(See Related Posts below for updates on the PLUS Loan Auction)
I have spent some time this afternoon searching for an update on the pilot PLUS Loan Auction, the mechanism by which the Department of Education would designate two lenders to be exclusive PLUS loan providers for each state. Their selections would be based on a closed bidding process described in the College Cost Reduction Act.
The last update I came across was posted in NASFAA News on November 13, 2008. Here were a few excerpts from that report:
- "Within the next several
weeks, the Department will publish an invitation in the Federal
Register for lenders that want to be prequalified to participate in the
auction process. The Department will then solicit bids from the pool of
prequalified loan providers for each state. Lenders' bids must be equal
to or less than the current special allowance rate."
- Update: I have searched the Federal Register on IFAP for 2008 and 2009 and did not come across any notices regarding the auction process
- "An official with the
Department says they understand that schools will need as much time as
possible to update their preferred lender lists and the appointed loan
providers to ensure a smooth transition next fall. The Department plans
to release the results of the bidding process in February.
- Update: It would appear that this February deadline to release the results would be extremely difficult to meet at this point.
The initial rationale for this auction was to reduce the Special Allowance Payment (SAP) through this competitive process. However as one Department of Education official was forced to concede ""Given this and the general
state of the credit markets, we don't expect any lenders will bid
significantly less than the reserve price."
Why does this matter?
Given my distance from DC (over 3,000 miles), I cannot claim any special insider knowledge on this topic, however I am encouraging our clients to include PLUS loans in their lender selection process so that they will have a back-up plan in case the auction is postponed.
It would also be nice to get an update from the Department of Education on this issue as more and more schools move forward with their lender selection processes.