TITLE 5: POST
SECONDARY EDUCATION
CHAPTER 5: POST
SECONDARY EDUCATIONAL PROGRAMS
PART 20: EDUCATIONAL LOAN PURCHASE PROGRAM
5.5.20.1 ISSUING
AGENCY: New Mexico Educational Assistance Foundation,
3900 Osuna NE, Albuquerque, New Mexico 87109
[2-28-98; 5.5.20.1 NMAC - Rn, 5 NMAC 5.20.1, 10-13-00]
5.5.20.2 SCOPE: New
Mexico Educational Assistance Foundation
[2-28-98; 5.5.20.2 NMAC - Rn, 5 NMAC 5.20.2, 10-13-00]
5.5.20.3 STATUTORY AUTHORITY:
Sections 21-21A-1 through 21-21A-23 NMSA 1978(Act).
[2-28-98; 5.5.20.3 NMAC - Rn, 5 NMAC 5.20.3, 10-13-00]
5.5.20.4 DURATION:
Permanent.
[2-28-98; 5.5.20.4 NMAC - Rn, 5 NMAC 5.20.4, 10-13-00]
5.5.20.5 EFFECTIVE
DATE: February 28,1998 unless a different date is
cited at the end of a section or paragraph and applies to all student loan
bonds issued on or after this date.
[2-28-98; 5.5.20.5 NMAC - Rn, 5 NMAC 5.20.5, 10-13-00]
5.5.20.6 OBJECTIVE: To
establish rules and regulations governing the origination and acquisition of
student loans by the New Mexico Educational Assistance Foundation pursuant to
the Educational Assistance Act (Sections 21-21A-1 through 21-21A-23 NMSA 1978.
[2-28-98; 5.5.20.6 NMAC - Rn, 5 NMAC 5.20.6, 10-13-00]
5.5.20.7 DEFINITIONS:
A. “Additional Bonds” means any Bonds, other than the 1998 Bonds,
the Series 1999 Bonds and the Series 2000 Bonds, issued pursuant to the
Indenture.
B. “Bond” or bonds”means the 1998 Bonds, the Series 1999 Bonds,
the Series 2000 Bonds and any Additional Bonds.
C. “Borrower Benefit Programs” means collectively the More Money Program,
the Instant Savings Program, the Easy Pay Program, the Pot of Gold Program, the
Teachers for Tomorrow Program and similar borrower benefit programs, approved
by the Board and permitted by the Indenture.
D. “Certificate
of Insurance” means a
certificate of federal loan insurance evidencing that a Financed Eligible Loan
is Insured pursuant to a Contract of Insurance.
E. “Contract
of Insurance” means the
Contract of Federal Loan Insurance, dated February 12, 1982, between the
Foundation and the Secretary, and any amendment thereof which is hereafter
entered into.
F. “Derivative
Product” means a written
contract or agreement the Foundation and a Reciprocal Payor, which provides
that the Foundation’s obligations thereunder will be conditioned on the absence
of (i) of failure by the Reciprocal Payor to make any payment required
thereunder when due and payable, or (ii) a default thereunder with respect to
the financial status of the Reciprocal Payor, and:
G. “Educational
Assistance Act” means Sections
21-21A-1 to 21-21A-23 NMSA 1978, as amended from time to time.
H. “Easy
Pay Program” means the
Borrower Benefit Program that provides for an interest rate reduction of one
quarter of one percent per annum if a borrower agrees to automatic loan payments
with respect to a borrower’s Eligible Loan.
I. “Eligible
Borrower” means a student,
parent or other borrower who is eligible under the Higher Education Act to be
the obligor of a loan for financing a program of post-secondary education.
J. “Eligible
Institution” shall mean an
"eligible institution" as defined under the Higher Education Act
which is a "participating school" within the meaning of the Higher
Education Act.
K. “Eligible
Loan” shall mean any loan
made to finance post-secondary education that is (a) made under the Higher
Education Act and is Guaranteed or Insured and has not been tendered to the
Guaranty Agency or the Secretary for payment (unless the situation giving rise
thereto has been cured) or (b) otherwise permitted to be acquired or originated
by the Foundation pursuant to its Program (provided that loans described in
this clause (b) shall not be originated or acquired pursuant to the Indenture
unless the Trustee and the Foundation shall have received a Favorable Opinion
(with respect to the use of the proceeds of Tax-Exempt Bonds) and a written
confirmation from each Rating Agency that the origination or acquisition of
such additional loans ( or a particular amount thereof) will not adversely
affect the Rating on any of the Bonds then outstanding.
L. “Eligible
Student” shall mean a
student who is eligible under the Higher Education Act to receive a loan, which
is Insured or Guaranteed, for financing a program of post-secondary education,
including a student who is eligible under the Higher Education Act to be a
student for whose benefit a PLUS/SLS Loan is made.
M. “Federal
Reimbursement Contracts”
means the agreements, dated July 1, 1981, as amended and supplemented, between
NMSLGC and the Secretary providing for the payment by the Secretary of amounts
authorized to be paid pursuant to the Higher Education Act, including (but not
necessarily limited to) reimbursement of amounts paid or payable upon defaulted
Financed Eligible Loans and other student loans Guaranteed or Insured by NMSLGC
and interest subsidy payments to holders of qualifying student loans guaranteed
or insured by NMSLGC.
N. “Financed”
or “financing”, when used
with respect to the Eligible Loans, shall mean or refer to Eligible Loans (i)
acquired or originated by the Foundation with balances in the Acquisition Fund
or otherwise deposited in or accounted for in the Acquisition Fund or otherwise
constituting a part of the Trust Estate and (ii) Eligible Loans substituted or
exchanged for Financed Eligible Loans, but does not include Eligible Loans from
the lien of the Indenture and sold or transferred, to the extent permitted by
the Indenture.
O. “Fiscal
Year” means the fiscal year
of the Foundation as established from time to time.
P. “Foundation” means the New Mexico Educational Assistance Foundation, a nonprofit
corporation duly organized and existing under the laws of the State, and any
successor to its functions relating to the Program.
Q. “Guarantee”
or “Guaranteed” means with
respect to an Eligible Loan, the insurance or guarantee by the Guaranty Agency
pursuant to such Guaranty Agency’s Guarantee Agreement of the maximum
percentage of the principal of and accrued interest on such Eligible Loan
allowed by the terms of the Higher Education Act with respect to such Eligible
Loan at the time it was originated and the coverage of such Eligible Loan by
Federal Reimbursement Contracts, providing, among other things, for
reimbursement to such Guaranty Agency for payments made by it on defaulted
Eligible Loans insured or guaranteed by such Guaranty Agency of at least the
minimum reimbursement allowed by the Higher Education Act with respect to a
particular Eligible Loan.
R. “Guaranty
Agency” means the NMSLGC,
and any other entity authorized to guarantee student loans under the Higher
Education Act, and their respective successors and assigns.
S. “Guarantee
Agreements” means a
guarantee or lender agreement with any Guaranty Agency, and any amendments
thereto.
T. “Guarantee
Fund” means a Guarantee Fund
established in accordance with the Guarantee Agreement.
U. “Guarantee
Program” means a Guaranty
Agency's student loan insurance program pursuant to which a Guaranty Agency
guarantees or insures student loans.
V. “Higher
Education Act” means the
Higher Education Act of 1965, as amended or supplemented from time to time, and
all regulations, directives, bulletins and guidelines proposed or promulgated
from time to time thereunder.
W. “Indenture”
means the Indenture of Trust
dated as of February 1, 1998 as amended and supplemented by the First Amendment
to Indenture of Trust dated as of November 15, 1998, as supplemented and
amended by the Second Supplemental Indenture of Trust dated as of May 1, 1999
and as supplemented and amended by the Third Supplemental Indenture of Trust
dated as of October 1, 2000 including all supplements and amendments thereto.
X. “Insurance”,
“Insured” or “Insuring”
means, with respect to an Eligible Loan, the insuring by the Secretary (as
evidenced by a Certificate of Insurance or other document or certification issued
under the provisions of the Higher Education Act) of 100% of the principal of
and accrued interest on such Eligible Loan.
Y. “Insured
Loan” means an Eligible Loan
which is Insured.
Z. “Instant
Savings Program” means the
Borrower Benefit Program that provides for an
interest rate reduction of one half of one percent with respect to a
Stafford Loan or a PLUS Loan guaranteed on or after May 1, 1998, when the loan
enters repayment with the Foundation.
AA. “Lender” means any "eligible lender," as
defined in the Higher Education Act and the Loan Purchase Regulations,
permitted to participate as a seller of Eligible Loans to the Foundation under
the Program and which has received an eligible lender designation from the
Secretary of Education with respect to Insured Loans or from a Guaranty Agency
with respect to Guaranteed Loans.
BB. “Loan
Purchase Agreement” or “Educational
Loan Purchase Agreement” means an agreement between the Foundation and a
Lender providing for the sale by the Lender to the Foundation of Eligible Loans
under the Program.
CC. “Loan
Purchase Regulations” means
the rules and regulations of the Foundation duly adopted by the Board which
pertain to the Program.
DD. “More
Money Program” means the
Borrower Benefit Program which provides for the payment of the guarantee fee of
up to one percent of the loan principal which would otherwise be deducted from
the proceeds of the loan and paid to the Guaranty Agency by the Foundation for
all Stafford Loans and PLUS Loans guaranteed on or after June 1, 1999.
EE. “NMGSLC” means the New Mexico Student Loan Guarantee
Corporation, a non-profit corporation organized under the laws of the State.
FF. “Outstanding” shall mean, when used in connection with any
bond, a bond which has been executed and delivered pursuant to the Indenture
which at such time remains unpaid as to principal or interest, and when used in
connection with a Derivative Product, a Derivative Product which has not
expired or been terminated, unless in all cases provision has been made for such
payment pursuant to Section 10.02 of the Indenture, excluding bonds which have
been replaced pursuant to Section 2.09 of the Indenture.
GG. “Pot
of Gold Program” means the
Borrower Benefit Program that provides for a one time five percent reduction of
the principal amount of all Eligible Loans entering repayment on or after June
30, 1994 for Eligible Borrowers who have made all forty eight of their
consecutive monthly payments on time as required by the applicable loan
documents.
HH. “PLUS/SLS
Loan” means a Student Loan
authorized under Section 428A or Section 428B of the Higher Education Act.
II. “Program” means the Foundation's program for the
origination of Eligible Loans as the same may be modified from time to time.
JJ. “Secretary” means the Secretary of the United States
Department of Education or any successor to the pertinent functions thereof
under the Higher Education Act.
KK. “Special
Allowance Payments” means
special allowance payments authorized to be made by the Secretary of Education
by Section 438 of the Higher Education Act, or similar allowances authorized
from time to time by federal law or regulation.
LL. “State” means the State of New Mexico.
MM. “Teachers
for Tomorrow” means the
Borrower Benefit Program that provides full interest forgiveness for an
Eligible Borrower when a Stafford Loan that is guaranteed on or after May 1,
2000 enters repayment if an Eligible Borrower is a full-time teacher in New
Mexico and such Stafford Loan is guaranteed by the Guaranty Agency and
disbursed by the Foundation or one of its participating lenders.
NN. “Trustee” means Zions First National Bank, acting in
its capacity as Trustee under the Indenture, or any successor trustee
designated pursuant to the Indenture.
[2-28-98, 5-14-99; 5.5.20.7 NMAC - Rn &
A, 5 NMAC 5.20.7, 10-13-00]
5.5.20.8 RESERVED.
[2-28-98; 5.5.20.8 NMAC - Rn, 5 NMAC 5.20.8,
Repealed, 10-13-00]
5.5.20.9 PURCHASE
OF NOTES OR BONDS: Prohibited Purchases. No Eligible Borrower or any related person
thereto within the meaning of Section 144(a) (3) of the Internal Revenue Code
of 1986, as amended, shall purchase, pursuant to any arrangement, formal or
informal, any notes, bonds or any other obligations of the Foundation in an
amount related to such Eligible Borrower’s Financed Student Loans.
[2-28-98; 5.5.20.9 NMAC - Rn, 5 NMAC 5.20.9,
10-13-00]
5.5.20.10 SERVICING
OF LOANS: Servicing of the Foundation. Eligible Loans purchased by the Foundation
shall be serviced by the Foundation or on behalf of the Foundation by a
servicer in accordance with such procedures as may be approved by the
Foundation from time to time.
[2-28-98; 5.5.20.10 NMAC - Rn, 5 NMAC
5.20.10, 10-13-00]
5.5.20.11 MAXIMUM
STUDENT LOAN AMOUNTS: Maximum Amount Permitted. The maximum amount of Eligible Loans
permitted for an Eligible Borrower shall be determined in accordance with the
Higher Education Act.
[2-28-98; 5.5.20.11 NMAC - Rn, 5 NMAC
5.20.11, 10-13-00]
5.5.20.12 INFORMATION
TO BE PROVIDED BY LENDERS TO ELIGIBLE BORROWERS:
Lenders Required Information. At the time a Lender makes an Eligible Loan
to an Eligible Borrower, the Lender shall provide thorough and accurate loan
information to the Eligible Borrower as required by the Higher Education Act
and the Guaranty Agency, which shall include:
A. the yearly and cumulative
maximum amounts that may be borrowed by an Eligible Borrower;
B. the terms on which
repayment will begin;
C. the maximum number of
years in which the Eligible Loan must be repaid;
D. the interest rate and
the maximum amount of required monthly payments;
E. any special options
that an Eligible Borrower may have for deferral, cancellation, prepayment,
consolidation, or other refinancing of the Eligible Loan;
F. a definition of
default and the consequences to the Eligible Borrower if the Eligible Borrower
should default, including a description of any arrangement made with credit
bureau organizations; and
[2-28-98; 5.5.20.12 NMAC – Rn & A, 5 NMAC
5.20.12, 10-13-00]
5.5.20.13 BORROWER
BENEFIT PROGRAMS: Borrower Benefit Programs Authorized. The Borrower Benefit Programs known as the
Easy Pay Program, Instant Savings Program, More Money Program, Pot of Gold
Program, Teachers for Tomorrow Program and similar borrower benefit programs
are authorized to be implemented by the Foundation as may be permitted by the
Indenture.
[5.5.20.13 NMAC - N, 10-13-2000]
5.5.20.14 REVISIONS
IN REGULATIONS:
A. Required Revisions. These regulations shall be subject to amendment, modification and
revisions from time to time to conform to the same provision of the Higher
Education Act or for any other purpose.
B. Prohibited Revisions. If any such amendment, modification or
revision will materially adversely affect the rights of a Lender pursuant to a
Loan Purchase Agreement which is then in effect or the rights of the holders of
then outstanding Bonds, such amendment, modification or revision will not be
effective with regard to such Loan Purchase Agreements or the holders of such
Bonds.
[2-28-98; 5.5.20.14 NMAC - Rn, 5 NMAC
5.20.13, 10-13-00]