Federal Family Education Loan Program, 31312-31317 [2011-13339]

Agencies

• DEPARTMENT OF EDUCATION

[Federal Register Volume 76, Number 104 (Tuesday, May 31, 2011)]
[Notices]
[Pages 31312-31317]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-13339]


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DEPARTMENT OF EDUCATION


Federal Family Education Loan Program

AGENCY: Federal Student Aid, Department of Education.

ACTION: Notice inviting guaranty agencies to submit proposals to 
participate in a Voluntary Flexible Agreement.

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SUMMARY: The Secretary invites guaranty agencies with agreements to 
participate in the Federal Family Education Loan (FFEL) Program to 
submit proposals to enter into a Voluntary Flexible Agreement (VFA) 
with the Secretary, as authorized by section 428A of the Higher 
Education Act of 1965, as amended (HEA). Guaranty agencies whose 
proposals are accepted will operate under the requirements of the VFA 
in lieu of the guaranty agency agreements established under sections 
428(b) and (c) of the HEA.
    The intent of this invitation is for the Secretary to receive 
proposals from guaranty agencies or from teams of guaranty agencies, 
that will lead to the development of VFAs that will enhance the 
integrity and stability of the FFEL Program, improve services to 
students, schools and lenders, and use Federal resources more cost-
effectively and efficiently. The Secretary is particularly interested 
in receiving proposals that eliminate poorly aligned incentives in

[[Page 31313]]

the current guaranty agency structure as well as the conflicts of 
interest that may potentially exist when a guaranty agency is 
responsible for both default prevention and default collections.
    The Secretary invites the submission of either individual proposals 
from a single guaranty agency or joint proposals from teams of guaranty 
agencies. However, under the Secretary's planned reorganization of 
guaranty agency responsibilities, as described in the ``Scope of the 
VFAs'' section of this notice, it is likely that joint proposals would 
result in greater efficiencies and ease of implementation. A joint 
proposal, if approved, will result in separate, but complementary, VFAs 
for each of the agencies in the team.
    A guaranty agency may submit more than one proposal in response to 
this notice. However, an agency will have only one VFA, that could 
provide that the agency assume a number of different guaranty agency 
activities as described in the GA Responsibility Areas section of this 
notice.
    This notice provides information on the scope and conditions of VFA 
proposals that the Secretary is seeking, the procedures for the 
submission of VFA proposals, the information that must be included in a 
VFA proposal submitted in response to this notice, and the steps the 
Secretary will take when finalizing a VFA.

DATES: Deadline for submission of a VFA proposal: August 1, 2011.

ADDRESSES: VFA proposals must be submitted via e-mail to the following 
e-mail address: vfateam@ed.gov.
    Instructions for Submitting Proposals: Each VFA proposal must be 
accompanied by a cover letter. The cover letter for an individual 
proposal submitted by one guaranty agency must be on the guaranty 
agency's letterhead, signed by the chief executive officer of the 
guaranty agency, and include the name, mailing address, e-mail address, 
Fax number, and telephone number of a contact person at the guaranty 
agency.
    While the cover letter for a joint proposal submitted by a team of 
guaranty agencies may be on the letterhead of one of the guaranty 
agencies included in the proposal, it must be signed by the chief 
executive officer of each of the guaranty agencies included in the 
joint proposal. The letter must also include the name, mailing address, 
e-mail address, Fax number, and telephone number of a contact person at 
each of those guaranty agencies.
    The cover letter and the proposal are to be submitted as Adobe 
Portable Document (PDF) attachments to an e-mail message sent to the e-
mail address provided in the ADDRESSES section of this notice. The 
``Subject'' line of the e-mail must read ``VFA Proposal-2011''.

FOR FURTHER INFORMATION CONTACT: Diane McLaughlin, U.S. Department of 
Education, Federal Student Aid, room 101J2, 830 First Street, NE., 
Washington, DC 20002. Telephone: (202) 377-3748 or by e-mail: 
diane.mclaughlin@ed.gov.
    If you use a telecommunications device for the deaf (TDD), call the 
Federal Relay Service (FRS), toll free, at 1-800-877-8339. Individuals 
with disabilities can obtain this document in an accessible format 
(e.g., braille, large print, audiotape, or computer diskette) on 
request to the program contact person listed above.

SUPPLEMENTARY INFORMATION:

Voluntary Flexible Agreements

    Under sections 428(b) and (c) of the HEA, guaranty agencies perform 
certain roles in the FFEL Program pursuant to agreements with the 
Secretary. Section 428A of the HEA authorizes the Secretary to enter 
into VFAs with guaranty agencies to replace the agreements required 
under sections 428(b) and (c) of the HEA. The purpose of a VFA is to 
permit a more flexible agreement between the Secretary and the guaranty 
agency than the standard agreements. The VFA authority allows the 
Secretary and the guaranty agency to develop, utilize, and evaluate 
alternate ways of ensuring that the responsibilities of FFEL Program 
guaranty agencies are fulfilled in the most cost-effective and 
efficient manner possible. The overall cost to the Federal government 
cannot increase as a result of the VFAs.
    As part of a VFA with a guaranty agency, the Secretary may waive or 
modify statutory and regulatory requirements as necessary, except that 
the Secretary may not waive any statutory requirements related to the 
terms and conditions attached to student loans or to default claim 
amounts paid to lenders.
    The HEA specifies that a VFA may include provisions related to the 
responsibilities of a guaranty agency with respect to: Administering 
the issuance of insurance on loans; monitoring student loan insurance 
commitments; undertaking default aversion activities; reviewing lender 
default claims; collecting defaulted loans; adopting internal systems 
of accounting and auditing that are acceptable to the Secretary and 
result in timely, accurate, and auditable reporting to the Secretary; 
monitoring institutions and lenders; and engaging in informational 
outreach to schools and students in support of access to higher 
education.
    The VFA may specify the fees the Secretary will pay, in lieu of 
revenues the guaranty agency would otherwise receive, and other funds 
that the agency may receive and retain. The VFA may also specify: The 
use of net revenues for other activities in support of postsecondary 
education; the performance standards that will be used to assess the 
agency's performance under the VFA and the consequences of the agency's 
failure to meet those standards; the circumstances under which a VFA 
may be terminated by the Secretary in advance of any established 
termination date; other student loan-related businesses the Secretary 
will permit the guaranty agency to engage in, and any other provisions 
the Secretary believes are necessary to protect the United States from 
unreasonable risk of loss.
    Pursuant to section 428A(b)(2)(B) of the HEA, the Secretary's costs 
under the VFAs resulting from this notice may not, in the aggregate, 
exceed the costs the Secretary would have incurred absent the VFAs. 
Therefore, to finalize the VFAs the Secretary must conclude that the 
total projected cost for all of the VFAs will not increase Federal 
costs compared to the projected costs under the original agreements. As 
the VFAs are implemented, the Secretary will monitor, at least 
quarterly, the Federal costs of the VFAs to ensure that the VFAs 
continue to meet this statutory cost requirement.
    The Secretary has exercised VFA authority in the past by entering 
into VFAs with five guaranty agencies. The last of those VFAs expired 
on September 30, 2008. A report on that earlier VFA initiative can be 
found at https://www.fp.ed.gov/PORTALSWebApp/fp/proj2.jsp.

Impact of ECASLA and the SAFRA Act

    The Secretary is requesting proposals for VFAs at this time because 
of significant legislative changes made to the FFEL Program over the 
past few years.
    The Ensuring Continued Access to Student Loan Act of 2008, as 
amended (Pub. L. 110-227) (ECASLA), authorized the Secretary to create 
programs to allow FFEL loan holders to sell certain outstanding FFEL 
Program loans to the Secretary. Under those programs, FFEL Program 
lenders sold more than 24.5 million loans to the Secretary. As a 
result, the outstanding portfolio of FFEL Program loans under guarantee 
has declined by more than $100 billion,

[[Page 31314]]

reducing both the short-term and long-term revenues of guaranty 
agencies.
    The SAFRA Act, part of the Health Care and Education Reconciliation 
Act of 2010 (Pub. L. 111-152), ended, as of July 1, 2010, the 
origination of new FFEL Program loans. As of July 1, 2010, all 
Stafford, PLUS, and Consolidation loans are being made under the 
William D. Ford Federal Direct Loan (Direct Loan) Program. The end of 
new FFEL Program loan originations necessarily changes the types and 
scope of guaranty agency activities. It also means that FFEL guaranty 
agencies will not have the estimated $75 billion of annual new loan 
volume that otherwise would have been added to their portfolios, thus 
resulting in further reductions to guaranty agency revenues.
    As a result of the ECASLA loan sales and the end of new FFEL 
Program loan originations because of the SAFRA Act, the total dollar 
amount of the FFEL Program guaranty agency portfolio has, as of 
December 31, 2010, been reduced by more than 20 percent from its total 
on December 31, 2008. As noted, this revenue reduction jeopardizes the 
guaranty agencies' ability to meet their FFEL Program responsibilities. 
In light of these circumstances, the Secretary believes that it is 
appropriate to establish new guaranty agency structures and financing 
mechanisms that will protect the Federal fiscal interest in the 
outstanding FFEL Program portfolio.
    The Secretary also wants to ensure that guaranty agencies are able 
to continue to provide high quality services to borrowers, lenders, and 
schools while supporting the important responsibilities that they have 
in the areas of default prevention, outreach, and oversight.

Scope of the VFAs

    The Secretary intends to use VFAs to reorganize guaranty agency 
responsibilities among VFA participating agencies in a way that will 
ensure that borrowers, students, and lenders receive needed services in 
a manner that is cost-effective for the taxpayer, eliminates the 
potential for conflicts of interest, and fully supports the FFEL 
Program. The VFAs will also provide important operational, fiscal, and 
program information that the Secretary may find beneficial in the 
administration of the Federal student financial assistance programs 
authorized by Title IV of the HEA.
    The Secretary expects that the VFAs will reduce guaranty agency 
operating costs from resulting economies of scale and from the specific 
programmatic strengths of individual agencies. One way to achieve 
economies of scale is by consolidating FFEL defaulted loan collection 
responsibilities among a small number of guaranty agencies. The 
Secretary expects that such consolidation would significantly reduce 
program costs for collections and related activities while providing 
resources to support other guaranty agency responsibilities.
    GA Responsibility Areas: The Secretary believes that an effective 
way to reorganize guaranty agency responsibilities is to arrange those 
responsibilities into the four distinct areas identified in this notice 
and described as ``GA Responsibility Areas.'' The activities and 
responsibilities included in each of the GA Responsibility Areas will 
be assigned to guaranty agencies so as to build on the particular 
strengths of an agency and reduce costs through efficiencies and 
economies of scale. Under this approach, each guaranty agency that 
participates under a VFA, as a result of the process announced in this 
notice, will assume responsibility for the activities included in one 
or more of the GA Responsibility Areas. The guaranty agency will likely 
be responsible for those activities not only for its own loan portfolio 
and service area but also, if included in the VFA, for the portfolio 
and service area of one or more other guaranty agencies participating 
under a VFA with the Secretary. At the same time, the guaranty agency 
would relinquish its responsibility for GA Responsibility Area 
activities assumed by other guaranty agencies under their respective 
VFAs.
    A GA Responsibility Area will only be assigned to a guaranty agency 
if the guaranty agency has demonstrated competency in performing the 
activities associated with that GA Responsibility Area.
    The Secretary has established the following four GA Responsibility 
Areas for the purpose of soliciting proposals from, and finalizing VFAs 
with, guaranty agencies. As noted elsewhere in this notice, VFA 
proposals may be submitted by one guaranty agency on its own behalf or 
by a team of guaranty agencies submitting a joint proposal. A joint 
proposal should clearly indicate which agency or agencies within the 
group will assume which GA Responsibility Area activities.
    As discussed below, each VFA proposal must include the types of 
data and measurements the guaranty agency suggests could be used to 
evaluate its performance under the VFA. The discussion of each GA 
Responsibility Area below includes examples of the types of data and 
measurements that the Secretary believes may be appropriate. Each VFA 
ultimately executed by the Department and the guaranty agency will 
include the specific data and measurements that will be used to 
evaluate the success of the VFA.

GA Responsibility Area I--Lender Claims Review, Lender Claims Payment, 
and Collections

    A guaranty agency that assumes, as part of its VFA, GA 
Responsibility Area I will perform the related activities for its own 
loan portfolio and for the portfolios of other guaranty agencies 
participating under a VFA with the Secretary. Thus, that guaranty 
agency must have the managerial and operational capacity, including 
significant and demonstrable scalability in its systems and other 
infrastructure, to assume expanded claims review, claims payment, and 
collections responsibilities. The guaranty agency must have efficient 
and cost-effective systems and processes that will result in 
significant cost savings when applied to the larger portfolio of loans 
for which it would be responsible.
    A guaranty agency that assumes GA Responsibility Area I may not 
also assume GA Responsibility Area II (Delinquency and Default 
Prevention and Management). This restriction is intended to eliminate 
the potential for conflicts of interest that may exist when a guaranty 
agency is responsible for default aversion on loans for which it may 
also be responsible for default collections if its default prevention 
efforts are not successful. For similar reasons, a guaranty agency that 
assumes GA Responsibility Area I may not also assume GA Responsibility 
Area IV (Lender/Servicer Oversight).
    A proposal to assume GA Responsibility Area I must include a 
suggested set of specific objectives, activities, and performance 
measures that the Secretary could use to evaluate the guaranty agency's 
effectiveness in meeting the proposed objectives by carrying out the 
proposed activities.
    The proposal must include a description of the specific data that 
the guaranty agency will provide to the Secretary for the evaluation. 
While proposals may include output measures, they should include 
specific and measurable outcomes. For example, an agency might propose 
to measure its success in working with borrowers to resolve defaults 
after the default claim was filed by the lender but before the agency 
paid the claim. This type of outcome measure is preferable to only 
measuring output in the form of counting the number of days it took the

[[Page 31315]]

agency to review a claim and make the insurance payment to the lender.
    An agency could also measure the borrower experience in terms of 
satisfaction with the collection communications from the agency (or its 
collection contractors) and the borrower's continued compliance with an 
established payment plan. Again, this type of outcome measure is 
preferable to an output measure such as the number of borrowers 
contacted.
    A joint proposal submitted by a team of guaranty agencies must 
specifically identify which guaranty agency within the group, if any, 
the team requests the Secretary to consider for assumption of Guaranty 
Agency Responsibility Area I. If one of the guaranty agencies in a team 
wishes to assume GA Responsibility Area I and others in the team GA 
Responsibility II or GA Responsibility Area IV, the proposal must show 
how the participating guaranty agencies will avoid potential conflicts 
of interest within the team with regard to collections and default 
aversion and lender oversight.

GA Responsibility Area II (Delinquency and Default Prevention and 
Management)

    A guaranty agency that assumes, as part of its VFA, GA 
Responsibility Area II for itself, and if included in the VFA, for the 
portfolios and service areas of other guaranty agencies participating 
under a VFA with the Secretary, must have the expertise and capacity to 
develop, implement, and evaluate a delinquency and default prevention 
and management program in an efficient and cost-effective manner. Any 
guaranty agency requesting GA Responsibility Area II must be able to 
demonstrate that it has these capabilities and that it has a plan for a 
robust delinquency and default prevention program.
    A proposal to assume GA Responsibility Area II must include a 
suggested set of specific objectives, activities, and performance 
measures that the Secretary could use to evaluate the guaranty agency's 
effectiveness in meeting the proposed objectives by carrying out the 
proposed activities.
    The proposal must include a description of the specific data that 
the guaranty agency will provide to the Secretary for the evaluation. 
The proposal should include outcomes not just outputs. For example, an 
agency might measure the extent to which borrowers understand their 
rights, obligations, and responsibilities as Federal student loan 
borrowers. This might include monitoring the repayment performance of 
delinquent borrowers who received intervention services from the agency 
or measuring whether borrowers, based upon the agency's communications 
and other intervention strategies, chose a more appropriate repayment 
plan for their financial situation.
    These types of outcome measures are preferable to only providing a 
routine output measure of counting the number of delinquent borrowers 
contacted.
    An agency could also work with postsecondary institutions to 
develop or enhance, and measure the effectiveness of student loan 
counseling programs and other financial counseling tools through 
students' demonstrated understanding of the implications of borrowing 
to meet postsecondary educational expenses, including methods for 
managing student loans and other financial transactions. An example of 
student behavior that can be measured to demonstrate that a student 
understands these issues might be measured by whether the student has 
provided the institution with information that will allow the 
institution to deposit the student's Title IV credit balances into a 
no-cost to the student account at a bank, credit union, or other 
federally insured account.
    These types of outcome measures are preferable to only providing an 
output measure such as the number of counseling sessions held or the 
number of borrower ``hits'' on a Web site.
    A joint proposal from a team of guaranty agencies must specifically 
identify which guaranty agency or guaranty agencies the team requests 
the Secretary to consider for Guaranty Agency Responsibility Area II.

GA Responsibility Area III (Community Outreach, Financial Literacy and 
Debt Management, School Training and Assistance, and School Oversight)

    A guaranty agency that assumes, as part of its VFA, GA 
Responsibility Area III must have the expertise and capacity to 
develop, implement, and evaluate a strategy to perform one or more of 
the GA Responsibility Area III activities in an efficient and cost-
effective manner. The guaranty agency must be able to demonstrate that 
it has these capabilities and has a plan for a comprehensive and 
scalable community outreach, financial literacy, training, and/or 
school oversight program for its current service area and, if included 
in the VFA, the service areas of other guaranty agencies participating 
under a VFA with the Secretary.
    While not every guaranty agency performing GA Responsibility Area 
III activities must carry out every allowable function independently, 
any joint proposals must demonstrate how all of the functions will be 
carried out by the team (e.g., one guaranty agency may carry out 
financial literacy efforts exclusively, while other guaranty agencies 
in the team perform the other GA Responsibility Area III functions).
    A proposal to assume GA Responsibility Area III must include a 
suggested set of specific objectives, activities, and performance 
measures that the Secretary could use to evaluate the guaranty agency's 
effectiveness in meeting the proposed objectives by carrying out the 
proposed activities.
    The proposal must include a description of the specific data that 
the guaranty agency will provide to the Secretary for the evaluation. 
The proposal should include outcomes not just outputs. For example, an 
agency might measure the effectiveness of its outreach and education 
activities by measuring the number of low-income, first-generation, and 
other under-represented students participating in postsecondary 
education. Indicators of effectiveness might include determining the 
number of such students who apply for admission to postsecondary 
institutions, complete and submit a FAFSA, apply for scholarships and 
other non-Federal assistance, exhaust all Federal and State aid options 
before taking private education loans, and enroll in and successfully 
complete a postsecondary education program of study. An agency could 
also determine the number of such students who indicate that they 
compare institutions, including financial aid awards, before selecting 
an institution and an academic program. These examples of outcome 
measures would be preferable to only providing an output measure such 
as the number of students or families contacted, the number of 
publications distributed, or the reach of a media campaign.
    Another example of an outcome measure for GA Responsibility Area 
III might be evaluating the effectiveness of the agency's training with 
and oversight of postsecondary institutions. Such an evaluation might 
assess whether and to what extent, as a result of the agency's training 
and intervention, the institution's understanding of and compliance 
with the requirements of the Title IV student aid programs improved. 
This type of outcome measure is preferable to only providing an output 
measure such as the number of training activities conducted or the 
number of program reviews completed.
    A joint proposal submitted by a team of guaranty agencies must 
specifically identify which guaranty agency or guaranty agencies the 
team requests the

[[Page 31316]]

Secretary to consider for GA Responsibility Area III.

GA Responsibility Area IV (Lender and Lender Servicer Oversight)

    A guaranty agency that assumes, as part of its VFA, GA 
Responsibility Area IV must have the expertise and capacity to perform 
lender and lender servicer oversight in an efficient and cost-effective 
manner. The guaranty agency must be able to demonstrate that it has 
this capability and has a plan for a comprehensive and scalable 
oversight program for lenders assigned to the agency under the VFA.
    A proposal to assume GA Responsibility Area IV must include a 
suggested set of specific objectives, activities, and performance 
measures that the Secretary could use to evaluate the guaranty agency's 
effectiveness in meeting the proposed objectives by carrying out the 
proposed activities. The proposal must also include an evaluation plan 
and the specific data that the guaranty agency will provide to the 
Secretary for the evaluation. Where possible, the evaluation plan 
should include outcomes not just outputs. For example, an agency might 
assess whether, and to what extent, as a result of the agency's 
intervention, the lender's or servicer's understanding of and 
compliance with FFEL Program requirements has improved. This type of 
outcome measure is preferable to output measures such as the number of 
oversight activities completed or the number of findings reported.
    A joint proposal submitted by a team of guaranty agencies must 
specifically identify which guaranty agency or guaranty agencies the 
team wishes the Secretary to consider for GA Responsibility Area IV.

Combinations of GA Responsibility Areas

    A VFA proposal may include a request that a guaranty agency assume 
more than one GA Responsibility Area. For example, a proposal may 
request that the guaranty agency assume GA Responsibility Area II 
(Delinquency and Default Prevention and Management) and GA 
Responsibility Area IV (Lender and Lender Servicer Oversight), or a 
submission may propose that the guaranty agency assume GA 
Responsibility Area II (Delinquency and Default Prevention and 
Management) and GA Responsibility Area III (Community Outreach, 
Financial Literacy and Debt Management, School Training and Assistance, 
and School Oversight).
    However, as noted earlier in this notice, a guaranty agency that 
assumes GA Responsibility Area I (Lender Claims Review, Lender Claims 
Payment, and Collections) may not also assume GA Responsibility Area II 
(Delinquency and Default Prevention and Management) or GA 
Responsibility Area IV (Lender and Lender Servicer Oversight).

Secretary's Oversight

    The Secretary will enhance oversight and monitoring of guaranty 
agencies--including those that have not entered into VFAs--to determine 
their continued financial viability and operational capacity to 
properly perform their FFEL Program responsibilities.
    Each guaranty agency that participates under a VFA resulting from 
this notice will be subject to oversight by the Secretary. This 
oversight will include, at a minimum, requirements for the guaranty 
agency to submit operational status reports, financial reports, 
performance metrics, and the results of the evaluations discussed in 
the Information to be Included with the VFA Proposal section of this 
notice.
    Oversight will also include monitoring to ensure that the guaranty 
agency meets its responsibilities under the Federal Information 
Security Management Act of 2002 (FISMA).
    A guaranty agency that does not enter into a VFA with the Secretary 
will continue to operate under the regular guaranty agency agreements 
of sections 428(b) and (c) of the HEA. However, because of the 
previously discussed financial and operational impacts on guaranty 
agencies of ECASLA and the SAFRA Act, the Secretary will carefully 
monitor such guaranty agencies to determine their continued financial 
viability and operational capacity to properly perform their FFEL 
Program responsibilities. This includes monitoring to ensure that the 
agencies meet their responsibilities under FISMA.

Financing of VFA Activities

    Using the statutory authority for VFAs in section 428A of the HEA, 
the Secretary intends to modify the process for, and the types and 
amount of, payments provided to guaranty agencies participating under a 
VFA.
    The Secretary expects that the reorganization of responsibilities 
among guaranty agencies under the VFAs as discussed in this notice will 
result in significant economies of scale and increased efficiencies. 
This will be especially true for those guaranty agencies assigned to GA 
Responsibility Area I (Lender Claims Review, Lender Claims Payment, and 
Collections). A portion of the amounts available from collections 
generated by the fewer number of guaranty agencies that will be 
assigned to GA Responsibility Area I, along with amounts that otherwise 
would have been provided to VFA participating guaranty agencies in the 
form of Account Maintenance Fees and Default Aversion Fees, will be 
used by the Secretary to support the activities of guaranty agencies 
assuming GA Responsibility Areas II, III, and IV.
    All payments to each guaranty agency will be made by the Secretary 
according to the terms of the financing plan included in the VFA with 
that agency. No payments will be made, directly or indirectly, from one 
guaranty agency to another and no guaranty agency may share its income 
under the VFA with another guaranty agency without the approval of the 
Secretary.
    Therefore, as noted in the following Information to be Included 
with the VFA Proposal paragraphs, proposals that identify a guaranty 
agency that wishes to assume GA Responsibility Area I activities must 
provide a performance-based financing structure that includes a 
comparison of current cash flows to projected cash flows that 
demonstrates increased cost-effectiveness.
    Proposals that identify a guaranty agency that wishes to assume 
activities in GA Responsibility Area II, GA Responsibility Area III, or 
GA Responsibility Area IV must include a proposed performance-based 
financing plan describing what each of the activities proposed will 
cost and how the guaranty agency expects to cover those costs.
    Guaranty agencies proposing to assume GA Responsibility Area II 
and/or GA Responsibility Area III activities are encouraged to include 
in their proposals pricing strategies that include leveraging 
activities and costs in partnership with other, non-guaranty agency 
entities or organizations.

Request for Proposals

    Guaranty agencies with agreements with the Secretary under sections 
428(b) and (c) of the HEA wishing to enter into a VFA with the 
Secretary as outlined in this notice must submit a written proposal by 
the date established in the DATES section of this notice.
    The Secretary believes that a comprehensive proposal can be 
presented in approximately 25 pages, excluding any tables, charts, or 
other similar attachments.

Information To Be Included With the VFA Proposal

    Each proposal for a VFA in response to this notice must include, 
for each of

[[Page 31317]]

the GA Responsibility Areas the guaranty agency or team of guaranty 
agencies wishes to assume, a discussion of the following:
     The specific objectives the guaranty agency or team 
proposes to accomplish.
     The specific activities the guaranty agency or team of 
guaranty agencies proposes to perform to meet those objectives.
     Where possible, summaries of and links to research 
providing justification for specific activities the guaranty agency or 
team of guaranty agencies proposes to perform. This information is 
particularly valuable for activities included in GA Responsibility 
Areas II and III.
     An implementation plan for carrying out the specific 
activities proposed for each GA Responsibility Area.
     A description of the expertise and accomplishments the 
guaranty agency or team of guaranty agencies has for the activities of 
each of the GA Responsibility Areas requested.
     How the proposed VFA would improve services to borrowers, 
lenders, schools, and the Department of Education.
     The specific performance metrics the guaranty agency or 
team of guaranty agencies proposes to use to measure benefits of the 
VFA to borrowers, lenders, students, and taxpayers.
     Plans for an evaluation scheme for the activities assigned 
to the guaranty agency or team of guaranty agencies, including, if 
feasible, plans for the evaluations to be conducted by an independent 
agency or organization not affiliated with the guaranty agency or 
agencies. As noted with some specificity under the discussions for each 
of the GA Responsibility Areas, evaluations should emphasize outcomes 
and not only outputs.
     Specific financing plans for each of the GA Responsibility 
Areas requested by the guaranty agency or team of guaranty agencies.
     How the proposal will create efficiencies in performing 
the activities of the GA Responsibility Area or Areas assumed by the 
guaranty agency or the team of guaranty agencies.
     An explanation of the likely impact the proposed VFA may 
have on the continued financial and operational viability of the 
guaranty agency.
     Any limitations on the expansion of the activities of the 
GA Responsibility Area beyond the existing portfolio and/or service 
area of the guaranty agency, including any timing constraints to such 
an expansion.
     How each guaranty agency will comply with FISMA.

Availability of Proposals

    VFA proposals will generally be considered public documents and 
will be available to members of the public and to other guaranty 
agencies. However, the Secretary intends to exempt pricing and 
financing information included in the proposal from disclosure as 
confidential business information.

Selection

    After reviewing and evaluating each VFA proposal received in 
response to this notice, the Secretary will decide whether to begin 
discussions with the guaranty agency or team of guaranty agencies that 
submitted the proposal to develop the VFAs. These discussions will 
address issues such as:
     The financing plan for the activities to be assumed by the 
guaranty agency or team of guaranty agencies.
     The budgets, allocation methods, and financing mechanisms 
(including performance-based financing mechanisms) that will be used to 
reimburse the guaranty agency for the activities it has assumed.
     Required reporting, including audit requirements.
     The standards by which each guaranty agency's performance 
of its responsibilities under the VFA will be assessed.
     The circumstances under which the VFA may be terminated by 
the Secretary.
     Other provisions that the Secretary may determine to be 
necessary to protect the United States from the risk of unreasonable 
loss and to promote the purpose of the Federal student aid programs.
    Electronic Access to This Document: 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 via the Federal Digital System 
at: https://www.gpo.gov/fdsys. At this site you can view this document, 
as well as all other documents of this Department published in the 
Federal Register, in text or Adobe Portable Document Format (PDF). To 
use PDF you must have Adobe Acrobat Reader, which is available free at 
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    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: https://www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.
    Program Authority: 20 U.S.C. 1070a, 1070a-1, 1070b-1070b-4, 1070c-
1070c-4, 1070g, 1071-1087-2, 1087a-1087j, and 1087aa-1087ii; 42 U.S.C. 
2751-2756b.

    Dated: May 25, 2011.
William J. Taggart,
Chief Operating Officer, Federal Student Aid.
[FR Doc. 2011-13339 Filed 5-27-11; 8:45 am]
BILLING CODE 4000-01-P