EA36 Matser Loans Sales Agreement 2007-2008

LOAN PURCHASE PROGRAMS ELECTRONIC ANNOUNCEMENT #36
Date:

November 26, 2008

To:

FFEL Program Community

From:

James A. Manning, Acting Chief Operating Officer
Federal Student Aid

Subject:

Federal Register Notice and Master Loan Sale Agreement for Short-Term Purchase
Program

The Secretary, in a Dear Colleague Letter dated November 20, 2008, announced that under the
authority granted her by section 459A of the Higher Education Act, the Department will, for a
limited period of time, purchase certain 2007-2008 academic year FFEL Program loans. This
short-term use of the authority to purchase FFEL Program loans is designed to prevent disruption
in student lending prior to one or more of the Asset-Backed Commercial Paper conduits, as
described in an earlier Dear Colleague Letter dated November 10, 2008, becoming operational.
Attached to this announcement is the text of the Notice that will shortly be published in the
Federal Register announcing the terms and conditions of the Department’s plan to purchase
2007-2008 FFEL Program loans. Included with the Notice is the “Master Loan Sale Agreement
2007-2008” dated November 24, 2008.
In separate Electronic Announcements we will provide additional information about the
academic year 2007-2008 loan purchase program, including the procedures under which a holder
of FFEL Program loans submits documents executing the “Master Loan Sale Agreement 20072008”.
Thank you for your continued support of these FFEL Loan Purchase Programs.
Attachment: Notice with MLSA

4000-01-U
DEPARTMENT OF EDUCATION, DEPARTMENT OF THE TREASURY, OFFICE
OF MANAGEMENT AND BUDGET
Federal Family Education Loan Program (FFELP)
AGENCY:

Department of Education, Department of the

Treasury, Office of Management and Budget.
ACTION:

Notice of terms and conditions of additional

purchase of loans under the Ensuring Continued Access to
Student Loans Act of 2008.
SUMMARY:

Under the authority of section 459A of the Higher

Education Act of 1965, as amended (“HEA”), as enacted by
the Ensuring Continued Access to Student Loans Act of 2008
(Pub. L. 110-227) and amended by Pub. L. 110-315 and Pub.
L. 110-350, the Department of Education (“Department”) may
purchase, or enter into forward commitments to purchase,
Federal Family Education Loan Program (“FFELP”) loans made
under sections 428 (subsidized Stafford loans), 428B (PLUS
loans), or 428H (unsubsidized Stafford loans) of the HEA,
on such terms as the Secretary of Education (“Secretary”),
the Secretary of the Treasury, and the Director of the
Office of Management and Budget (collectively, “Secretaries
and Director”) jointly determine are “in the best interest
of the United States” and “shall not result in any net cost

1

to the Federal Government (including the cost of servicing
the loans purchased).”
The Secretary initially exercised this authority in
accordance with a notice published in the Federal Register
on July 1, 2008 (73 FR 37422).

This notice (a) establishes

the terms and conditions that will govern certain
additional loan purchases made under section 459A of the
HEA, as extended by Pub. L. 110-350 (Short-term Purchase
Program), (b) outlines the methodology and factors that
have been considered in evaluating the price at which the
Department will purchase these additional FFELP loans, and
(c) describes how the use of those factors and methodology
will ensure that the additional loan purchases do not
result in any net cost to the Federal Government.

The

Secretaries and Director concur in the publication of this
notice and have jointly determined that the purchase of
additional loans as described in this notice is in the best
interest of the United States and shall not result in any
net cost to the Federal Government (including the cost of
servicing the loans purchased).
DATES:

Effective Date:

The terms and conditions governing

the purchase of additional loans under the Short-term
Purchase Program are effective December 1, 2008.

2

FOR FURTHER INFORMATION CONTACT:

U.S. Department of

Education, Office of Federal Student Aid, Union Center
Plaza, 830 First Street, NE., room 111G3, Washington, DC
20202.

Telephone: (202) 377-4401 or by e-mail:

[email protected].
If you use a telecommunications device for the deaf
(TDD), call the Federal Relay Service (FRS), toll free, at
1-800-877-8339.
Individuals with disabilities can obtain this document
in an accessible format (e.g., braille, large print,
audiotape, or computer diskette) on request to the contact
person listed under FOR FURTHER INFORMATION CONTACT.
SUPPLEMENTARY INFORMATION:
Introduction
The Department’s purchase of FFELP loans is intended
to ensure that students and parents continue to have access
to FFELP Stafford and PLUS loans for the remainder of the
2008-2009 academic year and the 2009-2010 academic year,
including second and subsequent disbursements of loans
which have already had a first disbursement.

The

Department initially offered lenders the opportunity to
participate in a Loan Participation Purchase Program
(“Participation Program”) and a Loan Purchase Commitment
Program (“Purchase Program”) (collectively, “Programs”).

3

Pursuant to section 459A of the HEA, the Secretaries and
Director established the terms and conditions that govern
the Participation Program and the Purchase Program in a
notice published in the Federal Register on July 1, 2008
(73 FR 37422).

Minor revisions to this notice were

published in the Federal Register on July 17, 2008 (73 FR
41048).
Under the Participation Program, the Department has
purchased participation interests in eligible loans that
are held by an eligible lender acting as a sponsor under a
Master Participation Agreement.

To participate in the

Participation Program, each sponsor entered into a Master
Participation Agreement with the Department and a thirdparty custodian.
Under the Purchase Program, the Department has
purchased eligible loans that are held by eligible lenders.
To participate in the Purchase Program, each eligible
lender entered into a Master Loan Sale Agreement with the
Department and agreed to deliver to the Department or its
agent the fully executed master promissory note (or all
electronic records evidencing the same) evidencing each
eligible loan that the lender wished to sell to the
Department and any and all other documents and computerized
records relating to all such loans.

4

Subsequent to the announcements of the Purchase
Program and Participation Program in July, the Secretaries
of Education and Treasury have concluded that additional
actions are necessary to ensure students and parents have
access to FFELP for the remainder of the 2008-2009 academic
year.

Specifically, the Secretaries believe some lenders

may not be able to obtain capital to make second
disbursements even for the short-term necessary before
lenders can utilize the existing programs.

Through the

Short-term Purchase Program, the Department is extending
the offer to purchase loans to include eligible loans made
for the 2007-2008 academic year under the terms and
conditions established in this notice, including the
appended Master Loan Sale Agreement-2007-2008, dated
November 24, 2008.

The Department plans to purchase these

loans on or about December 1, 2008 and will continue
purchasing them through February 28, 2009 or the date on
which one or more conforming Asset-Backed Commercial Paper
(ABCP) conduit(s) for purchasing FFELP loans becomes
operational, whichever occurs earlier.

The Department will

expend up to $500 million to purchase eligible loans each
week during this period, for a potential total aggregate
amount of up to $6.5 billion.

The Department will only

accept offers from lender requests for the Department to

5

purchase loans under the Short-term Purchase Program once
each week.

Details of how a lender must submit such offers

will be provided by the Department by postings to its
official Web site at www.federalstudentaid.ed.gov/ffelp.
The Department will purchase no loans from a lender in
a given week unless the average outstanding principal
balance of the loans offered by the lender for that week is
at least $3,000.

The Department will calculate the total

amount of the outstanding principal balance of the loans
offered for sale for the week by lenders that submit offers
that meet the $3,000 minimum balance requirement, and will
purchase all such loans if the amount needed to purchase
them does not exceed the $500 million offered amount.
If the amount needed to purchase all loans in
qualifying offers in a given week exceeds $500 million, the
Department will initially designate for purchase from each
lender an amount that is the lesser of its outstanding
balance of loans offered for sale or the total outstanding
balance of the loans offered by such lender multiplied by a
percentage that is the ratio of that lender’s 2007-2008
loan volume to the 2007-2008 loan volume of all lenders
that submitted qualifying offers to sell loans in the same
week.

If this process fails to spend the entire $500

million in a given week, the Department will determine the

6

percentage that the amount of loans offered by each lender
that was not initially designated for purchase bears to the
total amount offered but not so designated from all lenders
for that week, and it will multiply the remainder of the
$500 million by this percentage to designate for purchase
an additional amount of loans from each lender.

The

Department will purchase from each lender an amount that is
the sum of its initial plus additional designated amounts.
In no case will the Department purchase an amount that
exceeds a lender’s offered amount.

Moreover, no lender

shall receive more than 85 percent of the weekly offering
until all lenders wishing to sell loans to the Department
have been satisfied.
Terms and Conditions
Under the Short-term Purchase Program, the Department
will purchase fully disbursed FFELP loans (subsidized
Stafford loans, unsubsidized Stafford loans, and PLUS
loans) originated for academic year 2007-2008.

FFELP

Consolidation loans are not eligible for purchase by the
Department under this program.

To participate in the

Short-term Purchase Program, each eligible lender must
enter into a separate Master Loan Sale Agreement-2007-2008,
dated November 24, 2008 (attached as Appendix A to this
notice) with the Department and deliver to the Department

7

or its agent the fully executed master promissory note (or
all electronic records evidencing the same) evidencing each
eligible loan that the lender wishes to sell to the
Department and any and all other documents and computerized
records relating to that eligible loan.
For the purpose of the Short-term Purchase Program, an
otherwise eligible FFELP loan must have been first
disbursed on or after May 1, 2007 for a loan period that
includes July 1, 2007 or begins on or after that date.

At

the time of purchase by the Department, the loan must be
free and clear of any encumbrance, lien or security
interest or any other prior commitment.

At the time of

purchase by the Department, the loan cannot be in a default
status, be 210 or more days delinquent, or have had a
lender claim filed for it.

In addition, if the lender

wishes to sell a loan from a particular borrower, all loans
from that particular borrower must be offered for sale.
Under the Short-term Purchase Program, the Department
will purchase loans with borrower benefits; however, the
benefits are limited to those that can be implemented by
the Department’s servicer for these loans.

The Department

will accept loans that provide Eligible Borrower benefits
as summarized in Exhibit F to the Master Loan Sale
Agreement—2007-2008, dated November 24, 2008, attached as

8

Appendix A to this notice.

A listing of those specific

borrower benefits will be posted to the Department’s Web
site at www.federalstudentaid.ed.gov/ffelp.

The Department

will not purchase loans if a cash rebate was promised to
the borrower.
The Department will purchase loans for 97 percent of
the total of the outstanding principal balance plus accrued
but unpaid interest as of the purchase date.

In order to

ensure that the loans offered for sale represent a fair
share of the loans in a lender’s 2007-2008 portfolio, the
average outstanding balance of all of the loans included in
a lender’s weekly offer must be at least $3,000.

Upon

purchase, the loans become Federal assets and will be
serviced by the Department’s contracted servicer as FFELP
loans.

Any lender that wishes to participate in the Short-

term Purchase Program will be required to commit to
originate or acquire loans, and continue participation in
the FFEL program, as set forth in the Master Loan Sale
Agreement (Appendix A).

Additional terms and conditions

for the Short-term Purchase Program are contained in the
Master Loan Sale Agreement—2007-2008, dated November 24,
2008 (Appendix A).
Outline of Methodology and Factors in Determining Prices

9

In accordance with Pub.L. No. 110-227, Pub. L. 110315, and Pub. L. 110-350, the goal in structuring the
Short-term Purchase Program is to maximize student loan
availability while ensuring loan purchases result in no net
cost to the Federal Government.

More specifically, this

Short-term Purchase Program will offer temporary liquidity
to FFELP lenders to encourage their continued participation
in the program and ensure that students and parents have
access to FFELP Stafford and PLUS loans for the 2008-2009
and 2009-2010 academic years, including second and
subsequent disbursements of loans which have already had a
first disbursement.

This section of the notice responds in

particular to the statutory requirement for an outline of
the methodology and factors considered in evaluating the
price at which loans may be purchased, and describes how
the use of such methodology and consideration of such
factors will ensure no net cost to the Federal Government
results from the loan purchases under the Short-term
Purchase Program.
Price: As noted elsewhere in this notice, the Shortterm Purchase Program is intended as a temporary,
transitional measure to help lenders address immediate
liquidity shortages until one or more conforming Asset-

10

Backed Commercial Paper (ABCP) conduits for purchasing
FFELP loans become operational.
To determine the price FFELP loans would be purchased
at, the Secretary of Education and the Secretary of
Treasury took into account several factors.

These factors

included the price that would ensure this program resulted
in no net cost to the Federal Government; the increased
liquidity that the rate would offer distressed lenders;
borrower benefits; and other factors.

Based on this

analysis, the Secretaries determined that 97 percent of
outstanding principal and accrued interest was an
appropriate price for this program.
Borrower Benefits:

The Department will purchase loans

with certain borrower benefits; however, the Department
will only purchase loans with benefits that can be
implemented by Federal Student Aid’s current servicing
processes.

Further, the 97 percent price considers

borrower benefits for both administrative expediency, cost
neutrality, and to ensure that student’s or parent’s
expected borrower benefits on purchased loans are not
compromised.
Analysis of Cost Neutrality
The cost-neutrality analysis used credit subsidy cost
estimation procedures established under the Federal Credit

11

Reform Act of 1990 (Pub. L. No. 101-508) and OMB Circular
A-11.

These procedures entail performing various analyses

to project cash flows to and from the Government, excluding
administrative costs. For changes to outstanding FFEL
guaranteed loans, the analysis reflects the modification
cost, or the difference between the estimate of the net
present value of the remaining cash flows underlying the
most recent President’s Budget for such loan guarantees,
and the estimate of the net present value of these cash
flows after the purchase program, reflecting only the
effects of the modification.

For new loans, cash flows are

discounted to the point of disbursement, using the Credit
Subsidy Calculator 2 (“OMB calculator”), developed by the
Office of Management and Budget to estimate credit subsidy
costs for all Federal credit programs, as the discounting
tool. 1

Costs for new loans can be expressed as subsidy

rates that reflect the Federal costs associated with a
loan; these costs are expressed as a percentage of the
credit extended by the loan.

For example, a subsidy rate

1

The OMB calculator takes projected future cash flows from the
Department’s student loan cost estimation model and produces discounted
subsidy rates reflecting the net present value of all future Federal
costs associated with loans made in a given fiscal year. Values are
calculated using a “basket of zeros” methodology under which each cash
flow is discounted using the interest rate of a zero-coupon Treasury
bond with the same maturity as that cash flow. To ensure comparability
across various Federal credit programs, this methodology is
incorporated into the calculator and used government-wide to develop
estimates of the Federal costs of credit programs.

12

of 10.0 percent indicates a Federal cost of $10 on a $100
loan.
The metric to determine cost neutrality was that costs
under the new program should not exceed costs expected
under the FFEL program had the loan purchase authority in
Pub. L. No. 110-227 not been extended in this manner.

All

costs were based on estimates in the 2009 President’s
Budget for the FFEL program, and estimated administrative
costs.
Student loan cost estimates were developed to assess
the Federal cost incurred for loans financed for students
in five categories for each loan type: those attending
proprietary schools, two-year schools, freshmen/sophomores
at four-year schools, juniors/seniors at four-year schools,
and students in graduate programs.

Risk categories have

separate assumptions based on historical patterns -- for
example, the likelihood of default or the likelihood of
exercising statutory deferments or discharge benefits -- of
borrowers in each category.

The analysis also considered

risk factors particular to the Short-term Purchase Program,
such as the likelihood that lenders would sell only their
least profitable loans.

13

This discussion outlines the analysis of the Shortterm Purchase Program with respect to the following
critical aspects affecting the Federal cost:
o Administrative costs
o Borrower behavior
o Lender behavior
o Risk factors
Administrative Costs. Federal administrative costs are
normally not included in subsidy cost calculations.

To

capture the full cost of the Short-term Purchase Program,
however, section 459A of the HEA requires that the
determination of cost neutrality reflect total costs,
including Federal administrative costs subject to annual
appropriation, and these costs were included in this
analysis.

Administrative cash flows primarily involve

servicing costs associated with loans purchased by the
Department.

These costs can extend for up to 40 years, as

servicing must continue until the last loan is paid in
full.

Under the base scenario where $6.5 billion in small

loans were purchased, servicing costs would be $261 million
on a present value basis. Estimates were developed using
the price structure of the Department’s servicing contract
for put loans, with adjustments for start-up costs,
inflation, and other costs.

14

Borrower Behavior.

Since the base FFEL program serves

as the foundation of the Short-term Purchase Program, and
the characteristics of the base program are unchanged,
there is no reason to believe that the Short-term Purchase
Program will affect borrower behavior.

Thus, this cost

analysis uses borrower behavior assumptions used to prepare
the FY 2009 President’s Budget to gauge the effect on
program costs of borrower-based activities such as loan
repayment, use of statutory benefits such as deferments and
loan discharges, and default rates and timing.

These

assumptions are based on a wide range of data sources,
including the National Student Loan Data System, the
Department’s operational and financial systems, and a group
of surveys conducted by the National Center for Education
Statistics such as the 2004 National Postsecondary Student
Aid Survey, the 1994 National Education Longitudinal Study,
and the 1996 Beginning Postsecondary Student Survey.
Lender Behavior.

A key factor in assessing whether

the Short-term Purchase Program would operate in a costneutral manner was lender behavior:

specifically, how

lenders would participate in the program, including how
many and what type of loans would they eventually choose to
sell to the Department.

The Department considered

alternative scenarios of lender behavior to determine

15

whether the Short-term Purchase Program could be considered
cost-neutral under each.

Because the Short-term Purchase

Program would allow lenders to sell loans with contingent
borrower benefits--such as interest rate reductions for a
specified number of on-time payments--all alternatives
include an adjustment to reflect the impact of these
potential reductions on future loan repayments.

Consistent

with stress tests applied by rating agencies in the private
securitization market, this adjustment reduces the net cash
flow to the Government by reducing the principal of sold
loans by 0.5 percent a year.
In both scenarios, the Department assumed a “worstcase” in which lenders sold $6.5 billion of their smallest,
least profitable loans.

Because long-term loan servicing

costs are generally charged on an account basis independent
of loan size, small loans tend to be less profitable than
larger loans.

Under this scenario, it was determined that

costs for the Short-term Purchase Program were less
expensive to the Government than baseline subsidy costs for
FFELP loans.

(Please see Table 1 for a summary of the

analysis.)

16

Table 1:

Cost Neutrality Analysis Short-Term Loan Purchase Program

Baseline: Federal Family Education Loan (FFEL) Program Volume Eligible for Shortterm Purchase Program , 2007/2008 Award Year
Volume
Original Cohort Year
2007
2008
Total
Stafford
11,868
12,072
23,939
Unsubsidized Stafford
10,917
12,222
23,138
PLUS
5,196
3,341
8,537
Total
27,980
27,635
55,615
Scenario: Education purchases $6.5 billion in loans assuming the smallest average
borrower balances are put from outstanding 2007-2008 FFEL loans
Cost Percentage
Outlays
Original Cohort Year
2007
2008
2007
2008
Total
Loan Purchase Extension
Volume (non-add)
3,991
2,509
6,500
FFEL Guaranteed Loan Modification
Administrative Expenses (NPV)
Loan Purchase Subsidy Costs
Risk Adjustments (base case)
Claim Rejects
Operational Risk
General Administrative Risk
Portfolio Composition Risk
Subtotal, Loan Purchase Extension
Total (base case)
Risk Adjustment (high)
Additional Operational Risk
Subtotal, Loan Purchase Extension
Total (high risk)

Risk Factors.

-7.81%

-8.54%

(312)

(214)

(526)

3.67%

4.55%

147

114

261

-1.50%

2.18%

(60)

55

(5)

0.12%
0.20%
1.00%
1.00%
4.49%

0.12%
0.20%
1.00%
1.00%
9.05%

5
8
40
40
179
-132

3
5
25
25
227
13

8
13
65
65
406
-119

0.60%
5.09%

0.60%
9.65%

24
203
-108

15
242
28

39
445
-80

Analyzing whether the Short-term

Purchase Program would operate in a cost-neutral manner
requires that projected costs account for the presence of
various risk factors that must be assumed since the Shortterm Purchase Program will not operate entirely like the
base FFELP, or without operational risk.

As such, the

Secretaries’ and Director’s estimates included adjustments

17

for four risk factors:

that some of the loans purchased by

the Department would be those where the Department would
otherwise reject a reinsurance claim under the FFELP
(“claim rejects”); that unforeseen problems undermine the
Department’s ability to effectively oversee and administer
the Short-term Purchase Program (“operational risk”); that
costs related to servicing purchased loans do not fully
reflect possible future requirements (“general
administrative risk”); and, that the composition of loans
ultimately sold to the Department may result in higher
Federal costs than the composition assumed in this analysis
(“portfolio composition risk”).
To ensure cost estimates reflect a conservative
assessment of possible Federal costs, the Secretaries and
Director added cost adjustments to incorporate each risk
factor.

The adjustments were based on an assessment of

private-sector behavior and program data as follows:
Claim Rejects.

This risk factor takes into account

the costs associated with the purchase of loans that would
not typically qualify for the federal default guarantee in
the FFELP due to improper origination or servicing.

The 12

basis point increase in cost is based on a historical
rejected claim rate of 1 percent of volume, and assumes
that these loans would have higher loss rates than the

18

average portfolio.

This cost assessment is double that

which was assessed in the analysis of the original Purchase
Program.

This doubling is appropriate given that the 45-

day period allotted to the Department, under the Terms and
Conditions of the original Purchase Program, to conduct due
diligence on loans to be purchased is much shorter under
the Short-term Purchase Program.

This increased cost

assessment is intended to take this into account.
Operational Risk.

In the Short-term Purchase Program,

operational risk might result from servicing errors,
technology failures, and the risk of fraud.

While the

Department has made every effort to mitigate operational
risk, the emergency nature and accelerated implementation
timeframe for the Short-term Purchase Program make
operational risk more of a concern than in established
Department programs.
For the low risk scenario, the analysis assumes a 20
basis point increase in program cost to reflect this risk.
The analysis of the original Purchase Program only included
a 10 basis point assessment.

However, given the

accelerated implementation timeframe, as compared to the
original Purchase Program, the doubling of this assessment
is appropriate in this case.
For the high risk scenario, the analysis assumes an

19

additional 60 basis point increase for operational risk,
for a total of 80 basis points, consistent with the
assessment in the high risk scenario of the original
Purchase Program.

In this scenario, the worst-case was

estimated using survey data from bank regulators
implementing an overhaul of bank regulations.

The largest

United States banking organizations will be subject to a
new system of capital requirements that includes an
explicit charge for operational risk.

Under those

regulations, banks will be required to develop models
generating a probability distribution of losses for
operational risk, and hold capital equal to the 99.9th
percentile of that estimated probability distribution.
Banks were surveyed to measure the anticipated impact of
the regulations.

Using the best available models of

operational risk, the banks reported that operational risk
would account for roughly 10 percent of their required
capital.

As banks currently finance on average about eight

percent of their assets with capital, worst-case scenario
operational risk losses can thus be estimated at about one
percent of total assets.

Also, while we do not believe

that this program has, or necessarily will, face such a
level of operational risk, we developed the high scenario
to ensure that the program is cost-neutral, even under

20

extreme and unlikely circumstances.
General Administrative Risk.

The analysis of cost

neutrality examined the Department’s current loan servicing
contract, and assumptions of borrower status over the life
of the loan after purchase by the Department.

The analysis

assumed minimal start-up costs as the Short-term Purchase
Program builds on the current loan purchase program
infrastructure.

In December 2008, the Department plans to

extend its current loan servicing contract for one year.
This will involve the renegotiation of payment rates for
certain activities which may affect long-term servicing
costs for the loans purchased under the Short-term Purchase
Program.

Given the future uncertainty surrounding several

factors, including the assumptions outlined above and the
status of loans ultimately purchased by the Department, it
is possible that unforeseen additional costs may be
incurred.

Accordingly, a General Administrative Risk

Factor of 100 basis points was added to the analysis.
Portfolio Composition Risk.

The cost to the

Government of the Short-term Purchase Program

depends on

numerous factors, including loan size, default/prepayment
risk, borrower benefits, and other characteristics of the
purchased loans.

The cost-neutrality analysis accounts for

some of these factors, as outlined in this notice, but may

21

not incorporate all of the dimensions of lender behavior
and the loans ultimately purchased by the Department.
Given this uncertainty, savings may deviate to some degree
from the savings estimated in the model.

To ensure that

the potential risk and the potential costs are adequately
reflected, a Portfolio Composition Risk Factor of 100 basis
points was added to the analysis.

The Department

considered a base scenario under which lenders sold $6.5
billion in loans, the maximum amount allowable under the
Short-term Purchase Program.

This scenario also assumed

lenders would sell their smallest, least profitable loans
to the Department and included cost assessments for claim
rejects and operational risk.

This scenario would result

in an average loan balance of approximately $3,000.

Under

this scenario, the Short-term Purchase Program is costneutral.
The Department also considered a high operational risk
scenario in which the cost assessment for operation risk
was raised from 20 basis points to 80 basis points.

Even

with this increased assessment, the Short-term Purchase
Program remains cost-neutral.

The Terms and Conditions for

the Short-term Purchase Program seek to reduce the
likelihood of lenders exclusively selling low-balance
loans.

For example, a floor would be established under

22

which batches of loans sold to the Department must have a
minimum average balance of $3,000.

This would likely

ensure that the base scenario considered by the Department
would reasonably reflect the cost exposure to the Federal
Government should lenders choose to sell their lowest
balance loans.

In addition, lenders would be required to

sell all 2007-08 Stafford loans held for a specific
borrower.

These provisions make it less likely that

lenders will choose to sell only poorly-performing loans to
the Department.
Conclusion.

After taking into account alternative

market and lender behavior scenarios, the Administration
determines that the Short-term Purchase Program is in the
best interest of the United States and will result in no
net cost to the Government.
Applicable Program Regulations:

34 CFR part 682.

Electronic Access to This Document
You may view this document, as well as all other
Department of Education documents published in the Federal
Register, in text or Adobe Portable Document Format (PDF)
on the Internet at the following site:
http://www.ed.gov/news/fedregister/index.html.
To use PDF you must have Adobe Acrobat Reader, which
is available free at this site.

23

If you have questions

about using PDF, call the U.S. Government Printing Office
(GPO), toll free, at 1-888-293-6498; or in the Washington,
DC, area at (202) 512-1530.

You may also view this

document in PDF at the following site:
http://www.ifap.ed.gov. You may obtain a copy of the
Master Loan Sale Agreement and direction regarding
submission of the Master Loan Sale Agreement and offers to
sell loans at http://federalstudentaid.ed.gov/ffelp.
Note:

The official version of this document is the

document published in the Federal Register.

Free Internet

access to the official edition of the Federal Register and
the Code of Federal Regulations is available on GPO Access
at:

http://www.gpoaccess.gov/nara/index.html.

(Catalog of Federal Domestic Assistance Number 84.032
Federal Family Education Loan Program)

24

Program Authority:

20 U.S.C. 1087i-1.

Dated:

_________________________
Margaret Spellings,
Secretary of Education.

Dated:
____________________________
Karthik Ramanathan,
Acting Assistant Secretary of the
Treasury.

Dated:
____________________________
Jim Nussle,
Director, Office of Management and
Budget.

25

APPENDIX A

MASTER LOAN SALE AGREEMENT 2007-2008

UNITED STATES DEPARTMENT OF EDUCATION
`

NOVEMBER 24, 2008

ELIGIBLE LOANS MADE PURSUANT TO THE
FEDERAL FAMILY EDUCATION LOAN PROGRAM

-1-

TABLE OF CONTENTS
Page
Section 1.

Terms.........................................................................................................................1

Section 2.

Commitment to Lend Under the FFELP ...................................................................2

Section 3.

Definitions.................................................................................................................3

Section 4.

Sale/Purchase. ...........................................................................................................9

Section 5.

Conditions Precedent to Purchase. ..........................................................................11

Section 6.

Representations and Warranties of the Seller and the Eligible Lender Trustee......14

Section 7.

Rescission of Purchase; Obligation to Reimburse and Indemnify..........................19

Section 8.

Obligation to Remit Subsequent Payments and Forward Communications. ..........20

Section 9.

Continuing Obligation of the Seller ........................................................................20

Section 10.

Liability of the Seller; Indemnities..........................................................................21

Section 11.

Transfer of Servicing...............................................................................................21

Section 12.

Merger or Consolidation of, or Assumption of the Obligations of, the Seller........22

Section 13.

Expenses..................................................................................................................22

Section 14.

Survival of Covenants .............................................................................................22

Section 15.

Communication and Notice Requirements .............................................................22

Section 16.

Form of Instruments ................................................................................................23

Section 17.

Amendment; Waiver ...............................................................................................23

Section 18.

Audits ......................................................................................................................23

Section 19.

Severability Clause..................................................................................................24

Section 20.

Governing Law........................................................................................................24

Section 21.

Exhibits....................................................................................................................24

Section 22.

General Interpretive Principles................................................................................24

Section 23.

Reproduction of Documents....................................................................................25

Section 24.

Further Agreements.................................................................................................25

Section 25.

Other Department Program .....................................................................................25

Section 26.

Adoption..................................................................................................................25

Section 27.

Integration ...............................................................................................................25

-i-

EXHIBITS
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E
EXHIBIT F

-

FORM OF ADOPTION AGREEMENT
FORM OF BILL OF SALE
FORM OF SELLER’S OFFICER’S CERTIFICATE
FORM OF OPINION OF COUNSEL TO THE SELLER
FORM OF SECURITY RELEASE CERTIFICATION
LIST OF APPROVED BORROWER BENEFITS

- ii -

MASTER LOAN SALE AGREEMENT 2007-2008
This is a Master Loan Sale Agreement 2007-2008, dated November 24, 2008 (“Master
Loan Sale Agreement 2007-2008”), among the United States Department of Education
(“Department”) and an individual Eligible Lender (as defined below) or the holder of beneficial
interests in Loans (such entity, “Seller”), and if the latter, the related Eligible Lender Trustee, in
each case made party to this Master Loan Sale Agreement 2007-2008 by executing an Adoption
Agreement in the form attached hereto as Exhibit A.
WHEREAS, pursuant to Section 459A of the Higher Education Act of 1965, as amended
by the Ensuring Continued Access to Student Loans Act of 2008 (Pub. L. No. 110-227) (“Higher
Education Act”), the Department has the authority to purchase Stafford Loans and PLUS Loans,
on such terms as the Secretary of Education, the Secretary of the Treasury, and the Director of
the Office of Management and Budget jointly determine are in the best interest of the United
States to encourage Eligible Lenders to provide students and parents access to Stafford Loans
and PLUS Loans made under the Federal Family Education Loan Program for the 2008-2009
and 2009-2010 academic years;
WHEREAS, the Seller has an ownership interest in certain Stafford Loans and PLUS
Loans guaranteed under the Higher Education Act;
WHEREAS, the Seller may desire to sell its interest in such loans from time to time and
the Department may desire to purchase such loans from the Seller;
WHEREAS, to the extent that the Department, the Seller and the Eligible Lender Trustee
(if applicable) enter into an Adoption Agreement, this Master Loan Sale Agreement 2007-2008
shall provide for the Seller to sell to the Department certain of such loans by sale and transfer to
the Department of all of the Seller’s and the Eligible Lender Trustee’s (if applicable) right, title
and interest in, to and under such loans (including the right to service such loans) as authorized
by the Higher Education Act, all on the terms and conditions set forth below; and
WHEREAS, by its execution of an Adoption Agreement to this Master Loan Sale
Agreement 2007-2008, and upon each transfer hereunder, the Seller shall represent to the
Department that it shall continue to participate in the Federal Family Education Loan Program
and that it will originate new FFELP loans or acquire FFELP loans made by other lenders after
the Department’s purchases of Loans from the Seller.
NOW, THEREFORE, in connection with the mutual promises contained herein, the
parties hereto agree as follows:
Section 1.
Terms. This Master Loan Sale Agreement 2007-2008 establishes the
terms under which the Seller, together with an Eligible Lender Trustee, if any, which holds legal
title to Eligible Loans on behalf of the Seller and which is authorized to sell Eligible Loans on
behalf of the Seller, may sell, and the Department shall purchase, the Eligible Loans (and all
obligations of the Borrowers thereunder) specified on each Loan Schedule attached to each Bill
of Sale as the parties may execute from time to time pursuant to this Master Loan Sale
Agreement 2007-2008, subject to the terms of this Master Loan Sale Agreement 2007-2008.
Each such Bill of Sale shall be substantially in the form of Exhibit B, attached hereto,

incorporating by reference the terms of this Master Loan Sale Agreement 2007-2008, and shall
be a separate agreement among the Seller, the Eligible Lender Trustee (if applicable) and the
Department with respect to the Loans covered by the terms of such Bill of Sale for all purposes.
If the terms of a Bill of Sale conflict with the terms of this Master Loan Sale Agreement 20072008, the terms of this Master Loan Sale Agreement 2007-2008 shall supersede and govern
except to the extent that such conflict is specifically noted in the Bill of Sale and the parties
acknowledge and agree that notwithstanding such conflict, the terms of the Bill of Sale shall
govern.
The Department shall not purchase Loans hereunder unless the scheduled Purchase Date
is before the earlier of February 28, 2009 or the date on which an Asset-Backed Commercial
Paper (ABCP) Conduit is prepared to purchase loans. The Department will expend no more than
an aggregate total of $6.5 billion to purchase loans from all Sellers that enter into this
Agreement. The Department will not purchase a Loan owed by an individual unless the Seller
sells all Eligible Loans it holds that are owed by that individual.
For any given week the Department will expend up to $500 million to purchase Loans
from all Sellers with which it enters into this Agreement. The Department will purchase no
Loans from a lender for a given week unless the Department determines that the average
outstanding balance of the Loans offered for sale by the lender for that week is at least $3,000.
For each week, the Department will specify a time period within which interested Sellers must
offer Loans for purchase, and the procedure by which an offer must be made. The Department
will provide this information by electronic publication at http://federalstudentaid.ed.gov/ffelp.
The Department will consider only those offers that it receives within the specified time period
and that were submitted in the form and manner there stated. The Department will calculate the
total amount of the outstanding balance of the Eligible Loans offered for sale for the week by
lenders that submit offers that meet the required minimum average Loan balance. The
Department will purchase all such Loans if the amount needed to purchase them does not exceed
$500 million. If the amount needed to purchase all Eligible Loans in qualifying offers exceeds
$500 million, the Department will purchase, from each Lender, an amount up to the total
outstanding balances of the Loans offered by such Lender multiplied by the percentage which the
Lender’s FFELP Loan volume originated in the 2007-2008 academic year bears to the FFELP
Loan volume originated in the 2007-2008 academic year by all Lenders that submitted qualifying
offers to sell Loans in the same week. If the Department spends less than $500 million for a
given week to complete purchases in the amounts determined based on 2007-2008 lending, the
Department will determine the percentage that the amount of loans offered from each lender that
was not purchased bears to the total amount offered but not so purchased from all lenders for that
week. The Department will then spend up to the remainder of the $500 million to purchase an
amount of Loans from each Lender that corresponds to that lender’s percentage of all Loans
offered but not yet purchased. The Department will purchase Loans in the amounts determined
in this process on the basis of qualifying offers submitted by Sellers during the required time
period in the preceding week. The offers and purchases referenced in this paragraph shall also be
subject to terms set forth in a Federal Register notice to which this Agreement is appended, and
the terms of such notice are incorporated herein.
Section 2.
Commitment to Lend Under the FFELP. By its execution of the
Agreement, the Seller (and, as applicable, the Eligible Lender Trustee acting on its behalf)

-2-

represents that within the eighteen (18) months next following the month in which it sells
Eligible Loans to the Department under this Agreement –
A. It will originate and fully disburse Stafford or PLUS loans, or acquire Stafford or
PLUS loans made by other lenders for the 2008-2009 or 2009-2010 academic year, and that the
combined amount of such originated and acquired loans when fully disbursed shall be in a dollar
volume equal to 100 percent of the total of funds received in connection with the sale of those
Eligible Loans to the Department under this Agreement, net of any amounts expended to remove
encumbrances on such loans to make them eligible to be sold to the Department, and excluding
any loans sold by any Seller to the Department or to an ABCP Conduit and any loans in which
any Seller sells a participation interest to the Department.
The Seller may credit toward the amount of loans which it makes or acquires to meet its
responsibility under Section 2A those Loans that are made at its request by another lender, if
those loans meet these conditions, are not loans sold by any Lender to the Department or to an
ABCP Conduit, and are not loans in which any Lender sells a participation interest to the
Department.
B. It will conduct activities constituting a continued participation in the FFELP,
including but not limited to servicing a pre-existing FFELP loan portfolio, purchasing additional
FFELP loans, and maintaining a platform from which the Seller may originate FFELP loans.
C. It will, not later than fifteen (15) months next following the month in which it sells
Eligible Loans to the Department under this Agreement provide a report to the Department
setting forth that it originated FFELP loans in an amount equal of exceeding the total of funds
received in connection with the sale of those Eligible Loans to the Department, and setting forth
a detailed explanation of the manner in which it met the requirements of Section 2A.
Department.
Section 3.
Definitions. For purposes of this Master Loan Sale Agreement 20072008, the following capitalized terms shall have the respective meanings set forth below:
A.
“Adoption Agreement” means an Adoption Agreement, substantially in the form
of Exhibit A, attached hereto, of which this Master Loan Sale Agreement 2007-2008 forms a part
by reference, by and among the Department, a Seller and an Eligible Lender Trustee (if
applicable) obligating each of the parties thereto to the terms of this Master Loan Sale
Agreement 2007-2008. If the terms of an Adoption Agreement conflict with the terms of this
Master Loan Sale Agreement 2007-2008, the terms of this Master Loan Sale Agreement 20072008 shall govern except to the extent that such conflict is specifically noted in such Adoption
Agreement and the parties acknowledge and agree that notwithstanding such conflict, the terms
of the Adoption Agreement shall govern.
B.
“Bill of Sale” means each document in the form of Exhibit B, attached hereto,
executed by an authorized officer of the Seller and acknowledged by the Department, which
shall (i) set forth the Loans offered by the Seller and accepted for purchase by the Department,
(ii) sell, assign and convey to the Department and its assignees, all right, title and interest of the
Seller, in the Loans listed on that Bill of Sale and (iii) certify that the representations and

-3-

warranties made by the Seller pursuant to Sections 6A and 6B of this Master Loan Sale
Agreement 2007-2008 are true and correct.
C.

“Borrower” means the student or parent obligor on a Loan.

D.
“Business Day” means any day other than (i) a Federal holiday, (ii) a Saturday or
Sunday, or (iii) any other day on which banking institutions or trust companies operating in the
state or jurisdiction where the Eligible Lender is headquartered is authorized or obligated by law,
regulation, or executive order to remain closed.
E.
“Conduit” or “ABCP Conduit” means an entity that issues asset-backed
commercial paper to finance acquisition of FFELP loans and that holds an agreement from the
Department to purchase FFELP loans (a “Put Agreement”) it acquires.
F.
“Eligible Borrower Benefits,” or “Approved Borrower Benefits,” means only
those borrower benefits for a Loan that are listed in Exhibit F.
G.
“Eligible Lender” means an entity that is an eligible lender under Section 435(d)
of the Higher Education Act that holds Eligible Loans (whether directly or as an Eligible Lender
Trustee).
H.
“Eligible Lender Trustee” means an Eligible Lender that holds legal title to a
Loan for the benefit or on behalf of the Seller which holds the related beneficial ownership
interest in such Loan that is authorized to sell Eligible Loans on behalf of the Seller, and that
executes an Adoption Agreement together with such Seller.
I.
“Eligible Loan” means a Loan that meets the following criteria as of the
applicable Purchase Date:
(i)

the Loan was made for a loan period that included, or began on or after, July 1,
2007 and ended on or before August 31, 2008, and the first disbursement on the
Loan was made on or after May 1, 2007;

(ii)

the Loan is owned by the Seller, together with the Eligible Lender Trustee (if
applicable), and is fully disbursed;

(iii)

the Loan has been originated and serviced in compliance with all requirements of
applicable law, including the Higher Education Act and the implementing
regulations, the Equal Credit Opportunity Act, Regulation B and other applicable
consumer credit laws and equal credit opportunity laws, as applicable to such
Loan;

(iv)

the Loan is guaranteed at least 97% as to principal and interest by the applicable
Guarantor and eligible for reinsurance by the Department in accordance with the
Higher Education Act;

-4-

(v)

the Loan bears interest at a stated rate equal to the maximum rate permitted under
the Higher Education Act for such loan, except as the rate is modified by an
approved borrower benefit;

(vi)

the Loan is eligible for the payment of quarterly Special Allowance Payments;

(vii)

if the Loan is not yet in repayment status, the Loan is eligible for payment of
Interest Subsidy Payments, or if not eligible, has interest either billed quarterly to
the Borrower or capitalized to the extent permitted by the applicable Guarantor
(unless, by the Purchase Date, the Seller would not otherwise have billed the
borrower quarterly for interest accrued on the Loan);

(viii) the Loan is evidenced by a signed Promissory Note in the form (including any
required addenda) published by, and prescribed by, the Department, without
change of any kind, and is not subject to any agreement not contained in that note
that would bar, condition, or limit either transfer of the loan or the exercise by a
transferee of the rights of the Lender under terms of the note, except as such an
agreement relates exclusively to borrower benefits on the loan.;
(ix)

the Seller, together with the Eligible Lender Trustee (if applicable), has good and
marketable title to the Loan free and clear of any encumbrance, lien or security
interest or any other prior commitment other than as may be granted in favor of
the Department or that will be released pursuant to a Security Release
Certification upon the transfer hereunder;

(x)

the Loan has not been modified, extended or renegotiated in any way, except as
required or permitted under the Higher Education Act or other applicable laws,
rules and regulations, and the applicable Guarantee Agreement, except as any
such modification, extension, or renegotiation relates exclusively to borrower
benefits on the loan;

(xi)

the Loan constitutes a legal, valid and binding obligation to pay on the part of the
related Borrower enforceable in accordance with its terms and is not subject to a
current bankruptcy proceeding;

(xii)

the Loan is supported by the documents required under this Agreement;

(xiii) the Loan has no borrower benefits or other incentive programs other than Eligible
Borrower Benefits;
(xiv)

if the Loan is subject to a servicing agreement, such servicing agreement is
terminable with respect to such Loan upon ten (10) Business Days’ notice by the
Department without the payment by the Department of any de-boarding,
deconversion or related fees or expenses of the related servicer and without any
liability on the part of the Department;

(xv)

the sale or assignment of the Loan does not conflict with any law or require notice
to or consent, approval, authorization or order of any Person or governmental
-5-

authority, except for such consent, approval, authorizations or orders, if any, that
have been obtained prior to the related Purchase Date, and for any notices to
Borrowers and Guarantors required by the Higher Education Act;
(xvi)

if the Loan is one of several Eligible Loans held by or on behalf of the Seller that
are owed by an individual, each of those loans is sold to the Department; and

(xvii) the Loan has been originated or acquired by either an Eligible Lender, or a lender
that is not an Eligible Lender and the legal title of such Loan is held by an
Eligible Lender Trustee.
The following loans shall, without limitation, not be eligible for sale to the Department
pursuant to the terms of this Master Loan Sale Agreement 2007-2008:
(i)

loans which do not comply with the representations and warranties set forth in
Section 6B of this Master Loan Sale Agreement 2007-2008;

(ii)

FFELP consolidation loans or any other types of loans not specifically described
in this Master Loan Sale Agreement 2007-2008;

(iii)

loans disbursed for academic years other than 2007-2008;

(iv)

loans on which the Lender has committed to providing the Borrower with any
borrower benefits other than Eligible Borrower Benefits, without regard to
whether such a commitment purports to bind only the Lender;

(v)

loans on which a default claim or other claim for payment on the loan has been
filed with the related Guarantor or loans that are 210 or more days delinquent; and

(vi)

loans made by a guarantor or other lender as a Lender of Last Resort, pursuant to
Section 428(j) of the Higher Education Act, whether made with Federal advances
or other funds…

J.
“Equal Credit Opportunity Act” means the Equal Credit Opportunity Act (15
U.S.C. Section 1691 et seq.) as amended.
K.
“FFELP” means the Federal Family Education Loan Program authorized under
title IV, Part B of the Higher Education Act.
L.
“Guarantee Agreement” means an agreement between a Guarantor and the Seller
or the Eligible Lender Trustee (if applicable) that provides for the payment by such Guarantor of
amounts authorized to be paid pursuant to the Higher Education Act to holders of qualifying
FFELP student loans guaranteed in accordance with the Higher Education Act.
M.
“Guarantor” means any FFELP guaranty agency with which the Seller or the
Eligible Lender Trustee (if applicable) has in place a Guarantee Agreement, and which guarantor
is reinsured by the Department of Education for a percentage of claims paid for a given federal
fiscal year.

-6-

N.
“Higher Education Act” means the Higher Education Act of 1965, as amended, 20
U.S.C. Section 1001 et seq.
O.
“Interest Subsidy Payments” means the interest subsidy payments on certain
FFELP student loans authorized to be made by the Department pursuant to Section 428 of the
Higher Education Act.
P.
“Loan” means a FFELP Subsidized Stafford Loan or Unsubsidized Stafford Loan
or FFELP PLUS Loan that was made to a student or in the case of a parent PLUS loan, made to a
parent of a dependent student, evidenced by a Promissory Note and all related Loan Documents
together with any guaranties and other rights relating thereto including, without limitation,
Interest Subsidy Payments and Special Allowance Payments, together with the servicing rights
related thereto.
Q.
“Loan Documents” means with respect to each Loan, the following documents
(except as otherwise specifically provided by the Department):
(i)

a copy of the loan application if a separate application was provided to the Seller;

(ii)

a copy of the signed Promissory Note;

(iii)

the repayment schedule;

(iv)

a record of each disbursement;

(v)

notices of changes in a Borrower’s address and status as at least a half-time
student;

(vi)

evidence of the Borrower’s eligibility for a deferment;

(vii)

the documents required for the exercise of forbearance;

(viii) documentation of the assignment of the loan, if any;
(ix)

a payment history showing the date and amount of each payment received from or
on behalf of the Borrower, and the amount of each payment that was attributed to
principal, interest, late charges, and other costs;

(x)

a collection history showing the date and subject of each communication between
the Seller and the Borrower or endorser relating to collection of a delinquent
Loan, each communication other than regular reports by the Seller showing that
an account is current, between the Seller and a credit bureau regarding the loan,
each effort to locate a Borrower whose address is unknown at any time, and each
request by the Seller for default aversion assistance on the Loan;

(xi)

documentation of any master promissory note confirmation process or processes;

-7-

(xii)

any additional records that are necessary to document the validity of a claim
against the guarantee or the accuracy of reports submitted by the Seller; and

(xiii) a statement identifying the name and location of the entity in possession of the
original electronic promissory note and, if different, the name, company, address
and contact information of the person who is able to provide the affidavit or
certification described in 34 C.F.R. Section 682.414(a)(6)(i), including any
necessary supporting documentation.
R.
“Loan Schedule” means the schedule attached to each Bill of Sale (in the form
provided by the Department) and completed by or on behalf of the Seller and the Eligible Lender
Trustee (if applicable) that lists, by Borrower, (i) the Loans sold to the Department pursuant to
such Bill of Sale, (ii) the name and address of such Borrower, the loan number, the qualifying
institution attended by the Borrower, and the outstanding Principal Balance and accrued interest
of such Loans as of the related Purchase Date, and (iii) any other information the Department
may require including but not limited to certain identification numbers and dates relating to the
Eligible Loans.
S.
“Master Loan Sale Agreement 2007-2008” means this Master Loan Sale
Agreement 2007-2008, of which the Adoption Agreement forms a part by reference.
T.
“Master Participation Agreement” means the Master Participation Agreement,
dated July 25, 2008, together with the related adoption agreement among the Department, the
Seller, the Eligible Lender Trustee (if applicable) and the related Custodian.
U.

[Reserved.]

V.
“Person” means an individual, corporation, limited liability company, partnership,
joint venture, association, joint-stock company, trust, unincorporated organization or government
or any agency or political subdivision thereof.
W.
“PLUS Loan” means a Loan described in Section 428B of the Higher Education
Act and shall include loans to parents, designated as “PLUS Loans” or loans to graduate or
professional students, designated “Grad PLUS Loans.”
X.
“Principal Balance” means the outstanding principal amount of the Loan, plus
interest capitalized through the Purchase Date (if any).
Y.
“Promissory Note” means the master promissory note of the Borrower and any
amendment thereto evidencing the Borrower’s obligation with regard to a student loan
guaranteed under the Higher Education Act or the electronic records evidencing the same and
that contains the terms required by the Higher Education Act and implementing regulations.
Z.
“Purchase Date” means with respect to any purchase, the effective date of the
related Bill of Sale by which the related Loans are sold to the Department and legal title to such
Loans is conveyed to the Department. The latest Purchase Date scheduled hereunder shall be the
earlier of February 28, 2009 or the date on which an ABCP Conduit is prepared to purchase
loans.
-8-

AA. “Purchase Price” means with respect to each Loan sold to the Department
hereunder, 97 percent of the sum of (1) the outstanding Principal Balance of the Loan as of the
related Purchase Date, plus (2) accrued and unpaid interest on the Loan up to, but not including,
the related Purchase Date.
BB. “Regulation B” means the federal regulations governing the Equal Credit
Opportunity Act as it appears in Title 12, Code of Federal Regulations, Part 202.
CC. “Responsible Officer” means any director, vice president, assistant vice president,
any associate or any other officer of the Sponsor, customarily performing functions similar to
those performed by any of the above designated officers and with respect to a particular matter,
to whom such matter is referred because of such officer’s knowledge of and familiarity with the
particular subject and having direct responsibility for the administration of this Agreement.
DD. “Secretary” means the Secretary of Education, and “Department” means the
United States Department of Education, and either term includes any official of the Department
duly authorized to perform any function with respect to the transactions under this Master Loan
Sale Agreement 2007-2008.
EE.
“Security Release Certification” means the certification executed by the Seller
and a lienholder with respect to one or more Loans substantially in the form of Exhibit E hereto.
FF.

“Seller” has the meaning set forth in the preamble hereof.

GG. “Special Allowance Payments” means special allowance payments on FFELP
student loans authorized to be made by the Department pursuant to Section 438 of the Higher
Education Act.
HH.

“Stafford Loan” means a Subsidized Stafford Loan or an Unsubsidized Stafford

Loan.
II.
“Subsidized Stafford Loan” means a Loan described in Section 428(a) of the
Higher Education Act.
JJ.
“Unsubsidized Stafford Loan” means a Loan described in Section 428H of the
Higher Education Act.
Section 4.

Sale/Purchase.

Notice. The Seller shall notify the Department of its intent to sell Loans pursuant
A.
to this Master Loan Sale Agreement 2007-2008 at least five (5) Business Days prior to the
related Purchase Date and shall deliver a Loan Schedule for the Loans to be sold on a particular
Purchase Date to the Department together with such notice. The Department will notify the
Seller whether it agrees to purchase Loans and if so, the amount of Loans that the Department
agrees to purchase. The Seller shall submit, in a form specified by the Department, a list of the
loans it offers to sell and related information. The Seller shall submit this list of loans either with
the notice or at such later date as the Department may specify.

-9-

B.
Consummation of Sale and Purchase. The sale and purchase of Loans pursuant to
a Bill of Sale as of any Purchase Date shall be consummated upon (i) the Department’s receipt
from the Seller and the Eligible Lender Trustee (if applicable) of the related Bill of Sale together
with a Loan Schedule attached thereto, (ii) the delivery of the related Promissory Notes and
related Loan Documents to the Department, (iii) the payment by the Department to the Seller of
the Purchase Price, and (iv) the satisfaction of all other conditions precedent set forth in
Section 5B hereof in the manner set forth in this Agreement (or if unsatisfied, the Department
has permitted such unsatisfied conditions to be cured within an acceptable period of time
following the Purchase Date, in the Department’s sole discretion). The Department and the
Seller acknowledge and agree that the Purchase Price paid for each Loan includes consideration
for release by the Seller of any claim it may otherwise have with respect to related servicing
rights appurtenant to such Loan. Upon consummation, such sale and purchase shall be effective
as of the date of the Bill of Sale. The Seller shall use its best efforts to perform promptly its
obligations pursuant to such Bill of Sale with respect to each Loan.
C.
Settlement of the Purchase Price. On the Purchase Date, the Department shall pay
to the Seller the Purchase Price by electronic transfer in funds available by the next Business Day
to the account specified by the Seller. Upon payment to the Seller of the Purchase Price, (i) the
Seller shall deliver to the Department a duly executed Bill of Sale with respect to the related
Loans being sold on such Purchase Date in the form attached hereto as Exhibit B, (ii) either (x) if
the Seller is an Eligible Lender, the Seller does hereby sell, transfer, assign, set over and convey
to the Department, without recourse, but subject to the terms of the Agreement, all rights, title
and interest of the Seller in and to the Loans listed on the Loan Schedule delivered in connection
with the related Purchase Date, or (y) if the Seller is not an Eligible Lender, the Eligible Lender
Trustee does hereby sell, transfer, assign, set over and convey to the Department, without
recourse, but subject to the terms of the Agreement, all of its rights, title and interest in and to the
related Eligible Loans, and the Seller does hereby sell, transfer, assign, set over and convey to
the Department, without recourse, but subject to the terms of the Agreement, all of its beneficial
interests in such Eligible Loans, and (iii) the Seller does hereby sell, transfer, assign, set over and
convey to the Department all of the related servicing files and servicing rights appurtenant to the
related Loans, the related Promissory Notes and related Loan Documents (including, without
limitation, any rights of the Seller to receive from any third party any documents which
constitute a part of the loan or servicing files) and all rights and obligations arising under the
documents contained therein.
Purchase Frequency. The Seller may not sell Loans to the Department more
D.
frequently than weekly.
E.
Interest Subsidy and Special Allowance Payments and Fees. The Seller shall be
entitled to all Interest Subsidy Payments and Special Allowance Payments on the Loans up to but
not including the related Purchase Date, and shall be responsible for the payment of fees, if any,
applicable to Loans accruing up to but not including the related Purchase Date. The Department
shall be entitled to all payments on a Loan which are received after the Purchase Date.

- 10 -

F.
Transfer of Servicing. The Seller shall cause each related servicer of the Loans to
transfer servicing in accordance with the directions of the Department and in accordance with
industry standards related to the prudent servicing of FFELP loans.
Intent of the Parties. With respect to each sale of Loans pursuant to this Master
G.
Loan Sale Agreement 2007-2008 and the related Bills of Sale, it is the express intention of the
Seller and the Department, and the Seller hereby warrants that, the transfer and assignment
constitute a valid sale of such Loans and the rights to service such Loans from the Seller to the
Department, and that the legal and beneficial interest in and title to such Loans shall not be part
of the Seller’s estate in the event of the bankruptcy of the Seller or the appointment of a receiver
with respect to the Seller. If such transfer and assignment is deemed to be a pledge to secure a
loan and not a sale, then the parties also intend and agree that the Seller shall be deemed to have
granted, and in such event does hereby grant, to the Department, a first priority security interest
in all of its right, title and interest in, to and under such Loans, including the servicing rights
appurtenant thereto, all payments of principal or interest on such Loans due after the related
Purchase Date, all other payments made in respect of such Loans after the related Purchase Date
and all proceeds thereof and that this Master Loan Sale Agreement 2007-2008 shall constitute a
security agreement under applicable law. If such transfer and assignment is deemed to be a
pledge to secure a loan and not a sale, the Seller consents to the Department hypothecating and
transferring such security interest in favor of Department’s successors or assigns.
Section 5.

Conditions Precedent to Purchase.

A.
Initial Document Delivery. Not less than five (5) Business Days prior to the first
Purchase Date hereunder, the Seller shall submit to the Department fully executed originals of
the following documents:
(i)

an Adoption Agreement, in substantially the form of Exhibit A hereto, duly
executed by the Seller and the Eligible Lender Trustee (if applicable), in three
counterparts;

(ii)

if the Seller has not entered into the Master Loan Sales Agreement dated July 25,
2008 with the Department –

(iii)

(1)

an officer’s certificate, in substantially the form of Exhibit C hereto,
including all attachments thereto, and

(2)

an opinion of counsel to the Seller, in substantially the form of Exhibit D
hereto; and

such other documents as the Department may request.

- 11 -

B.
Purchase Date Closing Conditions. Any purchase of Loans pursuant to this
Master Loan Sale Agreement 2007-2008 on any Purchase Date is subject to the following
conditions precedent being satisfied (and the Seller, by accepting payment, shall be deemed to
have certified that all such conditions are satisfied on such Purchase Date):
(i)

Activities Prior to the Related Purchase Date. The Seller shall have provided any
assistance requested by the Department in determining that all required
documentation on the related Loans is present and correct.

(ii)

Servicing Released. Each Loan subject to a servicing agreement shall have been
released from such servicing agreement upon the sale to the Department
hereunder. The Seller shall be responsible for, and shall have paid, any deboarding, deconversion or related fees or expenses to the related servicer. The
Department shall obtain all rights to service such Loan and may, in its sole
discretion require deconversion of such Loan in order to service the loan itself or
through a third-party servicer of its designation.

(iii)

Bill of Sale/Loan Schedule/Loan Documents. The Seller shall deliver to the
Department:
(1)

A Bill of Sale that has been duly authorized and executed by an authorized
officer of the Seller and the Eligible Lender Trustee (if applicable),
covering the applicable Loans offered by the Seller and acknowledged and
accepted by the Department as set forth thereon;

(2)

The Loan Schedule attached to the Bill of Sale identifying each of the
Eligible Loans proposed to be sold; and

(3)

The Loan Documents for each Loan listed on the Loan Schedule.

(4)

In the case of a purchase of Loans evidenced by electronically signed
promissory notes, the Seller may, for all such Loans, satisfy its obligation
to provide Loan Documents by providing with its Bill of Sale a
“representative affidavit,” with full supporting material, that describes the
procedures the Lender used to make and hold a particular Loan and the
procedures whereby that Seller will be able to meet any additional needs
of the Department for records supporting that Loan, and a certification that
such representative affidavit describes the procedures that have been and
will be used respecting all other Loans sold to the Department (unless
otherwise indicated respecting any such other Loans, in which case a
separate representative affidavit may be provided) under this Master Loan
Sales Agreement. The Department shall consider a representative
affidavit acceptable only if it contains each of the following elements:
(I)

The name and location of the entity in possession of any original
electronic promissory note.

- 12 -

(II)

A description (such as a flow chart) of the steps followed by the
borrower to execute the promissory note (including those relating
to any applicable master promissory note confirmation process).

(III)

A copy of each computer screen as it appeared to the borrower
when signing the note electronically.

(IV)

A description of the field edits and any other security measures
used to ensure the integrity of the data submitted to the originator
electronically.

(V)

A description of how the executed promissory note has been
preserved so as to ensure that it could not be altered after it was
executed.

(VI)

Documentation supporting
electronic signature process.

the

Seller’s

authentication

and

(VII) An indication of the Seller’s capability and readiness to provide
Loan-specific affidavits for particular Loans in the future, as may
be requested by the Department.
(iv)

Endorsement. At the direction of and in such form as the Department may
designate, the Seller also agrees to individually endorse any Loan as the
Department may request from time to time.

(v)

Eligible Lender Trustee Sales. The Eligible Lender Trustee (if applicable) shall
have delivered to the Department such additional documents and information as
the Department shall have requested to evidence that the Eligible Lender Trustee
is fully authorized to sell each related Loan on behalf of the Seller.

(vi)

Security Release Certification. If any of the Loans has at any time been subject to
any security interest, pledge or hypothecation for the benefit of any Person, the
Seller shall deliver to the Department a Security Release Certification, in the form
of Exhibit E attached hereto executed by such Person.

(vii)

Additional Documents. The Seller shall have delivered to the Department such
additional documents and information as the Department shall have requested.

(viii) Additional Notices of Loan Transfer. The Seller shall deliver to the Borrower
such notices of loan transfer as may be required by the Higher Education Act and
implementing regulations. The Seller agrees that the Department may use the
related Bill of Sale, together with the related, attached Loan Schedule, as official
notification to the Guarantor of the assignment by the Seller and the Eligible
Lender Trustee (if applicable) on behalf of the Seller to the Department of the
Loans listed on such Loan Schedule.

- 13 -

(ix)

Independent Public Accountant Review. Upon the consummation of the initial
purchase of Loans hereunder, and on any subsequent dates specified by the
Department (but not more often than monthly), the Seller shall deliver an agreed
upon procedures letter by an independent public accountant with respect to the
Loans proposed to be sold on such Purchase Date, in form acceptable to the
Department.

C.
Power of Attorney. The Seller hereby grants to the Department an irrevocable
power of attorney, which power of attorney is coupled with an interest, (i) to individually
endorse or cause to be individually endorsed in the name of the Seller any Loan, (ii) to evidence
the transfer of such Loan to the Department, (iii) to cause to be transferred physical possession
from the Seller to the Department of any Promissory Note evidencing a Loan sold to the
Department hereunder, and (iv) to perform all other acts which the Department deems
appropriate to protect, preserve and realize upon the Loans sold hereunder, including, but not
limited to, the right to take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due with respect to any Promissory
Note, complete blanks in documents, transfer servicing and execute assignments and other
instruments on behalf of the Seller as its attorney in fact.
Section 6.
Trustee.

Representations and Warranties of the Seller and the Eligible Lender

A.
Representations as to the Seller and the Eligible Lender Trustee. The Seller, as to
each matter referenced below, and, to the extent expressly required below, the Eligible Lender
Trustee (if applicable), represents and warrants to the Department, as of the date the Adoption
Agreement is executed and as of the date of each Bill of Sale, that:
(i)

Each of the Seller and the Eligible Lender Trustee (if applicable) (1) is duly
organized, validly existing and in good standing under the laws of the State of its
formation or of the United States, as applicable, (2) has all licenses necessary to
carry out its business as now being conducted or is otherwise exempt under
applicable law from such licensing or qualification or is otherwise not required
under applicable law to effect such licensing or qualification and no demand for
such licensing or qualification has been made upon it by any such state, and (3) in
any event is in compliance with the laws of any such state to the extent necessary
to ensure the enforceability of each Loan. No licenses or approvals obtained by it
have been suspended or revoked by any court, administrative agency, arbitrator or
governmental body and no proceedings are pending which might result in such
suspension or revocation;

(ii)

The Seller or the Eligible Lender Trustee (if applicable) is an “eligible lender” as
such term is defined in Section 435(d) of the Higher Education Act, has a lender
identification number issued by the Department with respect to the Loans, and has
in effect a Guarantee Agreement with a Guarantor with respect to each of the
Loans;

- 14 -

(iii)

With respect to each state or jurisdiction therein in which the Seller undertakes
origination activities, Seller is in full compliance with such state’s or
jurisdiction’s (as applicable) laws, rules, regulations, orders, settlement
agreements and other standards and procedures, including those promulgated by
agencies or officers thereof, applicable to it and pertaining to the conduct of
participants in the student loan industry (including, without limitation, any
applicable “code of conduct” for participants in the student loan industry that
specifically and legally applies to the Seller and the Eligible Lender Trustee, to
the extent that non-compliance with such a code of conduct would adversely
affect the Department’s rights or interests with respect to the Loans that it
purchases);

(iv)

The Seller has administered, operated and maintained its FFEL program in such
manner as to ensure that such program and the Loans will benefit, in all material
respects, from the FFELP, the Guarantee Agreements related thereto and the
federal program of reimbursement for FFELP loans pursuant to the Higher
Education Act;

(v)

The Seller has not, with respect to any Loan sold under any Bill of Sale executed
pursuant to this Master Loan Sale Agreement 2007-2008, agreed to release any
Guarantor from any of its contractual obligations as a guarantor of such Loan or
agreed otherwise to alter, amend or renegotiate any material term or condition
under which such Loan is guaranteed, except as required by law or rules and
regulations issued pursuant to law, without the express prior written consent of
the Department;

(vi)

Each of the Seller and the Eligible Lender Trustee (if applicable) (1) has all
requisite power and authority to hold each Loan, to sell each Loan, and to
execute, deliver and perform, and to enter into and consummate, all transactions
contemplated by this Master Loan Sale Agreement 2007-2008, (2) has duly
authorized the execution, delivery and performance of this Master Loan Sale
Agreement 2007-2008 and (3) has duly executed and delivered this Master Loan
Sale Agreement 2007-2008. This Master Loan Sale Agreement 2007-2008,
assuming due authorization, execution and delivery by the other parties hereto,
constitutes the legal, valid and binding obligation of the Seller and the Eligible
Lender Trustee (if applicable), enforceable against each of them in accordance
with its terms except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of rights of creditors generally, and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or law);
provided, however, that if the Seller is not an Eligible Lender, the power and
authority to hold and sell each Loan described in clause (1) shall refer, with
respect to the Seller, to the beneficial interest of the Seller, and with respect to the
Eligible Lender Trustee, to its interest as the legal title holder of the Loan;

(vii)

The execution and delivery of this Master Loan Sale Agreement 2007-2008 by
each of the Seller and the Eligible Lender Trustee (if applicable) and the

- 15 -

performance of and compliance with the terms of this Master Loan Sale
Agreement 2007-2008 will not violate its formation documents or constitute a
default under or result in a breach or acceleration of, any material contract,
agreement or other instrument to which it is a party or which may be applicable to
it or its assets;
(viii) Neither the Seller nor the Eligible Lender Trustee (if applicable) is in violation of,
and the execution and delivery of this Master Loan Sale Agreement 2007-2008 by
it and its performance and compliance with the terms of this Master Loan Sale
Agreement 2007-2008 will not constitute a violation with respect to, any order or
decree of any court or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction over it or its assets, which violation
might have consequences that would materially and adversely affect the condition
(financial or otherwise) or its operations or its assets or might have consequences
that would materially and adversely affect the performance of its obligations and
duties hereunder;
(ix)

The Seller does not believe, nor does it have any reason or cause to believe, that it
cannot perform each and every covenant contained in this Master Loan Sale
Agreement 2007-2008;

(x)

There are no actions or proceedings against, or investigations of, the Seller before
any court, administrative agency or other tribunal (A) that might prohibit its
entering into this Master Loan Sale Agreement 2007-2008, (B) that seeks to
prevent the sale of the Loans or the consummation of the transactions
contemplated by this Master Loan Sale Agreement 2007-2008 or (C) that might
prohibit or materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Master Loan Sale
Agreement 2007-2008;

(xi)

No consent, approval, authorization or order of any court or governmental agency
or body is required for the execution, delivery and performance by the Seller or
the Eligible Lender Trustee (if applicable) of, or compliance by it with, this
Master Loan Sale Agreement 2007-2008 or the consummation of the transactions
contemplated by this Master Loan Sale Agreement 2007-2008, except for such
consents, approvals, authorizations or orders, if any, that have been obtained prior
to the related Purchase Date;

(xii)

The transfer of the Loans shall be treated as a sale on the books and records of the
Seller and the Eligible Lender Trustee (if applicable), and each of the Seller and
the Eligible Lender Trustee (if applicable) will treat the disposition of the Loans
pursuant to this Master Loan Sale Agreement 2007-2008 for tax and accounting
purposes as a sale. Each of the Seller and the Eligible Lender Trustee (if
applicable) shall maintain a complete set of books and records for each Loan
which shall be clearly marked to reflect the ownership of each Loan by the
Department;

- 16 -

(xiii) The consideration received by the Seller upon the sale of the Loans constitutes
fair consideration and reasonably equivalent value for such Loans;
(xiv)

The Seller is solvent and will not be rendered insolvent by the consummation of
the transactions contemplated hereby. The Seller is not transferring any Loan
with any intent to hinder, delay or defraud any of its creditors; and

(xv)

The Seller has an internal quality control program that verifies, on a regular basis,
the existence and accuracy of its legal documents, credit documents and
underwriting decisions, including all such documents and decisions that would
affect the validity of the representations and warranties required under this
Section 6A. The program shall include evaluating and monitoring the overall
quality of the Seller’s loan production and the servicing of such loans. The
program is to ensure that the Loans are originated and serviced in accordance with
applicable law; guard against dishonest, fraudulent, or negligent acts; and guard
against errors and omissions by officers, employees, or other authorized persons.

B.
Loan Level Representations. The Seller, as to each matter referenced below, and,
to the extent expressly required below, the Eligible Lender Trustee (if applicable), represents and
warrants to the Department, as to each Loan purchased by the Department under a Bill of Sale,
as of the related Purchase Date:
(i)

The Seller or the Eligible Lender Trustee (as applicable) has good and marketable
title to, and the Seller and Eligible Lender Trustee together are the sole owners of,
the Loans, free and clear of any security interest or lien (other than an interest or
lien that will be released simultaneously with the purchase of the Loan hereunder
pursuant to a Security Release Certification), charges, claims, offsets, defenses,
counterclaims or encumbrances of any nature (including, without limitation, any
circumstance that could impair transfer of title to the Loans free and clear of the
claim of any party) and no right of rescission, offsets, defenses or counterclaims
have been asserted or threatened with respect to any Loan. The sale of each Loan
constitutes the absolute transfer of all right, title and interests of the Seller and the
Eligible Lender Trustee (if applicable) in such Loan to the Department free and
clear of any lien or adverse claim;

(ii)

Each Loan is an Eligible Loan and the description of and information regarding
the Loans set forth in the Bill of Sale and the Loan Schedule is true, complete and
correct;

(iii)

The Seller or the Eligible Lender Trustee (as applicable) is authorized to sell,
assign, transfer and reacquire the Loans; and the sale, assignment and transfer of
such Loans is or, in the case of a Loan reacquisition by the Seller or the Eligible
Lender Trustee (if applicable), will be made pursuant to and consistent with the
laws and regulations under which each of the Seller and the Eligible Lender
Trustee (if applicable) operates, and will not violate any decree, judgment or order
of any court or agency, or conflict with or result in a breach of any of the terms,
conditions or provisions of any agreement or instrument to which it is a party or

- 17 -

by which the it or its property is bound, or constitute a default (or an event which
could constitute a default with the passage of time or notice or both) thereunder;
(iv)

Each Loan is in full force and effect in accordance with its terms and is the legal,
valid and binding obligations of the respective Borrower thereunder subject to no
defenses;

(v)

No consents and approvals are required by the terms of any Loan for the
consummation of the sale of such Loans hereunder to the Department;

(vi)

Each Loan has been duly made and serviced in accordance with the provisions of
the FFELP established under the Higher Education Act, and has been duly
guaranteed by a Guarantor; the Guarantee Agreement is in full force and effect,
and all premiums due and payable to such Guarantor as of the related Purchase
Date shall have been paid in full;

(vii)

Each Loan provides or, when the payment schedule with respect thereto is
determined, will provide for payments on a periodic basis that fully amortize the
Principal Balance thereof by its maturity, as such maturity may be modified in
accordance with any applicable deferral or forbearance periods granted in
accordance with applicable laws, including, those of the Higher Education Act or
any applicable Guarantee Agreement, as applicable;

(viii) Any payments on a Loan received by the Seller that have been allocated to the
reduction of principal and interest on such Loan have been allocated on a simple
interest basis;
(ix)

Each Loan has been duly made and serviced in accordance with the provisions of
the related program under which such Loan was originated and all applicable
federal, state and local laws;

(x)

Due diligence and reasonable care have been exercised in the making,
administering, servicing and collecting on each Loan and, all disclosures of
information required to be made pursuant to the Higher Education Act prior to the
Purchase Date have been made;

(xi)

Each Borrower is an eligible borrower under the terms of Section 428, 428B or
428H of the Higher Education Act, as applicable;

(xii)

All borrower origination and loan fees required by Section 438 of the Higher
Education Act have been paid to the Secretary or appropriately reserved by the
Seller or the Eligible Lender Trustee (if applicable) for payment to the Secretary;

(xiii) Each Loan is denominated and payable only in Dollars in the United States;
(xiv)

The transfer and assignment herein contemplated constitute a valid sale of the
Loans from the Seller or the Eligible Lender Trustee (if applicable) to the
Department, and the beneficial interest in and title to such Loans shall not be part

- 18 -

of the Seller’s or the Eligible Lender Trustee’s (if applicable) estate in the event
of its bankruptcy or the appointment of a receiver with respect to it;
(xv)

There is only one originally executed Promissory Note evidencing each Loan, and
such original Promissory Note (or a true and correct copy thereof) has been
delivered to the Department. For Loans that were executed electronically, the
Seller of such Loan (or its designee) has possession of the electronic records
evidencing the Promissory Note, including all Loan Documents. The Promissory
Notes that constitute or evidence the Loans do not have any marks or notations
indicating that they are pledged, assigned or otherwise conveyed to any Person
other than the Department or the Department’s designee (other than an interest or
lien that will be released simultaneously with the purchase of the Loan hereunder
pursuant to a Security Release Certification or, if applicable, any lien in favor of
the Department and its custodian under the Master Participation Agreement);

(xvi)

To the extent any Loan is evidenced by an electronic Promissory Note or an
electronic record, or to the extent the signature of the obligor on any Promissory
Note is an electronic signature, the Sponsor has complied (and has caused any
originator or servicer of the Loan to comply) with all regulations and other
requirements provided by the applicable Guarantor or the Department relating to
the validity and enforceability of such Promissory Note;

(xvii) Neither the Seller nor the Eligible Lender Trustee (if applicable) has pledged,
assigned, sold, granted a security interest in, or otherwise conveyed any of the
Loans (other than an interest or lien that will be released simultaneously with the
purchase of the Loan hereunder pursuant to a Security Release Certification).
Neither the Seller nor the Eligible Lender Trustee (if applicable) has authorized
the filing of or is aware of any financing statements against it that include a
description of collateral covering the Loans hereunder (whether or not additional
collateral is covered by such financing statements) or any other security interest
that has not been terminated, or that will not be terminated upon purchase by the
Department. Neither the Seller nor the Eligible Lender Trustee (if applicable) is
aware of any judgment or tax lien filings against it; and
(xviii) No Borrower of a Loan as of the related Bill of Sale, is noted in the related Loan
File as being currently involved in a bankruptcy proceeding.
Section 7.
Rescission of Purchase; Obligation to Reimburse and Indemnify. Upon
the occurrence of any of the conditions set forth below in this Section 7, the Department may
rescind its purchase of a Loan, and upon written demand by the Department, the Seller shall
repay to the Department the Purchase Price for such Loan (less any payments received by the
Department on that Loan), plus accrued and unpaid interest and applicable negative Special
Allowance Payments that would have been paid with respect to such Loan from the Purchase
Date to and including the date of repayment, plus any amounts otherwise owed to the Secretary
with respect to such Loan, plus any attorneys’ fees, legal expenses, court costs, damages,
servicing fees or other fees and expenses incurred by the Department in connection with such

- 19 -

Loan by reason of the occurrence of such conditions, and the Department shall thereupon
relinquish its interest in such Loan to the Seller:
A.
Any representation or warranty made or furnished by the Seller or the Eligible
Lender Trustee (if applicable) pursuant to Sections 6A and 6B of this Master Loan Sale
Agreement 2007-2008 shall prove to have been materially incorrect as of the applicable Purchase
Date (except that the Department may allow the Seller or the Eligible Lender Trustee up to 30
days to cure an unfounded representation or warranty made or furnished under Section 6B);
B.
On account of any circumstance or event that occurred prior the Purchase Date of
the Loan, a defense is asserted by a Borrower of the Loan with respect to such Borrower’s
obligation to pay all or any part of the Loan, and the Department, in good faith, believes that the
facts reported, if true, raise a reasonable doubt as to the legal enforceability of such Loan; or
C.

The Loan is not, in fact, an Eligible Loan on its Purchase Date.

In addition to the obligation described above, the Seller shall indemnify the Department
and any subsequent purchaser of the Loans and hold them harmless against liability for any
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from any claim, demand, defense or
assertion based on or grounded upon, or resulting from, any of the circumstances described in
Sections 7A through 7C above.
Section 8.

Obligation to Remit Subsequent Payments and Forward Communications.

A.
Any payment received by the Seller with respect to amounts accrued after the date
of the related Bill of Sale for any Loan sold to the Department, which payment is not reflected in
the related Loan Schedule, shall be held by the Seller in trust for the account of the Department
and the Seller hereby disclaims any title to or interest in any such amounts. Within two (2)
Business Days following the date of receipt, the Seller shall remit to the Department an amount
equal to any such payments along with a listing on a form provided by the Department
identifying the Loans with respect to which such payments were made, the amount of each such
payment and the date each such payment was received.
B.
Any written communication received at any time by the Seller or the Eligible
Lender Trustee (if applicable) with respect to any Loan subject to this Master Loan Sale
Agreement 2007-2008 or the related Bill of Sale shall be transmitted to the Department, or its
designated agent, within two (2) Business Days of receipt. Such communications shall include,
but not be limited to, letters, notices of death or disability, notices of bankruptcy, forms
requesting deferment of repayment or loan cancellation, and like documents.
Continuing Obligation of the Seller. The Seller shall provide all
Section 9.
reasonable assistance necessary for the Department to resolve account problems raised by any
Borrower, the Guarantor or the Secretary provided such account problems are attributable to or
are alleged to be attributable to (a) an event occurring during the period the Seller owned the
related Loan, or (b) a payment made or alleged to have been made to the Seller.

- 20 -

Section 10. Liability of the Seller; Indemnities. The Seller shall be liable in
accordance herewith only to the extent of the obligations specifically undertaken by the Seller
under this Master Loan Sale Agreement 2007-2008 and each related Bill of Sale.
A.
The Seller shall indemnify, defend and hold harmless the Department and its
officers, employees and agents in their individual capacity from and against any taxes that may at
any time be asserted against any such person with respect to the transactions contemplated herein
and in the other documents related hereto, including any sales, gross receipts, general
corporation, tangible and intangible personal property, privilege or license taxes and costs and
expenses in defending against the same.
B.
In addition to the indemnity of the Department set forth in Section 7 hereof, the
Seller shall indemnify, defend and hold harmless the Department and its officers, employees and
agents in their individual capacity, from and against liability for any and all costs, expenses
(including, without limitation, costs and expenses of litigation and of investigation counsel fees,
damages, judgments and amounts paid in settlement), losses, claims, damages and liabilities
arising out of, or imposed upon such person through, the Seller’s or the Eligible Lender Trustee’s
(if applicable) willful misfeasance, bad faith or negligence in the performance of its respective
duties under this Agreement, or by reason of its breach of any of its representations, warranties,
covenants or other obligations or duties under this Agreement.
Indemnification under Section 7 and this Section 10 shall survive the resignation or the
termination of this Master Loan Sale Agreement 2007-2008, and shall include reasonable fees
and expenses of counsel and expenses of litigation. If the Seller shall have made any indemnity
payments pursuant to this Section and the person to or on behalf of whom such payments are
made thereafter shall collect any of such amounts from others, such Person shall promptly repay
such amounts to the Seller, without interest.
Section 11. Transfer of Servicing. The Seller hereby agrees that the Loans are being
purchased by the Department on a servicing-released basis. If the Loan is subject to a servicing
agreement with any third party servicer, such agreement must be terminable with respect to such
Loan upon ten (10) Business Days’ notice by the Department (which may be given at any time
following the Department’s receipt of the Seller’s notice of intent to sell such Loan pursuant to
Section 4A hereof; provided, however, that such termination shall in no event be effective prior
to the consummation of the sale of such Loan to the Department), and the Seller shall be
responsible for any de-boarding, deconversion or related fees or expenses of such servicer.
Accordingly, upon purchase of any Loan, the Department shall obtain all rights to service such
Loan and may, in its sole discretion require deconversion of such Loan in order to service the
Loan itself or through a third-party servicer of its designation. The Seller shall deliver, or cause
the servicer of the Loans to deliver, the servicing and all related servicing files and records with
respect to the Loans to the designee specified by the Department in accordance with the
servicing transfer provisions provided by the Department to the Seller or its designated servicer;
provided, however, that the Seller and its designees may retain copies (in electronic or paper
medium) of the servicing files related to the origination and servicing of the Loans sold to the
Department hereunder.

- 21 -

Section 12. Merger or Consolidation of, or Assumption of the Obligations of, the
Seller. Any Person (a) into which the Seller or the Eligible Lender Trustee (if applicable) may
be merged or consolidated, (b) which may result from any merger or consolidation to which the
Seller or the Eligible Lender Trustee (if applicable) shall be a party or (c) which may succeed to
the properties and assets of the Seller or the Eligible Lender Trustee (if applicable) substantially
as a whole, shall be the successor to the Seller or the Eligible Lender Trustee (if applicable)
without the execution or filing of any document or any further act by any of the parties to this
Master Loan Sale Agreement 2007-2008; provided, that (i) the surviving Person, if other than the
Seller or the Eligible Lender Trustee (if applicable), shall, promptly following such merger or
consolidation, execute and deliver to the Department an agreement of assumption to perform
every obligation of the Seller or the Eligible Lender Trustee (if applicable) under this Master
Loan Sale Agreement 2007-2008 and each Bill of Sale; (ii) immediately after giving effect to
such transaction, no representation or warranty made pursuant to Section 6 shall have been
breached; and (iii) the surviving person, if other than the Seller, shall, promptly following such
merger or consolidation, deliver to the Department an Officers’ Certificate in the form of
Exhibit C and an Opinion of Counsel in the form of Exhibit D each stating that such
consolidation, merger or succession and such agreement of assumption comply with this
Section and that all conditions precedent, if any, provided for in this Master Loan Sale
Agreement 2007-2008 relating to such transaction have been complied with.
Section 13. Expenses. The Department shall pay the legal fees and expenses of its
attorneys. The Seller shall pay all other costs and expenses incurred in connection with
preparation, execution and delivery of this Master Loan Sale Agreement 2007-2008 and any Bill
of Sale and the transactions contemplated herein or therein, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for any Seller with respect thereto, and all
other costs and expenses incurred in connection with the transfer and delivery of the Loans to the
Department, including, without limitation, any fees and expenses incurred in connection with
transferring ownership of any Loans to the Department. The Seller need not pay for expenses
related to the servicing of Loans after the Loans are transferred to the Department. The Seller is
responsible for the costs it incurs for activities required under Section 8 and Section 9 of this
Master Loan Sale Agreement 2007-2008.
Section 14. Survival of Covenants. All covenants, agreements, representations and
warranties made herein and in or pursuant to any Bills of Sale executed pursuant to this Master
Loan Sale Agreement 2007-2008 shall survive the consummation of the acquisition of the Loans
provided for in the related Bill of Sale. All covenants, agreements, representations and
warranties made or furnished pursuant hereto by or on behalf of the Seller and the Eligible
Lender Trustee (if applicable) shall bind and inure to the benefit of any successors or assigns of
the Department and shall survive with respect to each Loan.
Section 15. Communication and Notice Requirements. All communications, notices
and approvals provided for hereunder shall be in writing and mailed or delivered to the Seller,
the Eligible Lender Trustee (if applicable), or the Department, as the case may be, at such
address as either party may hereafter designate by notice to the other party. All demands, notices
and communications hereunder shall be in writing and shall be deemed to have been duly given
if mailed, by registered or certified mail, return receipt requested, or, if by other means, when
received by the other party at the address as follows:

- 22 -

If to the Department:
By U.S. Postal Service mail:
United States Department of Education
400 Maryland Avenue, SW
UCP, Room 111G3
Washington, DC 20202-5402
Attention: FFEL Agreement Process Team
By courier or express mail:
United States Department of Education
830 First Street, N.E.
Room 111G3
Washington, DC 20202-5402
Attention: FFEL Agreement Process Team
If to the Seller or the Eligible Lender Trustee:
The address designated in the accompanying Adoption Agreement.
Section 16. Form of Instruments. All instruments and documents delivered in
connection with this Master Loan Sale Agreement 2007-2008 and any Bill of Sale, and all
proceedings to be taken in connection with this Master Loan Sale Agreement 2007-2008 and any
Bill of Sale and the transactions contemplated herein and therein, shall be in a form as set forth
in the attachments hereto, and the Department shall have received copies of such documents as it
or its counsel shall reasonably request in connection therewith.
Section 17. Amendment; Waiver. This Master Loan Sale Agreement 2007-2008, any
Bill of Sale and any document or instrument delivered in accordance herewith or therewith may
be amended by the parties hereto and thereto with the written consent of all parties hereto or
thereto. No term or provision of this Master Loan Sale Agreement 2007-2008 may be waived or
modified unless such waiver or modification is consistent with the requirements of Section 459A
of the Higher Education Act, is in writing and signed by the party against whom such waiver or
modification is sought to be enforced.
Section 18. Audits. Pursuant to Section 432(f) of the Higher Education Act, Seller
hereby grants the Department and its agents (including but not limited to, legal counsel and
internal or external auditors), the right at any time and from time to time during regular business
hours, (i) to examine and make copies of and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in the possession or under the control of
Seller relating to Loans sold hereunder and (ii) to visit the offices of Seller for the purpose of
examining such material described in clause (i) above, and to discuss matters relating to such
Loans or Seller’s performance hereunder with any officers and employees of Seller having
knowledge of such matters.

- 23 -

Section 19. Severability Clause. Any part, provision, representation or warranty of
this Master Loan Sale Agreement 2007-2008 which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any part, provision, representation or warranty of
this Master Loan Sale Agreement 2007-2008 which is prohibited or unenforceable or is held to
be void or unenforceable in any jurisdiction shall be ineffective, as to such jurisdiction, to the
extent of such prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction as to any Loan shall not
invalidate or render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereto waive any provision of law which prohibits or
renders void or unenforceable any provision hereof. If the invalidity of any part, provision,
representation or warranty of this Master Loan Sale Agreement 2007-2008 shall deprive any
party of the economic benefit intended to be conferred by this Master Loan Sale Agreement
2007-2008, the parties shall negotiate, in good-faith, to develop a structure the economic effect
of which is nearly as possible the same as the economic effect of this Master Loan Sale
Agreement 2007-2008 without regard to such invalidity.
Section 20. Governing Law. This Master Loan Sale Agreement 2007-2008 and any
Bill of Sale and the rights and obligations of the parties thereto shall be governed by and
construed in accordance with Federal law. To the extent there may be no applicable Federal law,
the internal laws of the State of New York (without giving regard to conflicts of laws principles
other than Sections 5-1401 and 5-1402 of the New York General Obligations Law) shall be
deemed reflective of Federal law insofar as to do so would not frustrate the purposes of any
provision of this Master Loan Sale Agreement 2007-2008 or the transactions governed thereby.
Section 21. Exhibits. The exhibits to this Master Loan Sale Agreement 2007-2008 are
hereby incorporated and made a part hereof and are an integral part of this Master Loan Sale
Agreement 2007-2008.
Section 22. General Interpretive Principles. For purposes of this Master Loan Sale
Agreement 2007-2008, except as otherwise expressly provided or unless the context otherwise
requires:
A.
The terms defined in this Master Loan Sale Agreement 2007-2008 have the
meanings assigned to them in this Master Loan Sale Agreement 2007-2008 and include the
plural as well as the singular, and the use of any gender herein shall be deemed to include the
other gender;
B.
Accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with generally accepted accounting principles;
C.
References herein to “Articles,” “Sections,” “Subsections,” “Paragraphs,” and
other Subdivisions without reference to a document are to designated Articles, Sections,
Subsections, Paragraphs and other subdivisions of this Master Loan Sale Agreement 2007-2008;

- 24 -

D.
Reference to a Subsection without further reference to a Section is a reference to
such Subsection as contained in the same Section in which the reference appears, and this rule
shall also apply to Paragraphs and other subdivisions;
E.
The words “herein,” “hereof,” “hereunder” and other words of similar import
refer to this Master Loan Sale Agreement 2007-2008 as a whole and not to any particular
provision; and
F.
The term “include” or “including” shall mean without limitation by reason of
enumeration.
Section 23. Reproduction of Documents. This Master Loan Sale Agreement 20072008 and all documents relating thereto, including, without limitation, (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by any party at the
closing, and (c) financial statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process. The parties agree that any such reproduction
shall be admissible in evidence as the original itself in any judicial or administrative proceeding,
whether or not the original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
Section 24. Further Agreements. Each of the Seller and the Eligible Lender Trustee
(if applicable) agrees to execute and deliver to the other such reasonable and appropriate
additional documents, instruments or agreements as may be necessary or appropriate to
effectuate the purposes of this Master Loan Sale Agreement 2007-2008.
Section 25. Other Department Program. Separately, the Department is offering
purchase of other loans under authority granted by the Ensuring Continued Access to Student
Loans Act of 2008.. This Master Loan Sale Agreement 2007-2008 does not require, nor does it
preclude, the participation of the Seller in the sale of those other loans.
Section 26. Adoption. This Master Loan Sale Agreement 2007-2008 shall be effective
with respect to any Seller and the Eligible Lender Trustee (if applicable) as of the day and year
on which an Adoption Agreement, in the form attached hereto as Exhibit A, is entered into by
both such Seller, the Eligible Lender Trustee (if applicable) and the Department.
Section 27. Integration. The Master Loan Sale Agreement 2007-2008, together with
the related Adoption Agreement, embodies the entire agreement and understanding of the parties
hereto and thereto and supersedes any and all prior agreements, arrangements and
understandings relating to the matters provided for herein and therein.
[NO FURTHER TEXT ON THIS PAGE]

- 25 -

EXHIBIT A
ADOPTION AGREEMENT
This Adoption Agreement, dated as of the date set forth on the signature page, among the
United States Department of Education (“Department”) [, the Eligible Lender Trustee (as listed
in Section 1A hereof) (“Eligible Lender Trustee”)] and the Seller (as listed in Section 1 hereof)
(“Seller”) is made pursuant to the Master Loan Sale Agreement 2007-2008, dated November 24,
2008, published by the Department (“Master Loan Sale Agreement 2007-2008”). Capitalized
terms used but not otherwise defined herein, shall have the meanings set forth in the Master Loan
Sale Agreement 2007-2008.
a)
The Department desires to purchase and the Seller desires to sell to the
Department, from time to time, certain Eligible Loans (as that term is defined in the Master Loan
Sale Agreement 2007-2008).
b)
The Department[, the Eligible Lender Trustee] and the Seller desire to set
forth herein the terms and conditions of such purchase and sale arrangements.
c)
This Adoption Agreement shall supersede and replace all prior agreements
between the parties regarding the sale of Eligible Loans by the Seller [and the Eligible Lender
Trustee] to the Department.
NOW, THEREFORE, in consideration of the above recitals and for other good and
valuable consideration, the receipt and adequacy of which are hereby acknowledged, the
Department and the Seller hereby agree as follows:
Section 1. “Seller” shall mean:
[SELLER]
[ADDRESS]
[LENDER ID]
The above address shall be the Seller’s address for the purpose of receiving notices pursuant to
the Master Loan Sale Agreement 2007-2008.
[Section 1A. “Eligible Lender Trustee” shall mean:
[ELIGIBLE LENDER TRUSTEE]
[ADDRESS]
[LENDER ID]
The above address shall be the Eligible Lender Trustee’s address for the purpose of receiving
notices pursuant to the Master Loan Sale Agreement 2007-2008.]
Section 2. Purchase and Sale of Loans. Following the date of this Adoption Agreement,
the Seller agrees to participate in the Department’s Purchase Program for Eligible Loans made
pursuant to the Federal Family Education Loan Program under the Master Loan Sale Agreement

A-1

2007-2008 and to deliver to the Department such Loans in the aggregate principal amounts as
evidenced by Bills of Sale executed by the Seller and acknowledged and accepted by the
Department pursuant to the Master Loan Sale Agreement 2007-2008. The Seller agrees to sell to
the Department and the Department agrees to purchase from the Seller such Loans on the terms
and subject to the conditions of the Master Loan Sale Agreement 2007-2008 as the same may be
supplemented or amended from time to time. Each of the Seller and the Department hereby
acknowledges and agrees to all terms and provisions of the Master Loan Sale Agreement 20072008 which relate to the selling of Loans which are incorporated herein in their entirety as if
such had been set forth herein in their entirety, as the same may be supplemented or amended
from time to time.
Section 3. Incorporation of Master Loan Sale Agreement 2007-2008. [Each of] [T]he
Seller [and the Eligible Lender Trustee] and the Department hereby acknowledges and agrees to
all terms and provisions of the Master Loan Sale Agreement 2007-2008 which are incorporated
herein in their entirety as if such had been set forth herein in their entirety, as the same may be
supplemented or amended from time to time.
Section 4. Governing Law. This Adoption Agreement and the rights and obligations of
the parties hereto shall be governed by and construed in accordance with Federal law. Insofar as
there may be no applicable Federal law, the internal laws of the State of New York (without
giving regard to conflicts of laws principles other than Sections 5-1401 and 5-1402 of the New
York General Obligations Law) shall be deemed reflective of Federal law insofar as to do so
would not frustrate the purposes of any provision of this Adoption Agreement.
[Signature Page Follows]

A-2

IN WITNESS WHEREOF, the parties hereto have caused this Adoption Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the day and year first
above written.

United States Department of Education

By:
Name:
Title:

Date of Adoption Agreement: ________________
(to be inserted by the Department)

[SELLER], as Seller

By:
Name:
Title:

[[ELIGIBLE LENDER TRUSTEE], as Eligible
Lender Trustee

By:
Name:
Title:]

A-3

EXHIBIT A
[May Be Used By Seller That Is Party
To July 25, 2008 Master Loan Sales Agreement]
ADOPTION AGREEMENT
This Adoption Agreement, dated as of the date set forth on the signature page, among the
United States Department of Education (“Department”) [, the Eligible Lender Trustee (as listed
in Section 1A hereof) (“Eligible Lender Trustee”)] and the Seller (as listed in Section 1 hereof)
(“Seller”) is made pursuant to the Master Loan Sale Agreement 2007-2008, dated November 24,
2008, published by the Department (“Master Loan Sale Agreement”). Capitalized terms used
but not otherwise defined herein, shall have the meanings set forth in the Master Loan Sale
Agreement 2007-2008.
a)
The Department desires to purchase and the Seller desires to sell to the
Department, from time to time, certain Eligible Loans (as that term is defined in the Master Loan
Sale Agreement).
b)
The Department[, the Eligible Lender Trustee] and the Seller desire to set
forth herein the terms and conditions of such purchase and sale arrangements.
c)
This Adoption Agreement shall supersede and replace all prior agreements
between the parties regarding the sale of Eligible Loans by the Seller [and the Eligible Lender
Trustee] to the Department.
NOW, THEREFORE, in consideration of the above recitals and for other good and
valuable consideration, the receipt and adequacy of which are hereby acknowledged, the
Department and the Seller hereby agree as follows:
Section 1. “Seller” shall mean:
[SELLER]
[ADDRESS]
[LENDER ID]
The above address shall be the Seller’s address for the purpose of receiving notices pursuant to
the Master Loan Sale Agreement.
[Section 1A. “Eligible Lender Trustee” shall mean:
[ELIGIBLE LENDER TRUSTEE]
[ADDRESS]
[LENDER ID]
The above address shall be the Eligible Lender Trustee’s address for the purpose of receiving
notices pursuant to the Master Loan Sale Agreement.]

A-4

Section 2. Purchase and Sale of Loans. Following the date of this Adoption Agreement,
the Seller agrees to participate in the Department’s Purchase Program for Eligible Loans made
pursuant to the Federal Family Education Loan Program under the Master Loan Sale Agreement
and to deliver to the Department such Loans in the aggregate principal amounts as evidenced by
Bills of Sale executed by the Seller and acknowledged and accepted by the Department pursuant
to the Master Loan Sale Agreement. The Seller agrees to sell to the Department and the
Department agrees to purchase from the Seller such Loans on the terms and subject to the
conditions of the Master Loan Sale Agreement as the same may be supplemented or amended
from time to time. Each of the Seller and the Department hereby acknowledges and agrees to all
terms and provisions of the Master Loan Sale Agreement which relate to the selling of Loans
which are incorporated herein in their entirety as if such had been set forth herein in their
entirety, as the same may be supplemented or amended from time to time.
Section 3. Incorporation of Master Loan Sale Agreement. [Each of] [T]he Seller [and the
Eligible Lender Trustee] and the Department hereby acknowledges and agrees to all terms and
provisions of the Master Loan Sale Agreement which are incorporated herein in their entirety as
if such had been set forth herein in their entirety, as the same may be supplemented or amended
from time to time.
Section 4. Governing Law. This Adoption Agreement and the rights and obligations of
the parties hereto shall be governed by and construed in accordance with Federal law. Insofar as
there may be no applicable Federal law, the internal laws of the State of New York (without
giving regard to conflicts of laws principles other than Sections 5-1401 and 5-1402 of the New
York General Obligations Law) shall be deemed reflective of Federal law insofar as to do so
would not frustrate the purposes of any provision of this Adoption Agreement.
Section 5. Reaffirmation of Certification by Seller’s Officer and Opinion of Counsel.
On [mm/dd/yy], the Seller executed an Officer’s Certification and provided an Opinion of
Counsel supporting the Seller’s Adoption Agreement for the July 25, 2008 Master Loan Sales
Agreement. The Seller hereby reaffirms the representations made in that Certification as
remaining true and correct as of the date on which the Seller executes this Adoption Agreement.
The Seller further represents that it has requested and received confirmation from the Counsel
who issued the Opinion of Counsel that nothing stated in the Opinion has changed in any
material respect through the date on which the Seller executes this Adoption Agreement.
[Signature Page Follows]

A-5

IN WITNESS WHEREOF, the parties hereto have caused this Adoption Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the day and year first
above written.

United States Department of Education

By:
Name:
Title:

Date of Adoption Agreement: ________________
(to be inserted by the Department)

[SELLER], as Seller

By:
Name:
Title:
Date executed by Seller:_______________
[[ELIGIBLE LENDER TRUSTEE], as Eligible
Lender Trustee

By:
Name:
Title:

A-6

EXHIBIT B
BILL OF SALE

(“Seller”) as the Seller [and

_______________________________ as the Eligible Lender Trustee]
under that certain Master Loan Sale Agreement 2007-2008 (“the Agreement”), dated November 24, 2008
and that certain Adoption Agreement executed in connection therewith by the Seller [, the Eligible Lender
Trustee], and the Department of Education (“the Department”) as of ____

] do[es] hereby sell, transfer, assign, set over and convey to the

Department as purchaser under the Agreement all right, title and interest of the Seller [and the Eligible
Lender Trustee] in and to the Loans included on the Loan Schedule attached hereto, together with the
related servicing files and servicing rights appurtenant thereto, the related Promissory Notes and related
Loan Documents (including, without limitation, any rights of the Seller to receive from any third party
any documents which constitute a part of the loan or servicing files) and all rights and obligations arising
under the documents contained therein, as of the date and time of receipt by the Seller of the Purchase
Price of $_____________________ for such Loans. The Seller has requested that the purchase date be
___________________ (“Purchase Date”). This sale is without recourse but subject to the terms of the
Agreement. Pursuant to the Agreement, the Seller has delivered to the Department or its designee the
documents for each Loan to be purchased as set forth in the Agreement.
On the Purchase Date, the ownership of each Loan and the related Promissory Note and the
contents of the Loan file and servicing file shall vest in the Department and the ownership of all records
and documents with respect to the related Loan prepared by or which come into the possession of the
Seller shall vest in the Department, and the Seller shall have delivered such records as are required by the
Department, or its designee, to the Department or its designee (except that copies thereof may be retained
as provided in the Agreement). During any period that the related Loan files and servicing files are
retained by the Seller, such files shall be retained and maintained, in trust, by the Seller for the benefit of
the Department.
If any of the Loans were made under a Master Promissory Note, this Bill of Sale excludes an
assignment of right[s] of the Seller [or Eligible Lender Trustee] to offer future loans under such Master
Promissory Note, and the Seller [or Eligible Lender Trustee] expressly reserve[s] such right to offer future
Loans under such Master Promissory Note. The Department agrees and warrants that it will not offer or
make any future loans under such Note.
The Seller authorizes the Department to use a copy of this Bill of Sale, including the Loan
Schedule attached, as official notification to the applicable Guaranty Agency(s) of assignment to the
Department of the Loans purchased pursuant hereto on the Purchase Date.

B-1

[Each of] [T]he Seller [and the Eligible Lender Trustee] named below hereby certifies to the
Department that with respect to the Loans included on the Loan Schedule attached here, as of the date of
the Seller’s signature below (Check one of the following) –
_____ No security interests of any kind have been granted that are now in effect.
_____ Security interests have been granted to __________ (“Secured
Lender”) that will be released by that Secured Lender using the revised “Security Release
Certification” (Exhibit E to the Master Loan Sales Agreement).
[Each of] [T]he Seller [and the Eligible Lender Trustee] confirms to the Department that the
representations and warranties set forth in Section 6 of the Agreement are true and correct with respect to
the Seller [and the Eligible Lender Trustee] and the Loans included on the Loan Schedule attached hereto
as of the date hereof, and that all statements made in the Seller’s Officer’s Certificate (Exhibit C of the
Agreement) and all attachments thereto remain complete, true and correct in all respects as of the date
hereof, and that the Loan characteristics identified on the attached Loan Schedule are true and correct as
of the date hereof.
Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the
Agreement.
IN WITNESS WHEREOF, the undersigned Seller/Sponsor [and the Eligible Lender Trustee]
have executed and delivered this Bill of Sale as of the latest date below written.

, as Seller

Signature_____________________________________________________________________________

Typed Name: __________________________________________________________________
Title:________________________________________________________________________________
Date: _________________________________________________________________
______________
, as Eligible Lender
Trustee
Signature:___________________________________________________________________________

Name:____________________________________________________________________
Title:_________________________________________________________________________
Date: _________________________________________________________________

Acknowledged by the United States Department of Education:

B-2

BILL OF SALE ATTACHMENT
AND FINAL LOAN SCHEDULE SUMMARY OF LOANS SOLD
PURSUANT TO
NOVEMBER 24, 2008 MASTER LOAN SALE AGREEMENT 2007-2008
To: U.S. Department of Education

[_________________, 200__]

From: [_____Seller_________________________________________]
[Seller’s Lender ID (LID)______________________________]

Scheduled Purchase Date: [MM/DD/CCYY]
(Must be submitted with the BILL OF SALE to the U.S Department of Education)

FINAL LOAN SCHEDULE SUMMARY OF LOANS SOLD
Loan Type

Number
of loans

Outstanding Principal
Accrued Unpaid
Balance at Purchase Date Interest at Purchase
Date

FFEL Stafford Subsidized
FFEL Stafford
Unsubsidized
FFEL PLUS (Parent &
Graduate or Professional
Student
Totals

PURCHASE PRICE CALCULATION
Total Outstanding Principal Balance at Purchase Date

[$_____________________.____]

Total Borrower’s Accrued/Unpaid Interest at Purchase Date[$_____________________.____]
Total Amount Outstanding at Purchase Date
X .97 =

[$__________________________]
[$_____________________.____]

TOTAL FINAL PURCHASE PRICE

[$_____________________.____]

B-3

Loan Schedule

B-4

EXHIBIT C
SELLER’S OFFICER’S CERTIFICATE
I, ________________________, hereby certify that I am the duly elected
______________ of [SELLER], a ______________ (“Seller”), and further certify, on behalf of
the Seller as follows:
Attached hereto as Attachment I are a true and correct copy of the
[Certificate of Incorporation and by-laws][certificate of limited partnership and limited
partnership agreement][certificate of formation and limited liability company operating
agreement] of the Seller as are in full force and effect on the date hereof.
No proceedings looking toward merger, liquidation, dissolution or
bankruptcy of the Seller are pending or contemplated.
Each person who, as an officer or attorney-in-fact of the Seller, signed (a)
the Adoption Agreement between the Department[, the Eligible Lender Trustee] and the Seller
pursuant to the Master Loan Sale Agreement 2007-2008 (“Agreement”), dated November 24,
2008, by the Department of Education (“Department”) and (b) any other document delivered
prior hereto or on the date hereof in connection with the sale of the Loans in accordance with the
Agreement and the related Bill of Sale was, at the respective times of such signing and delivery,
and is as of the date hereof, duly elected or appointed, qualified and acting as such officer or
attorney-in-fact, and the signatures of such persons appearing on such documents are their
genuine signatures.
Attached hereto as Attachment II is a true and correct copy of the
resolutions duly adopted by the board of directors of the Seller on ________________, 200_
(“Resolutions”) with respect to the authorization and approval of the sale of the Loans; said
Resolutions have not been amended, modified, annulled or revoked and are in full force and
effect on the date hereof.
Attached hereto as Attachment III is a Certificate of Good Standing of the
Seller dated ______________, 200_. No event has occurred since ___________________, 200_
which has affected the good standing of the Seller under the laws of the State of ___________.
All of the representations and warranties of the Seller contained in
Section 6 of the Agreement are true and correct in all material respects as of the date hereof.
[Each of] [T]he Seller [and the Eligible Lender Trustee] will have
performed all of its duties and satisfied all the material conditions on its part to be performed or
satisfied prior to the related Purchase Date pursuant to the Agreement and the related Bill of
Sale, including conditions regarding the constitution, qualifications, and operations of the Seller
and the Eligible Lender Trustee referenced in the representations and warranties required under
Section 6A of the Agreement.
All capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in the Agreement.
C-1

IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal
of the Seller.
Dated: _________________________
[Seal]
[SELLER]
(Seller)
By:
Name:
Title: [Responsible Officer]

I, _______________________, Secretary of the Seller, hereby certify that
_________________________ is the duly elected, qualified and acting [Responsible Officer] of
the Seller and that the signature appearing above is his/her genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated:_________________________
[Seal]
[SELLER]
(Seller)
By:
Name:
Title: [Assistant] Secretary

C-2

EXHIBIT D
OPINION OF COUNSEL TO THE SELLER
______________________________
(Date)
United States Department of Education
400 Maryland Avenue, SW
Washington, DC 20202
Re:

Master Loan Sale Agreement 2007-2008, dated November 24,
2008

Gentlemen:
I have acted as counsel to [SELLER], a _________________ (“Seller”), in
connection with the sale of certain Loans by the Seller to the Department of Education
(“Department”) pursuant to a Master Loan Sale Agreement 2007-2008, dated November 24,
2008, and the related Adoption Agreement, between the Seller, [the Eligible Lender Trustee] and
the Department (“Agreement”). Capitalized terms not otherwise defined herein have the
meanings set forth in the Agreement.
In connection with rendering this opinion letter, I, or attorneys working under my
direction, have examined, among other things, originals, certified copies or copies otherwise
identified to my satisfaction as being true copies of the following:
A.
B.

C.

D.

The Agreement;
The Seller’s [Certificate of Incorporation and by-laws][certificate of
limited partnership and limited partnership agreement][certificate of
formation and limited liability company operating agreement], as
amended to date;
Resolutions adopted by the Board of Directors of the Seller with
specific reference to actions relating to the transactions covered by
this opinion (“Board Resolutions”); and
Such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.

For the purpose of rendering this opinion, I have made such documentary, factual
and legal examinations as I deemed necessary under the circumstances. As to factual matters, I
have relied upon statements, certificates and other assurances of public officials and of officers
and other representatives of the Seller, and upon such other certificates as I deemed appropriate,
which factual matters have not been independently established or verified by me. I have also
assumed, among other things, the genuineness of all signatures, the legal capacity of all natural
persons, the authenticity of all documents submitted to me as originals, and the conformity to
original documents of all documents submitted to me as copies and the authenticity of the
originals of such copied documents.
D-1

On the basis of and subject to the foregoing examination, and in reliance thereon,
and subject to the assumptions, qualifications, exceptions and limitations expressed herein (if
any), I am of the opinion that:
1.
The Seller has been duly [incorporated][formed] and is validly existing
and in good standing under the laws of the State of __________ with corporate power and
authority to own its properties and conduct its business as presently conducted by it. The Seller
has the corporate power and authority to service the Loans, and to execute, deliver, and perform
its obligations under the Agreement.
2.
The Agreement has been duly and validly authorized, executed and
delivered by the Seller.
3.
The Agreement constitutes valid the legal and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms.
4.
No consent, approval, authorization or order of any state or federal court
or government agency or body is required for the execution, delivery and performance by the
Seller of the Agreement or the consummation of the transactions contemplated by the
Agreement, except for those consents, approvals, authorizations or orders which previously have
been obtained.
5.
The fulfillment of the terms of or the consummation of any other
transactions contemplated in the Agreement will not result in a breach of any term or provision
of the [certificate of incorporation or by-laws][certificate of limited partnership or limited
partnership agreement][certificate of formation and limited liability company operating
agreement] of the Seller, or, to the best of my knowledge, will not conflict with, result in a
breach or violation of, or constitute a default under, (i) the terms of any indenture or other
agreement or instrument known to me to which the Seller is a party or by which it is bound, (ii)
any State of ____________ or federal statute or regulation applicable to the Seller, or (iii) any
order of any State of ____________ or federal court, regulatory body, administrative agency or
governmental body having jurisdiction over the Seller, except in any such case where the default,
breach or violation would not have a material adverse effect on the Seller or its ability to perform
its obligations under the Agreement.
6.
There is no action, suit, proceeding or investigation pending or, to the best
of my knowledge, threatened against the Seller which, in my judgment, either in any one
instance or in the aggregate, would draw into question the validity of the Agreement or which
would be likely to impair materially the ability of the Seller to perform under the terms of the
Agreement.
7.
The sale of each Loan as and in the manner contemplated by the
Agreement is sufficient fully to transfer to the Department all right, title and interest of the Seller
thereto as noteholder.
[Assumptions and qualifications, if any]

D-2

I am admitted to practice law in the State of ___________, and I render no
opinion herein as to matters involving the laws of any jurisdiction other than the State of
_________ and the Federal laws of the United States of America.
Very truly yours,

D-3

EXHIBIT E

SECURITY RELEASE CERTIFICATION

I.

Release of Security Interest

___________________________(the Secured Lender), hereby relinquishes
any and all right, title and interest it may have in and to the Loans described on the Schedule of Loans
attached hereto upon purchase thereof by the Department of Education (“the Department”) from ____
_____ (“Seller”) pursuant to a Bill of Sale executed by the Seller on ______ under that certain Master Loan Sale Agreement 2007-2008 (“the
MLSA”), dated November 24, 2008, and the related Adoption Agreement between the Seller, [the
Eligible Lender Trustee] and the Department dated as of ____. This release is effective as of the date and time of receipt by the Secured Lender of
$________________ from the purchase of such Loans (“Date and Time of Receipt”). The Secured
Lender also certifies that, as of the Date and Time of Receipt, (i) all notes, assignments and other
documents in its possession relating to such Loans will have been delivered and released to the Seller
named below or its designees, other than copies thereof that are retained by the undersigned or its
designee (in electronic or paper medium), and (ii) all appropriate Uniform Commercial Code termination
statements will promptly be filed evidencing the release of its lien on the related Loans.
Secured Lender’s Name: _________________________________________________________
Address: ______________________________________________________________________
_______________________________________________________________________
Signed Name: __________________________________________________________________
Typed Name: ____________________________________________________________
Title: _________________________________________________________________________

Date: ___________________________________________________________________

E-1

II.

Certification of Release

The Seller hereby certifies to the Department of Education that, as of the date stated below, the security
interests to be released by the above named Secured Lender in the Loans in the Schedule referred to
above comprise all security interests relating to or affecting any and all such Loans. The Seller warrants
that, as the date stated below, there are no other security interests affecting any or all of such Loans, and
none will be created.
Seller’s Name: ________________________________________________________________
Signed Name: _________________________________________________________________
Typed Name: ______________________________________________________________
Title: ________________________________________________________________________
Date: ________________________________________________________________________

E-2

Schedule 1

Loan Schedule

E-3

EXHIBIT F
LIST OF APPROVED BORROWER BENEFITS
a.

An unconditional upfront fee reduction that has been paid prior to the loan
purchase date;

b.

A reduction in the outstanding principal balance that was applied prior to
the loan purchase date;

c.

A reduction in the loan’s interest rate that was applied prior to the loan
purchase date;

d.

A promised reduction in the loan’s interest rate under a plan included in
those listed by the Department at http://federalstudentaid.ed.gov/ffelp that is
contingent on the use of an automatic payment process by the borrower for any
payments due;

e.

A promised reduction in the loan’s outstanding principal balance that is
contingent on the borrower making those payments required under a plan
included in those listed by the Department at http://federalstudentaid.ed.gov/ffelp;
and

f.

A promised reduction in the loan’s interest rate that is contingent on the
borrower making those payments required under a plan included in those listed by
the Department at http://federalstudentaid.ed.gov/ffelp;.

E-4

Paperwork Burden Statement
According to the Paperwork reduction Act of 1995, no persons are required to respond to a
collection of information unless such collection displays a valid OMB control number. The
valid OMB control number for this information collection is 1845-0087. The time required to
complete the Master Loan Sales Agreement and Exhibits A, C, D and F for this information
collection is estimated to average 3 hours per response, including the time to review instructions,
search existing data resources, gather the data needed, and complete and review the information
collection. If you have any comments concerning the accuracy of the time estimate(s) or
suggestions for improving this form, please write to: U.S. Department of Education,
Washington, D.C. 20202-4537. If you have comments or concerns regarding the status of
your individual submission of this form, write directly to: Policy Liaison and
Implementation, Federal Student Aid, U.S. Department of Education, 400 Maryland Avenue,
S.W., UCP3, 11th floor, Washington D.C. 20202-4537.
Additionally, the time required to complete Exhibits B, and E for this information collection is
estimated to be 1 hours per response, including time to review instructions, search existing data
resources, gather the data needed and complete and review the information collection.