The mission of the Loan Operations Program is to administer the federal and state educational loan programs by working together to provide comprehensive, quality services efficiently to all program participants.
The goals of the Loan Operations Program are:
1. Effectively and efficiently administer assigned programs
2. Create a motivating environment to maximize staff productivity.
3. Maintain financial viability.
The Loan Operations Program includes the following activities:
1. Loan Administration - Processes new loans and services existing loan guarantees on behalf of the borrower and holder of the loan note.
2. Preclaims Section - Assists lenders, servicers, and delinquent borrowers in avoiding defaults on delinquent loans.
3. Claims Section - Processes claims against the loan guarantee filed by holders of the note and ensures that all claims scheduled for payment meet program requirements.
4. Collections Section - Maintains inventory control and collection activities to maximize recovery of defaulted loans and to ensure compliance with program regulations.
The Loan Operations Program administers federal and state student loan programs and performs the functions of loan origination and servicing, default prevention, default claim payment, and default recoveries.
The Loan Operations Program strives to provide financial assistance for Louisiana residents to pursue their studies at post-secondary and higher education levels by guaranteeing loans to participating lenders. This program assists students in meeting post-secondary educational expenses through low-cost, federally reinsured, educational loans which are made available to students through conventional lenders at no cost to the state. Federally funded components of this program are Stafford Loans (based on need), Unsubsidized Loans, Parent Loans for Undergraduate Students (PLUS), Supplemental Loans for (financially independent) Students (SLS), and Consolidation Loans. State components of this program funded by statutory dedications are the Louisiana Opportunity Loan Program (LA-OP) and the Louisiana Employment Opportunity Program (LEOP). OSFA charges guaranty fees for each applicant, retains interest income from the program guarantee account, and retains collection charges and the agency's share of principal and interest on loans collected from default borrowers.
The Louisiana Opportunity Loan Program (LA-OP) provides low interest loans to middle-income students for educational expenses. The program was implemented in FY 91-92 through general fund appropriations and a seed advance. In reauthorizing the Higher Education Act, the Congress created a new federal loan program for middle-income families. The federal unsubsidized loan program replaced LA-OP on October 1, 1996. The seed advance, in the amount of $2,250,000, remains in the agency's budget. It does not represent new funds. The Louisiana Employment Opportunity Loan Program (LEOP) was established to encourage the growth and expansion of existing industry and to attract new industry and jobs. An initial reserve of $500,000 was provided through the Louisiana Department of Economic Development. The first LEOP loan guarantee was issued on February 2, 1993. On March 17, 1994, the loan guarantee was expanded to include borrowers with adverse credit. These adverse credit loans were underwritten by J.B. Hunt Transport, Inc. until January 2, 1996, at which time they ceased to offer the LEOP loans to borrowers with adverse credit. The lender withdrew from the program effective July 10, 1996. Although no new loans have been guaranteed since that date, LASFAC continues to perform administrative functions required to service the outstanding loan guarantees.
The Preclaims Assistance function of this program prevents the guarantee agency from reaching the federal reinsurance "trigger" percentage by increasing the awareness of borrowers of their responsibility for repayment of their loan obligation. The Claims function of this program will pay lenders 98% of their losses if borrowers default on their student loans. The U.S. Department of Education will reimburse OSFA 98% of its losses. This reimbursement rate will drop if OSFA's annual default rate rises to "trigger" percentages of the amount of loans in repayment. Collection activities maximize the recovery of defaulted loans. OSFA retains up to 27% of the amount collected on defaulted student loans.
OBJECTIVES AND PERFORMANCE INDICATORS
1. The Loan Operations Program will maintain a minimum reserve ratio that complies with the federal requirement of 1.1% in FY 1998-99.
2. The Loan Operations Program will attain a 93.1% aversion rate to ensure defaults are less than 5% of loans in repayment in FY 1998-99.
3. The Loan Operations Program will increase the cumulative default recovery rate to 45% or to a minimum yearly dollar recovery of $14,512,700 by June 30, 1999.
RESOURCE ALLOCATION FOR THE PROGRAM
SOURCE OF FUNDING
This program is funded with the general fund, interagency transfers, and fees and self-generated revenues. The Department of Education, transfers funds to this program for Project Interact which will provide two courses for Early Intervention teacher certification. The Department of Education, Board of Elementary and Secondary Education, transfers monies to this program to support Distance Learning efforts. In addition, the Department of Education, under the Carl B. Perkins Vocational and Applied Technology Education Act, transfers funds to this program to provide satellite instruction. Louisiana Educational Television Authority has been established as the Statewide Resource Center for Educational Technology, in this capacity various statewide agencies transfer funds to LETA to evaluate and undertake various projects. Fees and self-generated revenues are grants and donations from various private sources.
ANALYSIS OF RECOMMENDATION
The total means of financing for this program is recommended at 108.2% of the existing operating budget. It represents 70.1% of the total request ($9,927,214) for this program. The changes in this program are primarily due to an increase in funding for merits, full funding of all recommended positions and a transfer of funds for non-licensees from the administration program into this program. The remaining difference is due to statewide adjustments.
ACQUISITIONS AND MAJOR REPAIRS
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