Financial Aid Services Bulletin 2009 - 003

PUT/Participation Programs

Under the Ensuring Continuing Access to Student Loans Act of 2008 (ECASLA), the U.S. Department of Education (ED), in collaboration with the U.S. Department of the Treasury and the Office of Management and Budget, has implemented four programs to improve liquidity in the student loan marketplace – the Loan Purchase Program (PUT), the Purchase of Participation Interests Program (PPI), the Short Term Loan Purchase Program, and the Asset-Backed Commercial Paper Conduit (ABCP).

The following chart provides a brief description of each program and information about how HESC will process and display them.

For more in-depth information, visit ED’s Web site, www.federalstudentaid.ed.gov/ffelp. Or contact ED by calling 866-938-4750 (for schools) or 800-508-1378 (for students/borrowers).

Programs to Improve Liquidity in the Student Loan Marketplace
Program Name	Eligible Loans	Description of Program and Processes
PUT	2008 - 09 loans through September 30, 2009 2009 - 10 loans through September 30, 2010	Loans must be fully disbursed. Loans are sold to the Department of Education but remain FFELP. New Lender code 899577. New Servicer code 700577. Nine days before the purchase, the balance is locked. There are no loan adjustments. Lenders may notify guaranty agencies and schools of loans to be PUT. Screen samples below show how the PUT loans will be displayed.
Participation	2008 - 09 loans through September 30, 2009 2009 - 10 loans through September 30, 2010	Loans placed in a participation facility are controlled by a Custodian. Subsequent disbursements are made by the Originating Lender, (Sponsor). The FFELP community agreed that lenders will not report loans as Participated until fully disbursed. The servicing of a Participated loan will remain the same. When fully disbursed/cancelled, the lender code will be updated to the new Custodian Lender Code. However, if the Participation is reported to HESC before the loan is fully disbursed, HESC will update the lender code to the Custodian Lender code, and will allow the disbursements to be made by the original lender so that schools can get their funds seamlessly. The fully disbursed loan can be redeemed by the lender or sold to the Department of Education in the PUT. Participated loans can be identified by the Custodian Lender Code. The approved list of custodian lender codes, as of today is: 834420, 834421, 834422, 834425, 834428, 834436, 834442, 834443, 834444, and 834445.
Short Term Loan Purchase	2007-08 loans through February 28, 2009 or when the Conduit begins operating, whichever comes first. Loan must have been fully disbursed on or after May 1, 2007 for the loan period beginning on or including July 1, 2007.	Loans must be fully disbursed. Loans are sold to the Department of Education but will remain FFELP. If a lender offers to sell a borrower’s loan it must include all eligible 2007-2008 loans it holds for that borrower. The New Lender code is 898577. The New Servicer code is 700577. This short-term use is designed to minimize the disruption in student lending prior to the Asset-Backed Commercial Paper conduit program becoming operational. Loans will be displayed on HESC’s screens the same way as the PUT loans.
Asset-Backed Commercial Paper Conduit	October 1, 2003 – July 1, 2009	An eligible lender trustee creates a pool called a conduit, to which other lenders transfer ownership of their student loans. The conduit issues commercial paper to sell and lenders are paid out of the amounts received from those investors. The loans could then be repurchased by the lender or sold to the Department of Education. Loans will be displayed on HESC’s screens the same way as the Participation loans.

Effect of PUT and Participation on Borrowers

The implementation of these programs will help to ensure unfettered access to FFEL funds for borrowers. Borrowers will be notified throughout the process and will not need to complete a new Master Promissory Notes (MPNs) to secure future education funding.

• PUT --Loans will be sold to the Department of Education but remain FFELP which means the borrowers will be able to use their MPNs for subsequent loans. They will not have to re-note. Loans will be serviced at the Department as FFELP loans, not as Direct Loans.
• Participation -- Loans may or may not be sold to the Department of Education. The borrowers will be able to use their MPNs for subsequent loans, they will not have to re-note. The lender will have the option of redeeming and retaining the servicing of the loan or of selling the loan to the Department once the loan has been fully disbursed.

Screen Message/Information

The following messages and information will be displayed for each program. The new fields are highlighted on the screen samples.

Loans Locked, but not PUT
Message Displayed	Limited Transactions Available in Preparation for Transfer to ED Servicer
Information Displayed	Lender Anticipated PUT Date: MM/DD/CCYY Cutoff Date: MM/DD/CCYY

Loans PUT
Message Displayed	Loan Transferred to ED Servicer
Information Displayed	ED Transfer Date: MM/DD/CCYY Lender Anticipated PUT Date: MM/DD/CCYY Lender PUT Cutoff Date: MM/DD/CCYY

Loans neither Locked nor PUT
No message will be displayed

Questions or Comments

Direct questions regarding this bulletin to manifest@hesc.org.

Please direct questions or comments regarding the use of HESC electronic products or services to Priority Services at priorityservices@hesc.org. Direct any technical problems with HESC electronic services to the HESC Help Desk.

To contact HESC toll free, call 1-866-431-HESC (1-866-431-4372) and follow the menu prompts.