Impact_of_Sequestration_on_Pending_or_New_NFPs.pdf

Impact of Sequestration on Pending or New Not-For-Profit Servicers

The sequester provisions of the Budget Control Act of 2011 reduced the spending levels in the account for not-for-profit (NFP) loan servicing operations. To stay within these reduced spending levels during FY 2014, the Department will be unable to bring any additional NFP servicers on board and will not enter into contracts with any additional NFP servicers, including servicers who currently have memoranda of understanding (MOUs) with the Department and new servicers wishing to enter into an MOU with the intent of ultimately obtaining a contract.

The effect of the sequester also precludes the Department from allowing any servicers that are not already party to an agreement with the Department to join existing servicing teams.

(Existing NFP servicers wishing to cease independent operations still have the opportunity to join another team provided they inform the Department of their intention prior to December 1, 2013.) Accordingly, the Department will not offer contracts to any new NFP servicers before July 1, 2014. The Higher Education Act provides that an NFP that does not have a contract with the Department before July 1, 2014, is not legally eligible for a contract after that date.