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Sallie Mae Sells Final Round of Student Loans (ECASLA)

In 2003 the Ensuring Continued Access to Student Loans Act (ECASLA) was put into place as a method to stabilize the student loan industry and insure lender participation from year to year. Basically, ECASLA was a piece of legislation that allowed education lenders the opportunity to sell off their loan portfolios each year to the Department of Education.  The money garnered from the transaction was then put back into the financial institution’s lending pool and doled out to students again in the form of education loans. This process kept lenders in business and students with access to federally backed education loans….until now.

Starting this year, banks and financial institutions are no longer part of the federal student loan process and all loans come directly from the Department of Education via StudentLoans.gov. Great debates and discussions have challenged the pros and cons of taking the “middle man” out of the federal student loan process but the end result is that they are now missing from the equation.

Based upon this, Sallie Mae recently announced that they will be selling off their final round of qualifying loans to the Department of Education on October 12th under the soon to expire ECASLA. This is certainly a monumental moment in the world of financial aid and student lending as this final transaction marks the end of an era in which banking institutions profited off of the federal student loan program.

The following is the eligibility criteria put into place by the Department of Education that depicts which loans they will purchase (and which ones they will not):

  • Were first disbursed between May 1, 2009, and June 30, 2010.
  • Have a loan period that includes or begins on or after July 1, 2009.
  • Are fully disbursed by September 30, 2010.
  • Have no borrower benefits other than a 0.25 percentage point interest rate reduction for auto-debit.

Sallie Mae will be contacting all affected borrowers prior to the sale and informing them of the change in where their loan will be housed. If borrowers don’t meet the loan criteria above, they will continue to make their payments directly to Sallie Mae.

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