Federal Updates

ED issues memo to lenders regarding interest reimbursement for certain borrowers affected by recent hurricanes

On June 2, ED released a memorandum to lenders providing additional guidance regarding the treatment of accrued interest for lenders holding unsubsidized Stafford and PLUS loans made to certain borrowers who were impacted by Hurricanes Katrina and Rita. The memorandum can be downloaded from the ED Financial Partners Web site. The associated spreadsheet described in the memorandum is also available.

More information
If you have questions about this memorandum, call TG customer assistance at (800) 845-6267 or send an e-mail message to cust.assist@tgslc.org.

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ED issues guidance on special allowance for certain PLUS loans

On June 5, ED released Dear Colleague Letter (DCL) FP-06-10. This letter provides guidance about the payment of special allowance for certain PLUS loans affected by the Higher Education Reconciliation Act (HERA). DCL FP-06-10 is available for download on the Information for Financial Aid Professionals (IFAP) Web site.

Prior to the passage of the HERA, there were limitations on the payment of special allowance for PLUS loans that were first disbursed on or after January 1, 2000, and before July 1, 2006. These limitations have been eliminated by the HERA. Therefore, lenders may receive special allowance payments on PLUS loans that were first disbursed on or after January 1, 2000, and before July 1, 2006, for periods beginning April 1, 2006. DCL FP-06-10 explains how lenders will bill for these payments on the Lender's Interest and Special Allowance Request and Report (LaRS).

More information
If you have questions about DCL FP-06-10, call TG customer assistance at (800) 845-6267 or send an e-mail message to cust.assist@tgslc.org.

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ED issues DCL on interest rate options for Consolidation loan processing

On May 29, ED released Dear Colleague Letter (DCL) FP-06-09. This letter provides options for lenders to use when determining Consolidation loan interest rates as of July 1, 2006 and shortly thereafter. DCL FP-06-09 is available for download on the Information for Financial Aid Professionals (IFAP) Web site at .

Since interest rates on loans that are subject to the variable interest rate provision are scheduled to increase significantly this July 1 (see Shoptalk Online Edition 359), ED is authorizing consolidating lenders to use the lower of the weighted average of the interest rates on the loans being consolidated as of July 1 or on the date the lender received the borrower's substantially complete Consolidation loan application. This will to help borrowers obtain the lowest statutory weighted average interest rate. FP-06-09 provides details with which a lender must comply in order to exercise this authority.

More information
If you have questions about DCL FP-06-09, call TG customer assistance at (800) 845-6267 or send an e-mail message to cust.assist@tgslc.org.

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Closed school corner

Following is a list of newly reported school closures and error corrections from the Postsecondary Educational Participants System (PEPS) and from the May 2006 Closed School Monthly Report supplied by the Department of Education:

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