Excerpt from: Higher Education Perspectives
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| November 10, 2008 | | The Department of Education announced today that it "intends to provide liquidity support to one or more conforming Asset-Backed Commercial Paper (ABCP) conduits."
Great, what does that mean? It means that the Department, using what is called a forward purchase agreement, will provide a promise to purchase loans that lenders may make in future or are currently holding.
This may address a problem that the small student loan specialists and not-for-profit lenders were facing. With out any ability to replenish funds by accessing the capital markets and selling their loans they could not make any new loans. This mechanism would give them that ability and retain the servicing rights to the loan. Hopefully this will bring back some of the lenders who had to suspend activities earlier in the year. | | |
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