To Our Valued Sallie Mae School Customers:

On Nov. 1, 2007, the U.S. Department of Education issued final regulations clarifying the use of preferred lender lists and defining affiliated lenders. Sallie Mae welcomes the much-needed clarity these regulations bring, which provide schools with clear guidance and also help enhance choice and transparency for students and families.

In the preamble accompanying the regulatory language, the Department clearly and explicitly explains its intent and guidance concerning the valuable role preferred lender lists can play in helping students and families successfully navigate the financial aid process. The final regulations confirm what schools and families have known for many years: Properly researched and constructed lender lists "serve as a source of unbiased information that facilitates rather than limits informed borrower choice." School Financial Aid Administrators should feel confident that the vital role they play in counseling families about student loans will be enhanced and protected moving forward.

The following highlights from the preamble language illustrate the clarity the Department's regulations provide schools, students and lenders:

Preferred Lender Lists

"The Secretary continues to believe that a school's use of a preferred lender list that is based on the school's unbiased research to identify the lenders providing the best combination of services and benefits to borrowers at that school may help students and their parents in navigating the increasingly complex FFEL Program. There is no statutory prohibition against the use of such lists, as long as the school does not use the list to limit the borrower's choice of lender."

Customer Service, Counseling, and Default Prevention

"Many schools began using preferred lender lists because of their concern about student loan defaults and the negative consequences for the borrowers and the school. Many schools continue to use preferred lender lists to identify lenders that provide high-quality customer service and loan servicing to prevent delinquency and default."

"Although the Secretary anticipates that financial benefits offered by a lender to the school's student and parent borrowers will be a key factor in a school's evaluation of lenders for its preferred lender list, she does not believe it should be the only factor that the school can consider. It is appropriate for a school to consider the quality of a lender's customer service in loan origination and loan servicing, its effectiveness in providing consumer information, counseling and debt management services, and its delinquency and default prevention efforts. Schools may face sanctions if their cohort default rates exceed certain levels, so a lender's effectiveness in working with borrowers to ensure that loans are repaid may be a legitimate consideration for some schools."

Critical Role of the Financial Aid Office

"We [the Department] also believe that students and parents increasingly rely upon financial aid offices for information and assistance in dealing with the number of FFEL lenders and the proliferation of marketing of student loan borrower benefits. Preferred lender lists and other consumer information on the student loan process can play a useful role in assisting financial aid officers in dealing with the large volume of requests for information and assistance, and in informing borrower choice. As long as preferred lender lists are properly researched and constructed in compliance with the regulations, we believe such lists can serve as a source of unbiased information that facilitates rather than limits informed borrower choice."

"The Department also agrees that schools should not be discouraged from negotiating with lenders for the best possible interest rates and borrower benefits for their borrowers. As a result, the regulations, while continuing to prohibit a school's solicitation of payments and other benefits from a lender for the school or its employees in exchange for the lender's placement on the school's list, do not prohibit a school from soliciting lenders for borrower benefits in exchange for placement on the school's list."

Affiliated Lenders Defined

"The regulations establish minimum standards to preserve borrower choice for those schools that choose to develop and use such a list. The Secretary continues to believe that three, unaffiliated lenders is the appropriate minimum number of lenders necessary to preserve borrower choice."

"We [the Department] believe, therefore, that ensuring a borrower's choice among lenders will be protected if "affiliation' for purposes of a preferred lender list is limited to affiliates that are under common ownership and control. The Secretary also wishes to clarify that the Department does not interpret the lender affiliation provision to include entities that are involved in postdisbursement activities, which a school has no abilityto monitor or control."

We invite all of our valued School Customers to visit Sallie Mae's Straight Talk website (salliemae.com/schools/
financial_aid/straight-talk/straighttalk.htm) for further information regarding the Department's final regulations and recent legislative changes. Sallie Mae stands ready to assist schools and ensure the Department's regulations are implemented with a promise to prioritize the needs of students and their families. While the regulations do not become effective until July 1, 2008, Sallie Mae fully endorses the Secretary's move to permit stakeholders, at their discretion, to implement the regulations before the official effective date.

The foundation of the Federal Family Education Loan Program (FFELP) is based on choice. Competition within the FFELP, which is driven by choice, has resulted in lower loan costs for students and specialized services that continually evolve to meet the needs of students, parents and schools. The FFELP also leverages significant resources devoted to teaching financial literacy (www.salliemae.com/before_college/
planning-wisely/debtsavvy/), helping families make informed decisions about their financing options (www.collegeanswer.com) and increasing access to postsecondary education (www.salliemaefund.org) — all of which are unmatched by other government programs.

As the landscape of higher education changes, Sallie Mae's industry-leading investments and commitment to increased transparency and the highest ethical standards will continue, as will our resolve to ensure the FFELP continues to be the overwhelming choice for students, parents, schools, and taxpayers.

Thank you.

Kevin Moehn
Executive Vice President