June 30, 2005

Important Notice
SUBJECT: Guaranty Agency Financial Report (GAFR) and NSLDS Data
Provider Instructions

This message is being sent in response to questions raised by the guaranty agency
community regarding the Guaranty Agency Financial Report (GAFR). Specifically,
agencies are asking which version of the GAFR instructions should be used, and
requesting further clarification of “borrower payment” reporting.

GAFR instructions dated December 2004 that were posted in the Financial Partner
Portal were the result of the Common Definitions Workgroup meetings held last
summer.

At the conclusion of the Common Definitions Workgroup sessions, Financial Partners

raised the borrower payment issue again. Further clarification was requested from the
Office of Postsecondary Education, Policy, Planning and Innovation on the treatment of
borrower payments. The final decision based on those discussions is as follows:

“… any borrower payments received by the lender and forwarded to the

guaranty agency, after the lender claim payment, are a partial refund of
reinsurance; and any borrower payments received directly by the guaranty
agency are subject to collection retention.”

This interpretation affects GAFR reporting on line items, MR-1, Claims Paid, MR-7,
Partial Refunds-CFY and MR-8, Partial Refunds-PFY, MR-12, GA Administrative
Wage Garnishment; and MR-13, Default Collections.

Financial Partners in conjunction with Borrower Services has made provisions for
guaranty agencies to report judgment loan amounts that are to be deducted from the
collection recovery calculation. These amounts are to be reported in MR-31, Other
Transactions Affecting the Federal Receivable.

The GAFR instructions have been revised to reflect this guidance and are effective
immediately. In order to accommodate any system changes required by the guaranty
agency community, compliance with these instructions will be required within one year.
The GAFR instructions dated June 2005 as posted on the Financial Partner Portal
replaces all previous versions and should be used for current GAFR reporting.

The June 2005 GAFR instructions are attached and posted at:

http://www.fp.ed.gov/PORTALSWebApp/fp/proj1.jsp

Questions regarding these instructions should be sent to: FSA GAR@ed.gov

Important Notice – Page 2

In accordance with the guidance from the Office of Postsecondary Education, Policy,
Planning and Innovation on the treatment of borrower payments, NSLDS updated the
GA Data Provider Instructions (DPI) to reflect the changes made to the GAFR
instructions.

The NSLDS DPI instructions dated June 2005 as posted on the Financial Partner Portal
replaces all previous versions and should be used for current NSLDS reporting.

The NSLDS DPI instructions are attached and posted at:

http://www.fp.ed.gov/PORTALSWebApp/fp/nslds.jsp

Questions regarding these instructions should be sent to: NSLDS@pearson.com