A 1: Federal Consolidation Loans and NHHELCO’s non-federal alternative loan program, Loan for Education Assistance Funding (LEAF^SM) have been suspended. Please note that within the LEAF^SM program there exist related offerings including two charitable programs: the Teachers for NH^SM Loan Forgiveness Program and NHHELCO Loan for NH Scholars^SM.

A 2: Federal Consolidation Loans (FCL) provide a way for students to combine one or more existing federal student loans into a single new loan. Based on the total educational loan indebtedness, extended repayment term allows for a lower monthly payment, but generally higher overall costs because of the additional interest expense. For those with variable rates (loans prior to 7/06) FCL allows you to obtain a fixed interest rate. Because all current loans are issued at a fixed rate, we saw a major decline in interest in the program. In FY06, we issued $188 million FCL. By FY07, the volume declined to $63.5 million.

Loan for Education Assistance Funding (LEAF^SM) provides funding to close the gap between what students receive in financial aid (including federal student loans such as Stafford or Perkins) and what the college actually costs. Students first apply for federal and institutional financial aid before applying for the LEAF^SM loan. The college/university financial aid administrator must certify that the student requires the loan in order for the funds to be made available to the student. This is a key issue as some alternative loan programs permit the student to apply without school certification. This is not good practice as those students are more likely to apply for more than they actually require and may miss opportunities for federal, state or institutional financial aid.

A 3: The first alternative loan offered nationally through the issuance of tax exempt bonds, was from our organization. It was called the Alternative Loan for Parents and Students (ALPS). Only 40 ALPS loans were issued in its first year, 1983. Since then, we have provided over $431 million to fund almost 64,000 alternative loans to NH residents or students attending school in NH.

A 4: The amounts students can borrow through the Federal Stafford Loan program are capped and fall far short of the typical tuition bill. For example, $3,500 is available for a dependent college freshman -- and many families turn to private loans to make up the difference.

A 5: In FY07, 4,769 New Hampshire residents and 1,361 non-NH residents attending NH institutions borrowed from the alternative loan program. The total volume for alternative loans in FY07 was $67 million.

A 6: In FY07, 17,034 NH residents and students attending NH institutions borrowed from the Stafford Loan program. The total volume for Federal Stafford Loans in FY07 was $151 million. Additionally, NHHELCO funded Federal Parent PLUS and Federal Graduate PLUS loans for parents and graduate students totaling $33 million in FY07. Total federal volume was $184 million in FY07.

A 7: The cohort default rate measures the percentage of borrowers who enter repayment on their loan in a given federal fiscal year and default on their loans by the end of the following fiscal year. Having a low cohort default rate means that NHHEAF’s commitment to provide excellent loan counseling, support services and borrower benefits is positively impacting federal loan borrowers. When students successfully repay their federal education loans, everyone benefits. Taxpayers don’t have to shoulder the burden of increased federal debt to cover loan losses; schools maintain their eligibility to award federal financial aid, and best of all, students realize the full benefit of the investment they have made in higher education.

A 8: Two Reasons.
a. The turmoil in capital market has had devastating effects on liquidity. We borrow money to fund loans by selling auction rate certificates (a type of bond) and right now, investors aren’t investing in the bond market. We can’t raise capital in the bond market even though, in the case of federal loans, there is a 97% government guaranty even if the loan defaults. Our agency’s failed auctions should be especially alarming from an industry and market perspective as NHHELCO has AAA bond rating, one of the lowest default rates in the nation, a solid asset base and tenure in the student loan industry since its inception in 1965.

b. Congress passed the College Cost Reduction and Access Act last fall which slashed federal subsidies to student loan companies.

A 9: Subprime mortgages and home equity loans were made to borrowers with bad credit histories. Because of a surge in subprime loan delinquencies, there has been impact to other credit markets, including the federally guaranteed student loan asset-backed securities market. Generally, auction-rate bonds are considered safe, cash-like securities. Until mid-February, banks supported prices by bidding for bonds that went unsold, preventing auctions they ran from failing. Now, however, auctions are failing as investor confidence in the creditworthiness of insurers backing the securities declines. The underwriters who used to bid on it in order to keep the market functioning smoothly no longer will.

A 10: Interest on auction-rate bonds is determined by bidding that typically occurs every 7, 28 or 35 days. An auction fails when there aren't enough buyers, and bondholders who wanted to sell are left holding the securities. When that happens, interest rates are set at a penalty rate stipulated when the securities were initially sold.

A 11: Customer Service representatives have been provided with a reference sheet which includes specifics about disbursements for current students. We also notified postsecondary institutions through the college presidents’ offices and financial aid offices. Our Web site is being updated to reflect the changes in our program offerings.

A 12: NHHELCO’s Board of Trustees has been aware of this impending crisis since December. NHHELCO has been working with lenders on lines of credit to fund student loans. We have had contact with congressional offices and have notified postsecondary institutions in New Hampshire. We receive constant communication from industry professional organizations (EFC, NCHELP, NASFAA) and received inquiries related to this issue from national and local press outlets including: the Associated Press, Bloomberg News, Boston Globe and Boston Herald, NY Times, National Public Radio, Newsweek, MSNBC, Wall Street Journal and many NH newspapers and radio stations.

A 13: There is a strong possibility, yes, but at what ultimate cost? The interruption in financial aid delivery will be enormous. Further, the cost to students (interest, origination fees, repayment fees and loss of borrower benefits) may still create an access issue as some may decide the cost to borrow is too high. And, as we have stressed to the NH institutions we serve, you would need to consider whether NHHEAF (as a nonprofit provider) serves a greater purpose within our state.

• NHHEAF has been here since the beginning with the sole purpose of helping students fund higher education since 1962.
• All NHHELCO loans are serviced by Granite State Management & Resources, a NHHEAF Network Organization, in our Concord, NH facilities. We provide life-of-loan servicing for our borrowers.
• NHHEAF has one of the lowest default rates in the nation.
• The Center for College Planning provides educational presentations to over 30,000 K-12 New Hampshire students and parents each year to help them prepare for higher education.

A 14: Please consider communicating with the media, US Department of Education, US Department of the Treasury and our Congressional Delegation about your concerns for the availability of student loan funding for NH residents pursuing postsecondary education.

The Honorable John Sununu Office of the Senator 111 Russell Senate Office Building Washington, DC 20510	The Honorable Judd Gregg Office of the Senator 393 Russell Senate Office Building Washington, DC 20510
The Honorable Paul Hodes Congressman 506 Cannon House Office Building Washington, DC 20515	The Honorable Carol Shea-Porter Congresswoman 1508 Longworth House Office Building Washington, DC 20515
The Honorable Henry M. Paulson, Jr. Secretary of the Treasury US Department of the Treasury 1500 Pennsylvania Ave., NW Room 3330 Washington, DC 20220	The Honorable Margaret Spellings Secretary of Education US Department of Education 400 Maryland Ave., SW Room 7W301 Washington, DC 20202