Here is the press release. Nelnet joins Sallie Mae, Student Loan Corporation and Access Group who all have previously noted their participation in conduit financings earlier this month. The conduit is described in the press release as:
"The Conduit provides five-year financing for federal Stafford and PLUS loans first disbursed from October 1, 2003 to June 30, 2009.
The Conduit is supported by a liquidity facility provided by the
Federal Financing Bank and an ultimate backstop purchase of the
financed student loans by the Department of Education. The company
expects the total cost of funding, on average, to be approximately
equal to the 3-month LIBOR rate plus 0 to 10 basis points."
This conduit has been a major positive to student lenders by enabling lenders to reduce the size of their warehouse facilities with the lower-cost financing afforded by the conduit. Access Group's CEO Christopher Chapman recently noted how using a conduit financing structure for FFELP going forward would ensure continued diversity of lenders, originators and servicers (comments paraphrased below):
With respect to maintaining private sector financing and a diversity of
lenders, originators and servicers that exist today, schools would see
continued value-added services that have been provided all these
years. Funding would be seamless and blind. Lenders today finance
loans in many different ways in the background. There would be
improvement if there was a consistent and viable source of financing
out into the future.
As more lenders rely on the this conduit facility, it will be interesting to see if this creeps into the debate as a viable long-term private-sector funding structure to minimize federal debt levels.
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