), 428B (PLUS loans), or 428H (unsubsidized Stafford loans) of the HEA, on such terms as the Secretary of Education (‘‘Secretary’’), the Secretary of the Treasury, and the Director of the Office of Management and Budget (collectively, ‘‘Secretaries and Director’’) jointly determine are ‘‘in the best interest of the United States’’ and ‘‘shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased).’’ This notice (a) establishes the terms and conditions that will govern the loan purchases made under section 459A of the HEA, (b) outlines the methodology and factors that have been considered in evaluating the price at which the Department will purchase loans made under section 428, 428B, or 428H of the HEA, and (c) describes how the use of those factors and methodology will ensure that the loan purchases do not result in any net cost to the Federal Government. The Secretaries and Director concur in the publication of this notice and have jointly determined that the programs described in this notice are in the best interest of the PO 00000 Frm 00016 Fmt 4703 Sfmt 4703 United States and shall not result in any net cost to the Federal Government (including the cost of servicing the loans purchased). DATES: Effective Date: The terms and conditions governing the Loan Purchase Commitment Program and the terms and conditions governing the Loan Participation Purchase Program are effective July 1, 2008. FOR FURTHER INFORMATION CONTACT: Kristie Hansen, U.S. Department of Education, Office of Federal Student Aid, Union Center Plaza, 830 First Street, NE., Room 113F1, Washington, DC 20202. Telephone: (202) 377–3309 or by e-mail: Kristie.Hansen@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 alternative format (e.g., Braille, large print, audiotape, or computer diskette) on request to the contact person listed under FOR FURTHER INFORMATION CONTACT. SUPPLEMENTARY INFORMATION: Introduction The purchasing of loans is intended to encourage eligible FFELP lenders to provide students and parents access to Stafford and PLUS loans for the 2008– 2009 academic year. To accomplish this objective, the Department is offering lenders the opportunity to participate in a Loan Purchase Commitment Program (‘‘Purchase Program’’) and a Loan Participation Purchase Program (‘‘Participation Program’’) (collectively, ‘‘Programs’’). Under the Loan Purchase Commitment Program, the Department may purchase eligible loans that are held by eligible lenders. To participate in the Purchase Program, each eligible lender must enter into a Master Loan Sale Agreement with the Department and deliver to the Department or its agent the fully executed master promissory note (or all electronic records evidencing the same) evidencing each eligible loan that the eligible lender wishes to sell to the Department and any and all other documents and computerized records relating to such eligible loans. Under the Loan Participation Purchase Program, the Department may purchase participation interests in eligible loans that are held by an eligible lender acting as a sponsor under a Master Participation Agreement. To participate in the Participation Program, each sponsor must enter into a Master Participation Agreement with the E:\FR\FM\01JYN1.SGM 01JYN1 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices Department and a third-party custodian acceptable to the Department and must have provided appropriate notice to the Department of the intent to participate in the Loan Purchase Commitment Program.1 Terms and Conditions Pursuant to section 459A of the HEA, the Secretaries and Director establish the terms and conditions that will govern the Loan Purchase Commitment Program (‘‘Loan Purchase Commitment Program Terms and Conditions,’’ attached as Appendix B to this notice) and the terms and conditions that will govern the Loan Participation Purchase Program (‘‘Loan Participation Purchase Program Terms and Conditions,’’ attached as Appendix C to this notice). The Loan Purchase Commitment Program Terms and Conditions and the Loan Participation Purchase Program Terms and Conditions are collectively referred to as the ‘‘Terms and Conditions.’’ (The Notice of Intent to Participate, referenced in the Terms and Conditions, is attached as Appendix D to this notice.) Outline of Methodology and Factors in Determining Prices sroberts on PROD1PC70 with NOTICES In accordance with Public Law 110– 227, the goal in structuring the Purchase Program and the Participation Program described in this notice is to maximize student loan availability while ensuring loan purchases result in no net costs to the Federal Government. These programs will offer temporary liquidity to FFELP lenders at prices that will encourage their continued participation in the FFELP. This notice responds, in particular, to the requirement in section 459A of the HEA for an outline of the methodology and factors considered in evaluating the price at which loans may be purchased, and describes how the use of such methodology and consideration of such factors will ensure that no net cost to the Federal Government results from the loan purchases under these programs. 1 Lenders that qualify as ‘‘eligible not-for-profit holders’’ for a higher special allowance rate may sell participation interests in their loans under this program without loss of eligibility for that rate. An entity qualifies for that rate only if the entity is the ‘‘sole beneficial owner of such loan.’’ 20 U.S.C. 1085(p)(2)(C). Courts treat a participation interest in a loan as a beneficial ownership of a loan. The Department becomes a beneficial owner of a loan in which it purchases a participation interest, and the lender then holds a junior beneficial ownership interest. In light of other statutory provisions and the congressional intent they evidence, the Department interprets the HEA to disqualify an otherwise-eligible not-for-profit holder only if a forprofit entity acquires beneficial ownership of a loan. See 20 U.S.C. 1085(p)(2)(B), (E), (3). VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 Servicing and Financing Costs. In determining the prices described in this notice, the Secretary and the Secretary of the Treasury analyzed the costs incurred in making FFELP loans by large and small lenders, for-profit and not-for-profit lenders, and national and regional lenders based on publicly available data and consultations with a number of lenders and financial market analysts. This analysis examined lender returns in the context of loan servicing and financing expenses associated with obtaining funding to pay program costs and finance actual loan disbursements. • The rate of lender returns on FFELP loans in the in-school and grace periods are effectively set by section 438 of the HEA at the commercial paper (CP) rate plus 1.19 percent or CP plus 119 basis points for for-profit lenders (a basis point equals one one-hundredth of a percent). 20 U.S.C. 1087–1(b)(2)(I)(ii) and (b)(2)(I)(vi)(I)(bb). For eligible notfor-profit holders, the HEA provides a return of CP plus 134 basis points. 20 U.S.C. 1087–1(b)(2)(I)(ii) and (b)(2)(I)(vi)(II)(bb). (These return levels reflect the net of borrower interest payments and Federal interest subsidies.) Returns are different for PLUS loans, which make up a relatively small portion of overall FFELP volume. These PLUS return levels were reflected in the cost neutrality calculations but, for simplicity, are not detailed in this notice. • Lenders reported that loan servicing costs generally average between 30 basis points and 60 basis points per dollar loaned, with larger, more efficient lenders typically averaging closer to 30 basis points and small or not-for-profit lenders averaging closer to 60 basis points. Lenders pay the Department a 1 percent fee on each loan they make. 20 U.S.C. 1087–1(d)(2)(B). In addition, lenders must repay excess interest payments as required by section 438 of the HEA. 20 U.S.C. 1087–1(b)(2)(v). Because the student borrowers of most loans subject to the Purchase Program and the Participation Program will be in school and not making payments on their loans during the 2008–2009 academic year, lenders may need to obtain funding to make these statutorilyrequired payments to the Department. Financing costs (i.e., interest expenses incurred to obtain capital from deposits or from private capital markets) typically total 15 basis points for every dollar loaned. • Subtracting estimated servicing and financing costs from the lender return levels established in the HEA leaves lenders with estimated pre-tax returns of CP plus 44–74 basis points for forprofit lenders and CP plus 59–89 basis PO 00000 Frm 00017 Fmt 4703 Sfmt 4703 37423 points for lenders that are eligible notfor-profit holders. Lenders finance loan disbursements from these returns. If lenders sell participation interests in their loans under the Participation Program, they are charged CP plus 50 basis points, leaving a net pre-tax return of ¥6 basis points to 24 basis points for for-profit lenders. If lenders can obtain private financing at a lower interest rate, their net pre-tax return would be higher. Based on this background information, the Secretaries and Director determined that setting the price paid by lenders on a participation interest in a loan at the principal of that loan and the commercial paper rate plus 50 basis points would offer most lenders sufficient opportunity to continue their participation in the FFELP. Setting a higher price risks limiting participation to only the largest lenders, while offering a lower price would be overly generous, especially for those same large lenders. Origination and Deconversion Costs. In addition to servicing and financing costs, lenders incur administrative costs to originate loans and remove or ‘‘deconvert’’ loans from their servicing systems. In determining the proper price to reimburse lenders for these costs, the Department and the Department of the Treasury analyzed information from lenders and servicers. The Department and the Department of the Treasury consulted with lenders, who provided them with their estimated origination and deconversion costs. Larger, more efficient lenders indicated that their origination costs ranged between $20–$30 per loan while these costs for smaller lenders were $75 per loan. Lenders indicated that their estimated deconversion costs (i.e. the costs resulting from the process of taking a loan from one lender’s servicing system and transferring it to another servicing system) ranged from $20–$50 per loan. To ensure the Participation Program is open to more than just the largest lenders, the Secretaries and Director used these estimates to establish a flat $75 fee paid on each loan sold to the Department to cover all servicing, origination, and deconversion costs. This assumes the lower end of the origination cost range and the higher end of the deconversion costs range. Pricing structures on many private servicing contracts tend to have costs that differ greatly for different services, with high origination costs and relatively low deconversion costs, or at times, the converse. Notwithstanding these differences, the Secretaries and Director are reasonably certain that the $75 fee accounts for these variations E:\FR\FM\01JYN1.SGM 01JYN1 37424 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices while ensuring adequate participation in the Participation Program. Analysis of Cost Neutrality sroberts on PROD1PC70 with NOTICES The cost-neutrality analysis used credit subsidy cost estimation procedures established under the Federal Credit Reform Act of 1990 (Pub. L. 101–508) and OMB Circular A–11. These procedures entail performing various analyses, projecting cash flows to and from the Government, and discounting those cash flows to the point of disbursement; the analysis also used the Credit Subsidy Calculator (‘‘OMB calculator’’), developed by the Office of Management and Budget to estimate credit subsidy costs for all Federal credit programs, as the discounting tool.2 The results of the analysis were subsidy rates that reflect the Federal costs associated with a loan; these costs are expressed as a percentage of the credit extended by the loan. For example, a subsidy rate of 10.0 percent indicates a Federal cost of $10 on a $100 loan. The metric to determine cost neutrality was that costs under the new Programs should not exceed costs expected under the FFELP had the loan purchase authority in section 459A of the HEA not been enacted. Thus all costs were compared to estimates in the 2009 President’s Budget for the FFELP, after adjustments were made for enacted legislation (other than the loan purchase authority provided by Pub. L. 110–227), including administrative costs. Student loan cost estimates were developed to assess the Federal cost incurred for loans financed for students in five categories: Students attending proprietary schools, students attending two-year schools, freshmen/sophomores at four-year schools, juniors/seniors at four-year schools, and students in graduate programs. Risk categories have separate assumptions based on historical patterns—for example, the likelihood of default or the likelihood of statutory deferments or discharge benefits—of borrowers in each category. The analysis also considered risk factors that are particular to the new programs, such as the likelihood that lenders 2 The OMB calculator takes projected future cash flows from the Department’s student loan cost estimation model and produces discounted subsidy rates reflecting the net present value of all future Federal costs associated with loans made in a given fiscal year. Values are calculated using a ‘‘basket of zeros’’ methodology under which each cash flow is discounted using the interest rate of a zero-coupon Treasury bond with the same maturity as that cash flow. To ensure comparability across various Federal credit programs, this methodology is incorporated into the calculator and used government-wide to develop estimates of the Federal costs of credit programs. VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 involved in loan participation agreements file for bankruptcy protection. This discussion outlines the analysis of the new Purchase Program and Participation Program with respect to the following critical aspects affecting the Federal cost: Æ Administrative costs; Æ Borrower behavior; Æ Lender behavior; and Æ Various risk factors. Administrative Costs. Under the Federal Credit Reform Act, Federal administrative costs are not included in credit subsidy cost calculations. However, to capture the full cost of the Purchase Program and Participation Program, section 459A of the HEA requires the determination of cost neutrality to include total costs, including Federal administrative costs that are subject to appropriation, and thus administrative costs were estimated and included in the costneutrality analysis. Administrative cash flows primarily involve servicing costs associated with loans purchased by the Department. These costs extend for up to 40 years, because servicing must continue until the last loan is paid in full. Administrative costs also include start-up costs to enhance the Department’s systems to accommodate the purchase of participation interests and any put FFELP loans. Other start-up costs include legal and technical advisory contracts and changes to Department accounting, reporting, and program compliance systems and processes. For the new programs, the Secretaries and Director estimated that start-up costs would be $15.7 million and servicing costs would vary, according to the amount of volume in the program. Estimates for start-up costs were derived from conversations with the Department’s existing service contract providers, while servicing cost estimates were derived from costs currently incurred with the Department’s Federal Direct Loan servicing contract. Borrower Behavior. Given the base FFELP serves as the foundation of the new programs, and the characteristics of the base program are unchanged, there is no reason to believe that the Purchase Program and Participation Program outlined in this notice will affect borrower behavior. Thus, this cost analysis uses the same borrower behavior assumptions as were used in preparing the 2009 President’s Budget to gauge the effect on program costs of borrower-based activities such as loan repayment, use of statutory benefits such as deferments and loan discharges, and default rates and timing. These PO 00000 Frm 00018 Fmt 4703 Sfmt 4703 assumptions are based on a wide range of data sources, including the National Student Loan Data System, the Department’s operational and financial systems, and a group of surveys conducted by the National Center for Education Statistics such as the 2004 National Postsecondary Student Aid Survey, the 1994 National Education Longitudinal Study, and the 1996 Beginning Postsecondary Student Survey. Lender Behavior. A key factor in assessing whether the Purchase Program and Participation Program would operate in a cost-neutral manner was lender behavior: Specifically, how many lenders would participate in each program and how many loans would they eventually choose to sell to the Department. The Secretaries and Director considered alternative scenarios of market conditions and lender behavior to determine whether each program could be considered costneutral. In one scenario, the Secretaries and Director assumed that market conditions would not improve and that FFELP lenders would put or sell participation interests to the Department in 100 percent of all FFELP loans made for the 2008–09 academic year. At the end of the participation period, FFELP lenders would also put 50 percent of those loans to the Department. The Secretaries and Director assumed that the loan volume would be $65 billion and that the total portfolio would be similar to the expected 2008–2009 school year of student loans under the FFELP before enactment of the loan purchase authority in Public Law 110–227.3 Further, the loans purchased at the end of the participation period would be representative of the total loan volume. Under this scenario, we determined that costs for both the Purchase Program and the Participation Program were less expensive to the Government than for the baseline subsidy costs for FFELP loans costs for the FFELP baseline in this period. (Please see Table 2, located in Appendix A, for a summary of the analysis for this scenario, which also includes the risk factors discussed in this notice.) The Secretaries and Director also considered other scenarios. In those scenarios, the Secretaries and Director sorted the expected FFELP volume under the Purchase Program and Participation Program into three 3 This loan volume assumption is the full FFELP non-consolidation estimate for the 2008–2009 academic year (as presented in the 2009 President’s Budget) and is adjusted to include increases to unsubsidized Stafford Loan limits provided for in Pub. L. 110–227. E:\FR\FM\01JYN1.SGM 01JYN1 sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices categories: Loans made by lenders and sold to the Department; loans made by lenders on which the lenders first sold participation interests to the Department and then, on September 30, 2009, sold the loans themselves to the Department; and loans made by lenders on which participation interests were sold to the Department but then redeemed by the lender, for a cash payment, eliminating the Department’s participation interest. In general, the Secretaries and Director derived volume allocations under particular scenarios by making assumptions about near-term market conditions, likely lender behavior based on type of lending institution and operational capability, and projecting lender demand for any particular option under those conditions. One of these scenarios, considered to be one of the most costly to the Government, would be that market conditions improve significantly over the next year, and that lenders sell a greater proportion of higher cost loans to the Government (in a process often termed ‘‘cherry-picking’’). A Congressional Budget Office analysis, and other analyses, of the FFELP portfolio have found that certain loans are more profitable for FFELP lenders than others. In particular, borrowers with small balances provide relatively little margin income relative to the fixed costs lenders face to service those loans. Some borrowers, including those that attended schools with higher than average default rates, are more likely to become delinquent and, consequently, present higher expected default costs, and greater losses of margin income due to default. The Terms and Conditions seek to reduce the impact of these risk factors. For example, program guidelines requiring lenders to sell all 2008–09 Stafford loans held for a specific borrower, combined with the administrative complexity and expense of identifying and deconverting only less profitable loans, make it less likely that lenders will choose to sell only poorly-performing loans to the Department. Nevertheless, if financial markets improve to the point where lenders can finance most loans privately, they might still sell those least profitable loans to the Department. In this situation, borrowers with very low balances will present relatively high servicing costs to the Department per dollar of outstanding balance. Under the scenario described in the preceding paragraph, the analysis estimates 4 percent of FFELP volume ($65 billion in the 2008–2009 academic year) will be loans made by lenders and VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 sold to the Department; 32 percent of volume ($21 billion) would be loans for which participation interests, and then the loans themselves, would be sold to the Department; and 32 percent ($21 billion) would be loans for which participation interests were sold, but then redeemed.4 Cost estimates assuming these volume allocations and risk adjustments for this scenario still compared favorably with the costs for the base FFELP. (Please see Table 3, located in Appendix A, for a summary of the analysis for this scenario and the risk factors discussed in the following sections.) It should also be noted that, in addition to the examples discussed herein that represent certain abnormal market and lender behavior conditions, all other alternatives under which the Purchase Program and Participation Program were analyzed were less expensive than base FFELP costs. Risk Factors. Analyzing whether the Purchase Program and Participation Program would operate in a cost-neutral manner requires that projected costs account for the presence of various risks and cost factors that must be assumed since the programs will not operate entirely like the base FFELP, nor without operational risk. In addition to cherry-picking, the Secretaries’ and Director’s estimates included adjustments for four other factors: that lenders involved in loan participation agreements file for bankruptcy protection (‘‘bankruptcy remoteness’’); 4 The loan volume assumption in this scenario was developed through conversations with a variety of lending institutions. Depository lending institutions indicated that they would use their own capital to originate new student loans rather than take advantage of the participation agreement structure. Non-depository institutions indicated they would use participation agreements. For the top 100 lenders in FY 2007, which together accounted for over 80 percent of FFELP nonconsolidation volume, 33 percent of volume was originated by depository institutions and 67 percent by non-depository institutions. (Figures for nondepository institutions include loans made by depository institutions acting as eligible lender trustees.) Lenders currently have $50 billion in warehouses and substantial additional loans securitized in rollover accounts that will require long-term refinancing. These inventory stocks may provide lenders with an incentive to put loans. Representatives of depository institutions indicated they may increase volume to ensure students have access to loans, but may not want to maintain this additional volume on their books. In consideration of these factors, estimates assumed all 2008–2009 FFELP non-consolidation loan volume originated by depository institutions over the level originated for 2007–2008 and 50 percent of 2008–2009 loans originated by nondepository institutions and included in the Loan Participation Purchase Program will be put. Estimates further assumed that all loans of $1,000 or less would be put first, with the balance up to the total amount put made up of loans of over $1,000. PO 00000 Frm 00019 Fmt 4703 Sfmt 4703 37425 that lenders redeem their participation agreements early, reducing Federal earnings from the participation interests acquired (‘‘interest adjustments’’); that unforeseen problems undermine the Department’s ability to effectively oversee and administer the Purchase Program and Participation Program (‘‘operational risk’’); and that some of the loans purchased by the Department would be those where the Department would otherwise reject a claim under the FFELP program (‘‘claim rejects’’). The Terms and Conditions for each program seek to reduce the impact of these risk factors. None of these factors is likely to lead to significant additional Federal costs. For example, the requirement that lenders sell participation interests that total at least $50 million will limit involvement to large financial institutions that, in general, are financially stable and not likely to proceed to bankruptcy. Additionally, upon filing for bankruptcy, the yield owed by the lender to the Department increases from principal of that loan and the commercial paper rate plus 50 basis points, to principal of that loan and the commercial paper rate plus 300 basis points. However, to ensure estimates reflect a conservative assessment of possible Federal costs, the Secretaries and Director added cost adjustments to incorporate each risk factor in all of the scenarios noted in the preceding paragraphs. The adjustments were based on an assessment of private-sector behavior and program data as follows: • Bankruptcy remoteness. The Government might face legal risks if a lender declares bankruptcy while holding rights to loans under the participation agreement. The Secretaries and Director believe that the structure to be utilized under the Participation Program offers sufficient bankruptcy protection, in that legal title of these participated loans will be placed in a custodial facility, and that the participation agreement vests the Government with a valid security interest under the Uniform Commercial Code. Nonetheless, a bankruptcy court might tie up control of the loans until the claims of other creditors are settled. This risk is more present if markets remain distressed during the next one to two years as the likelihood of bankruptcy is higher; however, the risk never goes to zero entirely. For the scenario in Table 2 below (where the market conditions do not improve), the analysis assumes an increase in cost of 15 basis points. For the scenario in Table 3, where market conditions do improve, the analysis assumes an E:\FR\FM\01JYN1.SGM 01JYN1 37426 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices sroberts on PROD1PC70 with NOTICES increase in cost of 5 basis points. Assumptions are based on an estimated one-year default rate of lenders and potential recoveries on default. • Interest adjustments. If financial market conditions significantly improve between now and the end of September 2009, lenders that took advantage of the participation agreements might opt to buy their loans out early and finance them privately through more favorable rates. While this outcome is highly desirable from a policy perspective, it would deprive the Department of some of the margin income it might expect from the participation agreement under a scenario where lenders opt to maintain their loans in the participation agreements until the last possible moment. The cost neutrality analysis below assumes a 20 basis point increase in the cost for interest that the Department does not realize, based on the expected placement of FFELP loans in the participation interest program, and the difference between the commercial paper rate plus 50 basis points lenders must pay the Department and the cost of Government borrowing. • Operational risk. Operational risk is in general a major concern in all credit activities in both the public and private sectors, and has been a major focus in recent efforts to overhaul bank regulations. (Operational risk is limited in this analysis to that related to funding and management of the participation or loan purchase agreements.) In the new Purchase Program and Participation Program, operational risk might result from imperfect controls of ineligible lending, servicing errors, technology failures, and the risk of fraud. While the Department has made every effort to mitigate operational risk, the emergency nature and accelerated implementation timeframe for these Programs make operational risk more of a concern than in established Department programs. For the low risk scenario, the analysis below assumes a 10 basis point increase in cost, reflecting risks other than credit or market risk, as banks are currently required to finance on average about eight percent of their assets with capital. VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 For the high scenario, we raised the factor related to operational risk by 70 basis points to equal a total of 0.80 percent. We estimated this worst-case scenario using survey data from bank regulators implementing an overhaul of bank regulations. The largest United States banking organizations will be subject to a new system of capital requirements which includes an explicit charge for operational risk. Under that regulation banks must develop models generating a probability distribution of losses for operational risk, and hold capital equal to the 99.9th percentile of that estimated probability distribution. Banks were surveyed to measure the anticipated impact of the regulation. Using the best available models of operational risk, the banks reported that operational risk would account for roughly ten percent of their required capital. As banks currently finance on average about eight percent of their assets with capital, worst-case scenario operational risk losses can thus be estimated at about one percent of total assets. Also, while we do not believe that this program has, or necessarily will, face such a level of operational risk, we developed the high scenario to ensure that the program is cost neutral, even under extreme and unlikely circumstances. • Claim rejects. This risk factor takes into account the costs associated with the purchase of loans that would not typically qualify for the federal guarantee in the FFEL program due to improper origination or servicing. The 6 basis point increase in cost is based on a historical rejected claim rate of 1 percent of volume, and assumes that these loans would have higher loss rates than the average portfolio. Cost estimates reflecting these factors, for each of the market condition and lender behavior scenarios discussed elsewhere in this notice, were calculated and included, as illustrated in Tables 2 and 3. As those analyses show, even with these risk adjustments, the estimated costs of the loans included in the Purchase Program and PO 00000 Frm 00020 Fmt 4703 Sfmt 4703 Participation Program remained lower than those for standard FFELP loans. Conclusion. After taking into account alternative market and lender behavior scenarios and appropriate risk factors, the Secretaries and Director determine that the Purchase Program and Participation Program are in the best interest of the United States and will result in no net cost to the Federal Government (including the cost of servicing the loans purchased). Applicable Program Regulations: 34 CFR part 682. Electronic Access to This Document You may view this document, as well as all other Department of Education documents 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/index.html. 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. You may also view this document in PDF at the following site: http://www.ifap.ed.gov. 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. (Catalog of Federal Domestic Assistance Number 84.032 Federal Family Education Loan Program) Program Authority: 20 U.S.C. 1087i–1. Dated: June 25, 2008. Margaret Spellings, Secretary of Education. Dated: June 25, 2008. Henry M. Paulson, Jr., Secretary of the Treasury. Dated: June 25, 2008. Jim Nussle, Director, Office of Management and Budget. BILLING CODE 4000–01–P E:\FR\FM\01JYN1.SGM 01JYN1 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00021 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37427 EN01JY08.049</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00022 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.050</GPH> sroberts on PROD1PC70 with NOTICES 37428 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00023 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37429 EN01JY08.051</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00024 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.052</GPH> sroberts on PROD1PC70 with NOTICES 37430 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00025 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37431 EN01JY08.053</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00026 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.054</GPH> sroberts on PROD1PC70 with NOTICES 37432 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00027 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37433 EN01JY08.055</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00028 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.056</GPH> sroberts on PROD1PC70 with NOTICES 37434 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00029 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37435 EN01JY08.057</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00030 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.058</GPH> sroberts on PROD1PC70 with NOTICES 37436 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00031 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37437 EN01JY08.059</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00032 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.060</GPH> sroberts on PROD1PC70 with NOTICES 37438 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00033 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37439 EN01JY08.061</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00034 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.062</GPH> sroberts on PROD1PC70 with NOTICES 37440 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00035 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37441 EN01JY08.063</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00036 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.064</GPH> sroberts on PROD1PC70 with NOTICES 37442 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00037 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37443 EN01JY08.065</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00038 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.066</GPH> sroberts on PROD1PC70 with NOTICES 37444 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00039 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37445 EN01JY08.067</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00040 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.068</GPH> sroberts on PROD1PC70 with NOTICES 37446 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00041 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37447 EN01JY08.069</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00042 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.070</GPH> sroberts on PROD1PC70 with NOTICES 37448 VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00043 Fmt 4703 Sfmt 4725 E:\FR\FM\01JYN1.SGM 01JYN1 37449 EN01JY08.071</GPH> sroberts on PROD1PC70 with NOTICES Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices VerDate Aug<31>2005 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices 21:01 Jun 30, 2008 Jkt 214001 PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 E:\FR\FM\01JYN1.SGM 01JYN1 EN01JY08.072</GPH> sroberts on PROD1PC70 with NOTICES 37450 Federal Register / Vol. 73, No. 127 / Tuesday, July 1, 2008 / Notices [FR Doc. E8–14820 Filed 6–30–08; 8:45 am] BILLING CODE 4000–01–C DEPARTMENT OF EDUCATION The Historically Black Colleges and Universities Capital Financing Advisory Board Department of Education, The Historically Black Colleges and Universities Capital Financing Advisory Board. ACTION: Notice of an open meeting. AGENCY: This notice sets forth the schedule and proposed agenda of an upcoming open meeting of the Historically Black Colleges and Universities Capital Financing Advisory Board. The notice also describes the functions of the Board. Notice of this meeting is required by Section 10(a)(2) of the Federal Advisory Committee Act and is intended to notify the public of their opportunity to attend. DATES: Friday, July 11, 2008. Time: 9 a.m.–11 a.m. ADDRESSES: Wyndham Grand Resort, Pelican Room, 6000 Rio Mar Boulevard, Rio Grande, Puerto Rico 00745. FOR FURTHER INFORMATION CONTACT: Don E. Watson, Executive Director, Historically Black College and University Capital Financing Program, 1990 K Street, NW., Room 6130, Washington, DC 20006; telephone: (202) 219–7037; fax: (202) 502–7852; e-mail: donald.watson@ed.gov. Individuals who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FRS) at 1–800–877–8339, Monday through Friday between the hours of 8 a.m. and 8 p.m., Eastern Standard Time. SUPPLEMENTARY INFORMATION: The Historically Black College and University Capital Financing Advisory Board (Board) is authorized by Title III, Part D, Section 347 of the Higher Education Act of 1965, as amended in 1998 (20 U.S.C. 1066f). The Board is established within the Department of Education to provide advice and counsel to the Secretary and the designated bonding authority as to the most effective and efficient means of implementing construction financing on historically black college and university campuses and to advise Congress regarding the progress made in implementing the program. Specifically, the Board will provide advice as to the capital needs of Historically Black Colleges and Universities, how those needs can be met through the program, and what additional steps might be sroberts on PROD1PC70 with NOTICES SUMMARY: VerDate Aug<31>2005 21:01 Jun 30, 2008 Jkt 214001 taken to improve the operation and implementation of the construction financing program. The purpose of this meeting is to review current program activities, provide guidance for 2008 activities, to make recommendations to the Secretary on the current capital needs of Historically Black Colleges and Universities, and to share additional steps in which the HBCU Capital Financing Program might improve its operation. Individuals who will need accommodations for a disability in order to attend the meeting (e.g., interpreting services, assistance listening devices, or materials in alternative format) should notify Don Watson at (202) 219–7037, no later than July 1, 2008. We will attempt to meet requests for accommodations after this date but cannot guarantee their availability. The meeting site is accessible to individuals with disabilities. An opportunity for public comment is available on Friday, July 11, 2008 between 10:30 a.m.–11 a.m. Those members of the public interested in submitting written comments may do so by submitting them to the attention of Don E. Watson, 1990 K Street, NW., Washington, DC, by Monday, July 7, 2008. Records are kept of all Board proceedings and are available for public inspection at the Office of The Historically Black College and University Capital Financing Advisory Board (Board), 1990 K Street, NW., Washington, DC 20006, from the hours of 9 a.m. to 5 p.m., Eastern Standard Time, Monday through Friday (EST). Electronic Access to This Document: You may 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/ federegister. 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 PO 00000 Frm 00045 Fmt 4703 Sfmt 4703 37451 Access at: http://www.gpoaccess.gov/nara/ index.html. Sara Martinez Tucker, Under Secretary of Education. [FR Doc. E8–14930 Filed 6–30–08; 8:45 am] BILLING CODE 4000–01–P DEPARTMENT OF ENERGY Proposed Agency Information Collection U.S. Department of Energy. Notice and Request for Comments. AGENCY: ACTION: SUMMARY: The Department of Energy (DOE) invites public comment on a proposed collection of information that DOE is developing for submission to the Office of Management and Budget (OMB) pursuant to the Paperwork Reduction Act of 1995. Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency’s estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Comments must be filed by September 2, 2008. If you anticipate difficulty in submitting comments within that period, contact the person listed in ADDRESSES as soon as possible. ADDRESSES: Send comments to Alice Lippert. Written comments may be sent to Office of Electricity Delivery and Energy Reliability (Attn: Comments on Refinery Disruption and Incident Report), OE–30, Forrestal Building, U.S. Department of Energy, Washington, DC 20585 or by fax at 202–586–2623, or by e-mail at Alice.Lippert@hq.doe.gov. To ensure receipt of the comments by the due date, submission by FAX or e-mail to is recommended. Alternatively, Alice Lippert may be contacted by telephone at 202–586–9600. FOR FURTHER INFORMATION CONTACT: Requests for additional information should be directed to Alice Lippert using the contact information listed above. DATES: E:\FR\FM\01JYN1.SGM 01JYN1

Agencies

[Federal Register Volume 73, Number 127 (Tuesday, July 1, 2008)]
[Notices]
[Pages 37422-37451]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-14820]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF EDUCATION

DEPARTMENT OF THE TREASURY

OFFICE OF MANAGEMENT AND BUDGET


Federal Family Education Loan Program (FFELP)

AGENCY: Department of Education, Department of the Treasury, Office of 
Management and Budget.

ACTION: Notice of terms and conditions of purchase of loans under the 
Ensuring Continued Access to Student Loans Act of 2008.

-----------------------------------------------------------------------

SUMMARY: Under section 459A of the Higher Education Act of 1965, as 
amended (``HEA''), as enacted within the Ensuring Continued Access to 
Student Loans Act of 2008 (Pub. L. 110-227), the Department of 
Education (``Department'') has the authority to purchase, or enter into 
forward commitments to purchase, Federal Family Education Loan Program 
(``FFELP'') loans made under sections 428 (subsidized Stafford loans), 
428B (PLUS loans), or 428H (unsubsidized Stafford loans) of the HEA, on 
such terms as the Secretary of Education (``Secretary''), the Secretary 
of the Treasury, and the Director of the Office of Management and 
Budget (collectively, ``Secretaries and Director'') jointly determine 
are ``in the best interest of the United States'' and ``shall not 
result in any net cost to the Federal Government (including the cost of 
servicing the loans purchased).''
    This notice (a) establishes the terms and conditions that will 
govern the loan purchases made under section 459A of the HEA, (b) 
outlines the methodology and factors that have been considered in 
evaluating the price at which the Department will purchase loans made 
under section 428, 428B, or 428H of the HEA, and (c) describes how the 
use of those factors and methodology will ensure that the loan 
purchases do not result in any net cost to the Federal Government. The 
Secretaries and Director concur in the publication of this notice and 
have jointly determined that the programs described in this notice are 
in the best interest of the United States and shall not result in any 
net cost to the Federal Government (including the cost of servicing the 
loans purchased).

DATES: Effective Date: The terms and conditions governing the Loan 
Purchase Commitment Program and the terms and conditions governing the 
Loan Participation Purchase Program are effective July 1, 2008.

FOR FURTHER INFORMATION CONTACT: Kristie Hansen, U.S. Department of 
Education, Office of Federal Student Aid, Union Center Plaza, 830 First 
Street, NE., Room 113F1, Washington, DC 20202. Telephone: (202) 377-
3309 or by e-mail: Kristie.Hansen@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 
alternative format (e.g., Braille, large print, audiotape, or computer 
diskette) on request to the contact person listed under FOR FURTHER 
INFORMATION CONTACT.

SUPPLEMENTARY INFORMATION:

Introduction

    The purchasing of loans is intended to encourage eligible FFELP 
lenders to provide students and parents access to Stafford and PLUS 
loans for the 2008-2009 academic year. To accomplish this objective, 
the Department is offering lenders the opportunity to participate in a 
Loan Purchase Commitment Program (``Purchase Program'') and a Loan 
Participation Purchase Program (``Participation Program'') 
(collectively, ``Programs'').
    Under the Loan Purchase Commitment Program, the Department may 
purchase eligible loans that are held by eligible lenders. To 
participate in the Purchase Program, each eligible lender must enter 
into a Master Loan Sale Agreement with the Department and deliver to 
the Department or its agent the fully executed master promissory note 
(or all electronic records evidencing the same) evidencing each 
eligible loan that the eligible lender wishes to sell to the Department 
and any and all other documents and computerized records relating to 
such eligible loans.
    Under the Loan Participation Purchase Program, the Department may 
purchase participation interests in eligible loans that are held by an 
eligible lender acting as a sponsor under a Master Participation 
Agreement. To participate in the Participation Program, each sponsor 
must enter into a Master Participation Agreement with the

[[Page 37423]]

Department and a third-party custodian acceptable to the Department and 
must have provided appropriate notice to the Department of the intent 
to participate in the Loan Purchase Commitment Program.\1\
---------------------------------------------------------------------------

    \1\ Lenders that qualify as ``eligible not-for-profit holders'' 
for a higher special allowance rate may sell participation interests 
in their loans under this program without loss of eligibility for 
that rate. An entity qualifies for that rate only if the entity is 
the ``sole beneficial owner of such loan.'' 20 U.S.C. 1085(p)(2)(C). 
Courts treat a participation interest in a loan as a beneficial 
ownership of a loan. The Department becomes a beneficial owner of a 
loan in which it purchases a participation interest, and the lender 
then holds a junior beneficial ownership interest. In light of other 
statutory provisions and the congressional intent they evidence, the 
Department interprets the HEA to disqualify an otherwise-eligible 
not-for-profit holder only if a for-profit entity acquires 
beneficial ownership of a loan. See 20 U.S.C. 1085(p)(2)(B), (E), 
(3).
---------------------------------------------------------------------------

Terms and Conditions

    Pursuant to section 459A of the HEA, the Secretaries and Director 
establish the terms and conditions that will govern the Loan Purchase 
Commitment Program (``Loan Purchase Commitment Program Terms and 
Conditions,'' attached as Appendix B to this notice) and the terms and 
conditions that will govern the Loan Participation Purchase Program 
(``Loan Participation Purchase Program Terms and Conditions,'' attached 
as Appendix C to this notice). The Loan Purchase Commitment Program 
Terms and Conditions and the Loan Participation Purchase Program Terms 
and Conditions are collectively referred to as the ``Terms and 
Conditions.'' (The Notice of Intent to Participate, referenced in the 
Terms and Conditions, is attached as Appendix D to this notice.)

Outline of Methodology and Factors in Determining Prices

    In accordance with Public Law 110-227, the goal in structuring the 
Purchase Program and the Participation Program described in this notice 
is to maximize student loan availability while ensuring loan purchases 
result in no net costs to the Federal Government. These programs will 
offer temporary liquidity to FFELP lenders at prices that will 
encourage their continued participation in the FFELP. This notice 
responds, in particular, to the requirement in section 459A of the HEA 
for an outline of the methodology and factors considered in evaluating 
the price at which loans may be purchased, and describes how the use of 
such methodology and consideration of such factors will ensure that no 
net cost to the Federal Government results from the loan purchases 
under these programs.
    Servicing and Financing Costs. In determining the prices described 
in this notice, the Secretary and the Secretary of the Treasury 
analyzed the costs incurred in making FFELP loans by large and small 
lenders, for-profit and not-for-profit lenders, and national and 
regional lenders based on publicly available data and consultations 
with a number of lenders and financial market analysts. This analysis 
examined lender returns in the context of loan servicing and financing 
expenses associated with obtaining funding to pay program costs and 
finance actual loan disbursements.
     The rate of lender returns on FFELP loans in the in-school 
and grace periods are effectively set by section 438 of the HEA at the 
commercial paper (CP) rate plus 1.19 percent or CP plus 119 basis 
points for for-profit lenders (a basis point equals one one-hundredth 
of a percent). 20 U.S.C. 1087-1(b)(2)(I)(ii) and (b)(2)(I)(vi)(I)(bb). 
For eligible not-for-profit holders, the HEA provides a return of CP 
plus 134 basis points. 20 U.S.C. 1087-1(b)(2)(I)(ii) and 
(b)(2)(I)(vi)(II)(bb). (These return levels reflect the net of borrower 
interest payments and Federal interest subsidies.) Returns are 
different for PLUS loans, which make up a relatively small portion of 
overall FFELP volume. These PLUS return levels were reflected in the 
cost neutrality calculations but, for simplicity, are not detailed in 
this notice.
     Lenders reported that loan servicing costs generally 
average between 30 basis points and 60 basis points per dollar loaned, 
with larger, more efficient lenders typically averaging closer to 30 
basis points and small or not-for-profit lenders averaging closer to 60 
basis points. Lenders pay the Department a 1 percent fee on each loan 
they make. 20 U.S.C. 1087-1(d)(2)(B). In addition, lenders must repay 
excess interest payments as required by section 438 of the HEA. 20 
U.S.C. 1087-1(b)(2)(v). Because the student borrowers of most loans 
subject to the Purchase Program and the Participation Program will be 
in school and not making payments on their loans during the 2008-2009 
academic year, lenders may need to obtain funding to make these 
statutorily-required payments to the Department. Financing costs (i.e., 
interest expenses incurred to obtain capital from deposits or from 
private capital markets) typically total 15 basis points for every 
dollar loaned.
     Subtracting estimated servicing and financing costs from 
the lender return levels established in the HEA leaves lenders with 
estimated pre-tax returns of CP plus 44-74 basis points for for-profit 
lenders and CP plus 59-89 basis points for lenders that are eligible 
not-for-profit holders. Lenders finance loan disbursements from these 
returns. If lenders sell participation interests in their loans under 
the Participation Program, they are charged CP plus 50 basis points, 
leaving a net pre-tax return of -6 basis points to 24 basis points for 
for-profit lenders. If lenders can obtain private financing at a lower 
interest rate, their net pre-tax return would be higher.
    Based on this background information, the Secretaries and Director 
determined that setting the price paid by lenders on a participation 
interest in a loan at the principal of that loan and the commercial 
paper rate plus 50 basis points would offer most lenders sufficient 
opportunity to continue their participation in the FFELP. Setting a 
higher price risks limiting participation to only the largest lenders, 
while offering a lower price would be overly generous, especially for 
those same large lenders.
    Origination and Deconversion Costs. In addition to servicing and 
financing costs, lenders incur administrative costs to originate loans 
and remove or ``deconvert'' loans from their servicing systems. In 
determining the proper price to reimburse lenders for these costs, the 
Department and the Department of the Treasury analyzed information from 
lenders and servicers.
    The Department and the Department of the Treasury consulted with 
lenders, who provided them with their estimated origination and 
deconversion costs. Larger, more efficient lenders indicated that their 
origination costs ranged between $20-$30 per loan while these costs for 
smaller lenders were $75 per loan. Lenders indicated that their 
estimated deconversion costs (i.e. the costs resulting from the process 
of taking a loan from one lender's servicing system and transferring it 
to another servicing system) ranged from $20-$50 per loan.
    To ensure the Participation Program is open to more than just the 
largest lenders, the Secretaries and Director used these estimates to 
establish a flat $75 fee paid on each loan sold to the Department to 
cover all servicing, origination, and deconversion costs. This assumes 
the lower end of the origination cost range and the higher end of the 
deconversion costs range.
    Pricing structures on many private servicing contracts tend to have 
costs that differ greatly for different services, with high origination 
costs and relatively low deconversion costs, or at times, the converse. 
Notwithstanding these differences, the Secretaries and Director are 
reasonably certain that the $75 fee accounts for these variations

[[Page 37424]]

while ensuring adequate participation in the Participation Program.

Analysis of Cost Neutrality

    The cost-neutrality analysis used credit subsidy cost estimation 
procedures established under the Federal Credit Reform Act of 1990 
(Pub. L. 101-508) and OMB Circular A-11. These procedures entail 
performing various analyses, projecting cash flows to and from the 
Government, and discounting those cash flows to the point of 
disbursement; the analysis also used the Credit Subsidy Calculator 
(``OMB calculator''), developed by the Office of Management and Budget 
to estimate credit subsidy costs for all Federal credit programs, as 
the discounting tool.\2\ The results of the analysis were subsidy rates 
that reflect the Federal costs associated with a loan; these costs are 
expressed as a percentage of the credit extended by the loan. For 
example, a subsidy rate of 10.0 percent indicates a Federal cost of $10 
on a $100 loan.
---------------------------------------------------------------------------

    \2\ The OMB calculator takes projected future cash flows from 
the Department's student loan cost estimation model and produces 
discounted subsidy rates reflecting the net present value of all 
future Federal costs associated with loans made in a given fiscal 
year. Values are calculated using a ``basket of zeros'' methodology 
under which each cash flow is discounted using the interest rate of 
a zero-coupon Treasury bond with the same maturity as that cash 
flow. To ensure comparability across various Federal credit 
programs, this methodology is incorporated into the calculator and 
used government-wide to develop estimates of the Federal costs of 
credit programs.
---------------------------------------------------------------------------

    The metric to determine cost neutrality was that costs under the 
new Programs should not exceed costs expected under the FFELP had the 
loan purchase authority in section 459A of the HEA not been enacted. 
Thus all costs were compared to estimates in the 2009 President's 
Budget for the FFELP, after adjustments were made for enacted 
legislation (other than the loan purchase authority provided by Pub. L. 
110-227), including administrative costs.
    Student loan cost estimates were developed to assess the Federal 
cost incurred for loans financed for students in five categories: 
Students attending proprietary schools, students attending two-year 
schools, freshmen/sophomores at four-year schools, juniors/seniors at 
four-year schools, and students in graduate programs. Risk categories 
have separate assumptions based on historical patterns--for example, 
the likelihood of default or the likelihood of statutory deferments or 
discharge benefits--of borrowers in each category. The analysis also 
considered risk factors that are particular to the new programs, such 
as the likelihood that lenders involved in loan participation 
agreements file for bankruptcy protection.
    This discussion outlines the analysis of the new Purchase Program 
and Participation Program with respect to the following critical 
aspects affecting the Federal cost:
    [cir] Administrative costs;
    [cir] Borrower behavior;
    [cir] Lender behavior; and
    [cir] Various risk factors.
    Administrative Costs. Under the Federal Credit Reform Act, Federal 
administrative costs are not included in credit subsidy cost 
calculations. However, to capture the full cost of the Purchase Program 
and Participation Program, section 459A of the HEA requires the 
determination of cost neutrality to include total costs, including 
Federal administrative costs that are subject to appropriation, and 
thus administrative costs were estimated and included in the cost-
neutrality analysis. Administrative cash flows primarily involve 
servicing costs associated with loans purchased by the Department. 
These costs extend for up to 40 years, because servicing must continue 
until the last loan is paid in full. Administrative costs also include 
start-up costs to enhance the Department's systems to accommodate the 
purchase of participation interests and any put FFELP loans. Other 
start-up costs include legal and technical advisory contracts and 
changes to Department accounting, reporting, and program compliance 
systems and processes.
    For the new programs, the Secretaries and Director estimated that 
start-up costs would be $15.7 million and servicing costs would vary, 
according to the amount of volume in the program. Estimates for start-
up costs were derived from conversations with the Department's existing 
service contract providers, while servicing cost estimates were derived 
from costs currently incurred with the Department's Federal Direct Loan 
servicing contract.
    Borrower Behavior. Given the base FFELP serves as the foundation of 
the new programs, and the characteristics of the base program are 
unchanged, there is no reason to believe that the Purchase Program and 
Participation Program outlined in this notice will affect borrower 
behavior. Thus, this cost analysis uses the same borrower behavior 
assumptions as were used in preparing the 2009 President's Budget to 
gauge the effect on program costs of borrower-based activities such as 
loan repayment, use of statutory benefits such as deferments and loan 
discharges, and default rates and timing. These assumptions are based 
on a wide range of data sources, including the National Student Loan 
Data System, the Department's operational and financial systems, and a 
group of surveys conducted by the National Center for Education 
Statistics such as the 2004 National Postsecondary Student Aid Survey, 
the 1994 National Education Longitudinal Study, and the 1996 Beginning 
Postsecondary Student Survey.
    Lender Behavior. A key factor in assessing whether the Purchase 
Program and Participation Program would operate in a cost-neutral 
manner was lender behavior: Specifically, how many lenders would 
participate in each program and how many loans would they eventually 
choose to sell to the Department. The Secretaries and Director 
considered alternative scenarios of market conditions and lender 
behavior to determine whether each program could be considered cost-
neutral.
    In one scenario, the Secretaries and Director assumed that market 
conditions would not improve and that FFELP lenders would put or sell 
participation interests to the Department in 100 percent of all FFELP 
loans made for the 2008-09 academic year. At the end of the 
participation period, FFELP lenders would also put 50 percent of those 
loans to the Department. The Secretaries and Director assumed that the 
loan volume would be $65 billion and that the total portfolio would be 
similar to the expected 2008-2009 school year of student loans under 
the FFELP before enactment of the loan purchase authority in Public Law 
110-227.\3\ Further, the loans purchased at the end of the 
participation period would be representative of the total loan volume. 
Under this scenario, we determined that costs for both the Purchase 
Program and the Participation Program were less expensive to the 
Government than for the baseline subsidy costs for FFELP loans costs 
for the FFELP baseline in this period. (Please see Table 2, located in 
Appendix A, for a summary of the analysis for this scenario, which also 
includes the risk factors discussed in this notice.)
---------------------------------------------------------------------------

    \3\ This loan volume assumption is the full FFELP non-
consolidation estimate for the 2008-2009 academic year (as presented 
in the 2009 President's Budget) and is adjusted to include increases 
to unsubsidized Stafford Loan limits provided for in Pub. L. 110-
227.
---------------------------------------------------------------------------

    The Secretaries and Director also considered other scenarios. In 
those scenarios, the Secretaries and Director sorted the expected FFELP 
volume under the Purchase Program and Participation Program into three

[[Page 37425]]

categories: Loans made by lenders and sold to the Department; loans 
made by lenders on which the lenders first sold participation interests 
to the Department and then, on September 30, 2009, sold the loans 
themselves to the Department; and loans made by lenders on which 
participation interests were sold to the Department but then redeemed 
by the lender, for a cash payment, eliminating the Department's 
participation interest. In general, the Secretaries and Director 
derived volume allocations under particular scenarios by making 
assumptions about near-term market conditions, likely lender behavior 
based on type of lending institution and operational capability, and 
projecting lender demand for any particular option under those 
conditions.
    One of these scenarios, considered to be one of the most costly to 
the Government, would be that market conditions improve significantly 
over the next year, and that lenders sell a greater proportion of 
higher cost loans to the Government (in a process often termed 
``cherry-picking''). A Congressional Budget Office analysis, and other 
analyses, of the FFELP portfolio have found that certain loans are more 
profitable for FFELP lenders than others. In particular, borrowers with 
small balances provide relatively little margin income relative to the 
fixed costs lenders face to service those loans. Some borrowers, 
including those that attended schools with higher than average default 
rates, are more likely to become delinquent and, consequently, present 
higher expected default costs, and greater losses of margin income due 
to default.
    The Terms and Conditions seek to reduce the impact of these risk 
factors. For example, program guidelines requiring lenders to sell all 
2008-09 Stafford loans held for a specific borrower, combined with the 
administrative complexity and expense of identifying and deconverting 
only less profitable loans, make it less likely that lenders will 
choose to sell only poorly-performing loans to the Department.
    Nevertheless, if financial markets improve to the point where 
lenders can finance most loans privately, they might still sell those 
least profitable loans to the Department. In this situation, borrowers 
with very low balances will present relatively high servicing costs to 
the Department per dollar of outstanding balance.
    Under the scenario described in the preceding paragraph, the 
analysis estimates 4 percent of FFELP volume ($65 billion in the 2008-
2009 academic year) will be loans made by lenders and sold to the 
Department; 32 percent of volume ($21 billion) would be loans for which 
participation interests, and then the loans themselves, would be sold 
to the Department; and 32 percent ($21 billion) would be loans for 
which participation interests were sold, but then redeemed.\4\ Cost 
estimates assuming these volume allocations and risk adjustments for 
this scenario still compared favorably with the costs for the base 
FFELP. (Please see Table 3, located in Appendix A, for a summary of the 
analysis for this scenario and the risk factors discussed in the 
following sections.)
---------------------------------------------------------------------------

    \4\ The loan volume assumption in this scenario was developed 
through conversations with a variety of lending institutions. 
Depository lending institutions indicated that they would use their 
own capital to originate new student loans rather than take 
advantage of the participation agreement structure. Non-depository 
institutions indicated they would use participation agreements. For 
the top 100 lenders in FY 2007, which together accounted for over 80 
percent of FFELP non-consolidation volume, 33 percent of volume was 
originated by depository institutions and 67 percent by non-
depository institutions. (Figures for non-depository institutions 
include loans made by depository institutions acting as eligible 
lender trustees.)
    Lenders currently have $50 billion in warehouses and substantial 
additional loans securitized in rollover accounts that will require 
long-term refinancing. These inventory stocks may provide lenders 
with an incentive to put loans. Representatives of depository 
institutions indicated they may increase volume to ensure students 
have access to loans, but may not want to maintain this additional 
volume on their books.
    In consideration of these factors, estimates assumed all 2008-
2009 FFELP non-consolidation loan volume originated by depository 
institutions over the level originated for 2007-2008 and 50 percent 
of 2008-2009 loans originated by non-depository institutions and 
included in the Loan Participation Purchase Program will be put. 
Estimates further assumed that all loans of $1,000 or less would be 
put first, with the balance up to the total amount put made up of 
loans of over $1,000.
---------------------------------------------------------------------------

    It should also be noted that, in addition to the examples discussed 
herein that represent certain abnormal market and lender behavior 
conditions, all other alternatives under which the Purchase Program and 
Participation Program were analyzed were less expensive than base FFELP 
costs.
    Risk Factors. Analyzing whether the Purchase Program and 
Participation Program would operate in a cost-neutral manner requires 
that projected costs account for the presence of various risks and cost 
factors that must be assumed since the programs will not operate 
entirely like the base FFELP, nor without operational risk. In addition 
to cherry-picking, the Secretaries' and Director's estimates included 
adjustments for four other factors: that lenders involved in loan 
participation agreements file for bankruptcy protection (``bankruptcy 
remoteness''); that lenders redeem their participation agreements 
early, reducing Federal earnings from the participation interests 
acquired (``interest adjustments''); that unforeseen problems undermine 
the Department's ability to effectively oversee and administer the 
Purchase Program and Participation Program (``operational risk''); and 
that some of the loans purchased by the Department would be those where 
the Department would otherwise reject a claim under the FFELP program 
(``claim rejects'').
    The Terms and Conditions for each program seek to reduce the impact 
of these risk factors. None of these factors is likely to lead to 
significant additional Federal costs. For example, the requirement that 
lenders sell participation interests that total at least $50 million 
will limit involvement to large financial institutions that, in 
general, are financially stable and not likely to proceed to 
bankruptcy. Additionally, upon filing for bankruptcy, the yield owed by 
the lender to the Department increases from principal of that loan and 
the commercial paper rate plus 50 basis points, to principal of that 
loan and the commercial paper rate plus 300 basis points.
    However, to ensure estimates reflect a conservative assessment of 
possible Federal costs, the Secretaries and Director added cost 
adjustments to incorporate each risk factor in all of the scenarios 
noted in the preceding paragraphs. The adjustments were based on an 
assessment of private-sector behavior and program data as follows:
     Bankruptcy remoteness. The Government might face legal 
risks if a lender declares bankruptcy while holding rights to loans 
under the participation agreement. The Secretaries and Director believe 
that the structure to be utilized under the Participation Program 
offers sufficient bankruptcy protection, in that legal title of these 
participated loans will be placed in a custodial facility, and that the 
participation agreement vests the Government with a valid security 
interest under the Uniform Commercial Code. Nonetheless, a bankruptcy 
court might tie up control of the loans until the claims of other 
creditors are settled. This risk is more present if markets remain 
distressed during the next one to two years as the likelihood of 
bankruptcy is higher; however, the risk never goes to zero entirely. 
For the scenario in Table 2 below (where the market conditions do not 
improve), the analysis assumes an increase in cost of 15 basis points. 
For the scenario in Table 3, where market conditions do improve, the 
analysis assumes an

[[Page 37426]]

increase in cost of 5 basis points. Assumptions are based on an 
estimated one-year default rate of lenders and potential recoveries on 
default.
     Interest adjustments. If financial market conditions 
significantly improve between now and the end of September 2009, 
lenders that took advantage of the participation agreements might opt 
to buy their loans out early and finance them privately through more 
favorable rates. While this outcome is highly desirable from a policy 
perspective, it would deprive the Department of some of the margin 
income it might expect from the participation agreement under a 
scenario where lenders opt to maintain their loans in the participation 
agreements until the last possible moment. The cost neutrality analysis 
below assumes a 20 basis point increase in the cost for interest that 
the Department does not realize, based on the expected placement of 
FFELP loans in the participation interest program, and the difference 
between the commercial paper rate plus 50 basis points lenders must pay 
the Department and the cost of Government borrowing.
     Operational risk. Operational risk is in general a major 
concern in all credit activities in both the public and private 
sectors, and has been a major focus in recent efforts to overhaul bank 
regulations. (Operational risk is limited in this analysis to that 
related to funding and management of the participation or loan purchase 
agreements.) In the new Purchase Program and Participation Program, 
operational risk might result from imperfect controls of ineligible 
lending, servicing errors, technology failures, and the risk of fraud. 
While the Department has made every effort to mitigate operational 
risk, the emergency nature and accelerated implementation timeframe for 
these Programs make operational risk more of a concern than in 
established Department programs. For the low risk scenario, the 
analysis below assumes a 10 basis point increase in cost, reflecting 
risks other than credit or market risk, as banks are currently required 
to finance on average about eight percent of their assets with capital. 
For the high scenario, we raised the factor related to operational risk 
by 70 basis points to equal a total of 0.80 percent. We estimated this 
worst-case scenario using survey data from bank regulators implementing 
an overhaul of bank regulations. The largest United States banking 
organizations will be subject to a new system of capital requirements 
which includes an explicit charge for operational risk. Under that 
regulation banks must develop models generating a probability 
distribution of losses for operational risk, and hold capital equal to 
the 99.9th percentile of that estimated probability distribution. Banks 
were surveyed to measure the anticipated impact of the regulation. 
Using the best available models of operational risk, the banks reported 
that operational risk would account for roughly ten percent of their 
required capital. As banks currently finance on average about eight 
percent of their assets with capital, worst-case scenario operational 
risk losses can thus be estimated at about one percent of total assets. 
Also, while we do not believe that this program has, or necessarily 
will, face such a level of operational risk, we developed the high 
scenario to ensure that the program is cost neutral, even under extreme 
and unlikely circumstances.
     Claim rejects. This risk factor takes into account the 
costs associated with the purchase of loans that would not typically 
qualify for the federal guarantee in the FFEL program due to improper 
origination or servicing. The 6 basis point increase in cost is based 
on a historical rejected claim rate of 1 percent of volume, and assumes 
that these loans would have higher loss rates than the average 
portfolio.
    Cost estimates reflecting these factors, for each of the market 
condition and lender behavior scenarios discussed elsewhere in this 
notice, were calculated and included, as illustrated in Tables 2 and 3. 
As those analyses show, even with these risk adjustments, the estimated 
costs of the loans included in the Purchase Program and Participation 
Program remained lower than those for standard FFELP loans.
    Conclusion. After taking into account alternative market and lender 
behavior scenarios and appropriate risk factors, the Secretaries and 
Director determine that the Purchase Program and Participation Program 
are in the best interest of the United States and will result in no net 
cost to the Federal Government (including the cost of servicing the 
loans purchased).
    Applicable Program Regulations: 34 CFR part 682.

Electronic Access to This Document

    You may view this document, as well as all other Department of 
Education documents 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/index.html.
    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. You may also view this 
document in PDF at the following site: http://www.ifap.ed.gov.

    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.

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

    Program Authority: 20 U.S.C. 1087i-1.

    Dated: June 25, 2008.
Margaret Spellings,
Secretary of Education.
    Dated: June 25, 2008.
Henry M. Paulson, Jr.,
Secretary of the Treasury.
    Dated: June 25, 2008.
Jim Nussle,
Director, Office of Management and Budget.
BILLING CODE 4000-01-P

[[Page 37427]]

[GRAPHIC] [TIFF OMITTED] TN01JY08.049


[[Page 37428]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.050


[[Page 37429]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.051


[[Page 37430]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.052


[[Page 37431]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.053


[[Page 37432]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.054


[[Page 37433]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.055


[[Page 37434]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.056


[[Page 37435]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.057


[[Page 37436]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.058


[[Page 37437]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.059


[[Page 37438]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.060


[[Page 37439]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.061


[[Page 37440]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.062


[[Page 37441]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.063


[[Page 37442]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.064


[[Page 37443]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.065


[[Page 37444]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.066


[[Page 37445]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.067


[[Page 37446]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.068


[[Page 37447]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.069


[[Page 37448]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.070


[[Page 37449]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.071


[[Page 37450]]


[GRAPHIC] [TIFF OMITTED] TN01JY08.072


[[Page 37451]]


[FR Doc. E8-14820 Filed 6-30-08; 8:45 am]
BILLING CODE 4000-01-C