Questions and Answers

Cessation of Borrower Benefits

Q. What is MHESLA?
A. The Michigan Higher Education Student Loan Administration (MHESLA)
is a state agency that participates as a lender in the Federal Family
Education Loan Program (FFELP). As a lender, MHESLA offered
Federal Stafford, PLUS and Grad PLUS loans for attendance at schools
that were eligible for FFELP.

Q. What action is being taken?

A. Effective June 30, 2010 MHESLA is terminating borrower benefits for
borrowers who have not yet made the requisite number of on-time
payments. Borrowers who are currently receiving borrower benefits will
retain these as long as future payments are made on-time and as long
as sufficient funds are available. Delinquent loans will lose borrower
benefits that were already achieved.

Again, borrowers who have not yet made the required number of on-
time payments are no longer eligible for any borrower benefits except
the 0.25% interest rate reduction for payments made electronically.

Q. What are borrower benefits?

A. In general, borrower benefits are subsidies offered by lenders to
borrowers who maintain a good record of repayment.

Q. Why is MHESLA terminating the borrower benefits for borrowers who

have not yet made the required number of on-time payments?
A. Due to adverse economic conditions, termination of the borrower
benefits for those borrowers who have not yet made the required
number of on-time payments is required. Specifically, it is the result of
increased expenses paid by MHESLA caused by the severe and
ongoing credit crisis, as well as decreased income due to loan yield
limitations under the federal College Cost Reduction and Access Act
 and other federal changes. Also changes to the Higher Education Act
lowered the revenue lenders are allowed to keep for each loan.
Therefore, funding for the borrower benefits is no longer available for
borrowers who have not yet made the required number of on-time
payments. Without eliminating certain borrower benefits the State of
Michigan's ability to conduct and finance all state programs would be
severely impacted.

Q. What specific borrower benefit programs are impacted?

A. MHESLA borrower benefit programs subject to this action are:
PLEASE NOTE: Borrowers who have already achieved these benefits
retain them as long as future payments are made on-time and as long
as sufficient funds are available. Late payments disqualify borrowers
from all benefit programs except the 0.25% interest rate reduction for
electronic payments.

1. Prompt Pay Savings (1997-2002) -- This program ended in 2002 and was
a precursor to MSF. Borrowers were awarded a 2% interest rate reduction after
48-consecutive months of on-time payments.
2. Michigan Students First (2003-2008) Originally announced in 2002, this
was the largest benefit program. This program credited the borrowers account
by an amount equivalent to the loan origination fee (up to 3%), essentially
eliminating the fee. This benefit has already been applied and wont be reversed.
The interest rate was reduced to 0% for borrowers who made 36 consecutive on-
time monthly payments.
3. Michigan Engineering Incentive (2005-2008) Certain borrowers who
majored in engineering or technology and who resided and worked in Michigan
could get a 0% interest rate loan.
4. Michigan Advantage Consolidation (2005-2008) For consolidated
loans greater than $7,500, the interest rate was reduced by 1% after 36
consecutive on-time monthly payments were made and payments remained
current.

Q. How did I get a loan with borrower benefits?

A. You would have received your Federal Stafford, PLUS, Grad PLUS or
Consolidation loan from MHESLA or a lender that sold their FFELP
 loans to MHESLAs State Secondary Market, and met the borrower
criteria already mentioned.

Q. What is my interest rate now?

A. Effective June 30, 2010 student loans held by MHESLA will no longer
become eligible for an interest rate subsidy from MHESLA. Loans that
have achieved the reduced interest rate will retain that rate, unless the
loan becomes delinquent and as long as sufficient funds are available. If
a loan loses the reduced interest rate subsidy, the rate will return to the
statutory interest rate as prescribed in the Master Promissory Note that
you signed. The interest rate varies based on the type of loan and loan
origination date.

Interest rates are available on your servicers Web site.

Q. How can I contact the servicer?

A. Nelnet: Web site: www.nelnet.com toll-free 888-486-4722
Great Lakes: Web site: www.glhec.org toll-free 800-236-4300
Sallie Mae: Web site: www.salliemae.com toll-free 888-272-5543

Q. If I have a MHESLA loan, am I affected by this change?

A. Not necessarily. Not all MHESLA borrowers will be impacted. Only
borrowers that have NOT met the eligibility requirements as of June 30,
2010 and have not received the reduced interest rate for a borrower benefit
program will be impacted and will not be eligible for reduced interest rates.
These borrowers loans will remain at the statutory interest rate. Borrowers
who are currently receiving a reduced interest rate may remain at the
reduced rate as long as future payments are made on-time and as long as
sufficient funds are available.

Q. What happens to my payment amount?

A. For most borrowers, your outstanding loan balance and monthly
payment amount will not change.

Q. Can I pay my loan in full?

A. Yes, you can contact the servicer for a payoff amount. Depending on
 the receipt date of the payment which pays your loan in full, the interest
charges will vary.

Q. What are my repayment options?

A. If you have other eligible outstanding federal student loans, you may
want to consolidate them into one payment. Consolidation information
and application can be found at www.studentaid.ed.gov.

In addition, there are currently 5 repayment options available for FFEL

Program student loans. To review all available repayment options, visit
the U.S. Department of Education Web site at www.studentaid.ed.gov.
Select Repaying Your Loans from the tool bar on the left hand side.
This site includes full details on the various repayment options, including
calculators to assist you in making an informed decision. Generally,
youll have from 10 to 25 years to repay your loan, depending on which
repayment plan you choose.

Q. Why did MHESLA offer borrower benefits?

A. MHESLA has used borrower benefits since 1997 as an incentive for
borrowers to maintain a good repayment record on their loans. This was
a good way for MHESLA, as a state agency, to return any available
earnings to Michigan borrowers. Within the student loan industry such
borrower benefits were relatively common amongst lenders, until the
credit crisis in 2008, as incentives to promote timely repayment of debt
or to encourage the pursuit of certain occupations.

MHESLA offered the borrower benefits to lower the cost of education

loans. This action was chosen instead of rebating excess earnings to
the IRS. (Federal Treasury)