Sallie Mae sent a notice out to financial aid administrators this afternoon indicating that they would not be participating in the upcoming PLUS Loan auction either as a lender or as a lender of last resort.
Here are some highlights from their announcement:
- Sallie Mae believes best interests of parents and students is to continue with the current PLUS program at least until Congress provides additional clarification on President Obama's budget proposal to move all federal loans through the Direct Loan program.
- Sallie Mae cites the auction's "structural requirements" which preclude it from participating.
- Presumably, Sallie Mae is referring to the fact that bidders need to commit to a 2 year period while ECASLA, the current financing source for most lenders, is scheduled to run out in 2010.
- If pilot PLUS auction does not produce a number of qualified bids (and no lenders step forward as lenders of last resort) in a given state then existing Parent PLUS program would be continued for 2009-10.
With 40% market share of Parent PLUS loans, Sallie Mae's actions make it more likely that some if not all of the state PLUS auctions will fail. Earlier this month, Chase had indicated that they would not be participating in this PLUS loan process also. Expect more lenders to make similar announcements in the days leading up to April 1st.
Advice for your lender selection process:
- Include Parent PLUS loans in your decision-making process to ensure that you are ready with a lender list should the auctions fail.
Key dates for the auction include:
- Submission of pre-qualification information: April 1, 2009
- Submission of lender-of-last resort information: April 1, 2009
- Auction date: April 15, 2009
- Winning bids to be announced no later than April 24, 2009
- Winners to be posted at http://www.ed.gov/ope/plus-auction/
Related posts:
- Winning bidders for PLUS loan auction to be announced on April 24th (March 3, 2009)
- Department of Education seeks emergency OMB clearance to move PLUS auction forward (March 2, 2009)
- NASFAA urges Congress to delay Parent PLUS auction (February 24, 2009)
- What's up with the Parent PLUS auction? (January 31, 2009)
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