PROSPECTUS SUPPLEMENT
File Pursuant to Rule 424(b)(5)
(To prospectus dated November 11, 2002)
File No. 333-75952
$206,200,000
Student Loan Asset-Backed Notes
Series 2002-2
SLC Student Loan Trust-I
Issuer
SLC Student Loan Receivables I, Inc.
Depositor
The Student Loan Corporation
Seller and Servicer
We are offering our auction rate notes in the following four classes:
Original
Principal Price to Underwriting Proceeds to
Class Amount Final Maturity Public Discount Issuer(1)
----- ------ -------------- ------ -------- ---------
A-5........ $ 65,350,000 December 1, 2035 100% 0.35% $ 65,121,275
A-6........ $ 65,350,000 December 1, 2035 100% 0.35% $ 65,121,275
A-7........ $ 65,350,000 December 1, 2035 100% 0.35% $ 65,121,275
B-2........ $ 10,150,000 December 1, 2035 100% 0.35% $ 10,114,475
------------ ------------
Total... $206,200,000 $205,478,300
- --------
(1) Before deducting expenses estimated to be $500,000.
The notes will be secured by student loans.
All of the Class A notes offered pursuant to this prospectus supplement will
be rated Aaa by Moody's Investors Service, Inc. and AAA by Standard & Poor's
Rating Services and Fitch Ratings. The Class B notes offered pursuant to this
prospectus supplement will be rated A2 by Moody's Investors Service, Inc. and A
by Standard & Poor's Rating Services and Fitch Ratings.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal offense.
You should consider carefully the "Risk Factors" beginning on Page S-6 of
this Prospectus Supplement and on Page 6 of the Prospectus.
These notes are asset backed securities issued by a trust. The notes are not
obligations of SLC Student Loan Receivables I, Inc., the depositor or any of
their affiliates. This prospectus supplement may be used to offer and sell the
notes only if accompanied by the prospectus.
Affiliates of the issuer expect to enter into market making transactions in
the offered notes and may act as principal or agent in any of these
transactions. Any such purchases or sales will be made at prices related to
prevailing market prices at the time of sale. This prospectus supplement and
the prospectus may be used by the affiliates of the issuer in connection with
these transactions.
The underwriters named below are offering the notes subject to approval of
certain legal matters by their counsel. The notes will be delivered in
book-entry form only on or about November 20, 2002.
Salomon Smith Barney Merrill Lynch & Co.
November 11, 2002
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Summary S-1
Risk Factors S-6
The Seller S-7
Previously Issued Notes S-7
Credit Enhancement S-8
Use of Proceeds S-8
Characteristics of Our Student Loans S-8
Information Relating to the Guarantee Agencies S-12
Special Note Regarding Forward Looking Statements S-16
Plan of Distribution S-17
Legal Matters S-18
Global Clearance, Settlement and Tax Documentation Procedures Annex I
PROSPECTUS
About this Prospectus ii
Summary of the Offering 1
Risk Factors 6
Special Note Regarding Forward Looking Statements 11
Description of the Notes 11
Security and Sources of Payment for the Notes 17
Book-Entry Registration 20
Additional Notes 23
Summary of the Indenture Provisions 24
Description of Credit Enhancement 34
The Student Loan Program of SLC Student Loan Trust-I 35
Description of the Federal Family Education Loan Program 44
Description of the Guarantee Agencies 54
Material U.S. Federal Income Tax Considerations 59
ERISA Considerations 62
Plan of Distribution 64
Legal Matters 64
Ratings 65
Incorporation of Documents by Reference; Where to Find More Information 65
Glossary of Terms 66
ii
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THE
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes in two separate documents
that progressively provide more detail. This prospectus supplement describes the
specific terms of the notes. The accompanying prospectus provides general
information, some of which may not apply to the notes. You are urged to read
both the prospectus and this prospectus supplement in full to obtain information
concerning the notes.
Cross-references are included in this prospectus supplement and the
accompanying prospectus to captions in the materials where you can find further
discussions about related topics. The table of contents on the preceding page
provides the pages on which these captions are located.
Some of the terms used in this prospectus supplement and the accompanying
prospectus are defined under the caption "Glossary of Defined Terms" beginning
on page 66 in the accompanying prospectus.
iii
SUMMARY
o The following summary is a very general overview of the terms of the
notes being offered by this prospectus supplement and does not contain
all of the information that you need to consider in making your
investment decision.
o Before deciding to purchase the offered notes, you should consider the
more detailed information appearing elsewhere in this prospectus
supplement and in the prospectus.
o This prospectus supplement contains forward-looking statements that
involve risks and uncertainties. See "Special Note Regarding Forward
Looking Information" in the prospectus.
General
o The offered notes will be issued pursuant to an indenture of trust and
will be senior and subordinate notes having the rights described in
the prospectus. We will issue the Class A offered notes and Class B
offered notes in minimum denominations of $25,000 or an integral
multiple thereof. We will use the proceeds from the sale of the
offered notes to purchase a portfolio of student loans, to make a
deposit to the Reserve Fund and to pay costs of issuing the offered
notes. The Class A notes and Class B notes offered under this
prospectus supplement and the accompanying prospectus are referred to
as the Class A offered notes and the Class B offered notes, and
together as the offered notes.
o We have previously issued other classes of notes and have used the
proceeds we received to purchase student loans. All of those student
loans previously acquired, along with the student loans we will
purchase with the proceeds of the offered notes, have been originated
under the Federal Family Education Loan Program and are or will be
pledged to the indenture trustee to secure repayment of all of the
notes issued under the indenture. The composition of this common pool
of collateral will change over time as student loans are repaid and
new student loans are added.
o We have previously issued a Class R-1 note to the depositor. The Class
R-1 note is a Class R residual note and is subordinate to the Class A
notes and the Class B notes. When the word "notes" appears in this
prospectus supplement or in the accompanying prospectus it refers only
to the Class A and Class B notes. When the term "all of the notes
issued under the indenture" appears in this prospectus supplement it
refers to the notes and the Class R-1 note.
o The sole source of funds for payment of all of the notes issued under
the indenture are the student loans, the investments that we pledge to
the indenture trustee and the payments that we receive on those
student loans and investments. To the extent the value of the student
loans and other assets in the trust estate exceeds 100.5% of the
outstanding principal balance of all of the notes issued under the
indenture (excluding the Class R notes), interest and principal will
be paid on the Class R notes and when the Class R notes are paid in
full the indenture trustee may release funds to us.
Cut-Off Date
o November 20, 2002. The trust will receive all payments made on and
after the cut-off date on the student loans pledged to the indenture
trustee.
o The information presented in this prospectus supplement relating to
the student loans is as of September 30, 2002, which we refer to as
the statistical cut-off date. The depositor believes that the
information set forth in this prospectus supplement with respect to
the student loans as of the statistical cut-off date is representative
of the characteristics of the student loans as they will exist at the
date of issuance of the notes, although certain characteristics of the
student loans may vary. We refer to the date of issuance of the notes
as the closing date.
S-1
Principal Parties
Issuer:
o SLC Student Loan Trust-I
Depositor:
o SLC Student Loan Receivables I, Inc.
Seller and Servicer:
o The Student Loan Corporation
Subservicer:
o SunTech, Inc.
Administrator:
o The Student Loan Corporation
Indenture Trustee:
o Deutsche Bank Trust Company Americas
(formerly known as Bankers Trust Company)
Eligible Lender Trustee:
o Deutsche Bank Trust Company Americas
(formerly known as Bankers Trust Company)
Owner Trustee:
o Wilmington Trust Company
Auction Agent
o Deutsche Bank Trust Company Americas
(formerly known as Bankers Trust Company)
Final Maturity
The offered notes will mature on December 1, 2035.
Interest Rates
Initial
Auction Initial Rate
Class Date Adjustment Date
----- ---- ---------------
A-5 December 12, 2002 December 13, 2002
A-6 December 19, 2002 December 20, 2002
A-7 December 16, 2002 December 17, 2002
B-2 December 19, 2002 December 20, 2002
S-2
For each auction period, the interest rate for the offered notes will equal
the least of:
o the rate determined pursuant to the auction procedures described in
the accompanying prospectus under "Description of Notes-Auction Rate
Securities;"
o a maximum rate, defined in the indenture as the least of:
the LIBOR rate for a comparable period plus a margin ranging from
1.50% to 3.50% depending upon the ratings of the notes,
18%, and
the maximum rate permitted by law; and
o a net loan rate, defined in the indenture to mean the greater of:
the Commercial Paper Rate (90-day) plus 0.70%, or
the weighted average interest rate on our student loans (net of the
rebate fee payable to the Secretary of Education with respect to our
Federal Consolidation Loans) less our program expense percentage. This
percentage, which is currently 0.75%, is determined by us and equals
our estimated annual expenses divided by the outstanding principal
balance of all our loans.
After the initial auction period, the period between auctions for the
offered notes will generally be 28 days, subject to adjustment if the auction
period would begin or end on a non-business day. We may change the length of the
auction period for any class of auction rate securities as described in the
prospectus under the heading "Description of the Notes-Auction Rate Securities."
If, on the first day of any auction period a payment default on the offered
notes has occurred and is continuing, the rate for the interest period will be
the non-payment rate, which is one-month LIBOR plus 1.50%.
If in any auction all the auction rate securities subject to the auction
are subject to hold orders, the interest rate for the interest period will equal
the all-hold rate, which is the LIBOR rate for a period comparable to the
auction period less 0.20%.
Interest Payments
o On the first business day after each auction period for a class of
auction rate securities, we will pay the holders of those auction rate
securities the interest accrued on their auction rate securities
during the preceding auction period at the applicable interest rate.
We will calculate interest on the basis of a 360-day year and the
actual number of days elapsed during the related auction period.
Principal Redemptions
Although no installments of principal are due on the notes prior to their
final maturity, they are subject to redemption as follows:
o We will redeem notes with the principal payments that we receive on
the student loans.
o That portion of interest payments received on the student loans which
is not needed to pay interest on the notes and to pay our expenses is
referred to as excess interest. Excess interest will generally be used
for mandatory redemption of the notes, except that excess interest
will instead be used to pay interest and principal on the Class R
notes to the extent that, after giving effect to such payments, the
ratio of our assets to our liabilities (excluding the Class R notes)
is not less than 100.5%. If no Class R notes are
S-3
outstanding, the amount of excess interest that would have been
applied to pay interest and principal on the Class R notes will either
be used for optional redemption of the notes or be released to the
depositor.
o We will redeem notes with the remaining proceeds deposited in the
Acquisition Fund on the issue date no earlier than December 5, 2002.
o We may also redeem all outstanding notes when the aggregate
outstanding principal balance of all of our notes (excluding the Class
R notes) is 10% or less of the aggregate initial principal balance of
all of the notes (excluding the Class R notes) issued under the
indenture.
We cannot predict when the offered notes will be redeemed. However, they
will be paid in full by December 1, 2035.
The redemption price for offered notes to be redeemed will be the principal
balance of the notes plus accrued interest to the date of redemption. Carry-over
amounts and interest on the carry-over amounts will be paid prior to any
optional redemption of offered notes. To the extent funds are available in the
Revenue Fund to pay carry-over amounts and interest on carry-over amounts on any
payment date as described in the prospectus, such funds will be allocated first
to pay carry-over amounts and interest on carry-over amounts on notes subject to
mandatory redemption on such payment date. Any carry-over amount and interest on
the carry-over amount not paid on the date a note is redeemed will be cancelled
and not paid on that note on any subsequent date.
We have previously issued a Class B-1 note that is subordinate to the Class
A notes. We will generally redeem all Class A notes before any Class B notes are
redeemed. However, we may redeem Class B notes prior to redeeming Class A notes
to the extent that, after giving effect to such redemption the ratio of our
assets to our liabilities (excluding the Class R notes) exceeds 100.5% and the
ratio of our assets to our Class A notes exceeds 106%. These percentages may be
changed with the consent of the rating agencies rating our notes.
See "Description of the Notes" in the prospectus for a more complete
discussion of how we will pay your notes.
Class R Notes
We have previously issued a Class R-1 note in a principal amount of
$8,500,000. The Class R-1 note will mature on December 1, 2042 and bears
interest at the Commercial Paper Rate (90-day) plus 0.85%, adjusted on the first
business day of each calendar quarter. Interest on the Class R-1 note accrues
from March 27, 2002, and will capitalize on each June 1 and December 1, but will
be payable on each June 1 and December 1, commencing December 1, 2002 only to
the extent that, after giving effect to such payments, the ratio of our assets
to our liabilities (excluding the Class R notes) exceeds 100.5%. This percentage
may be changed with the consent of the rating agencies rating our notes.
Acquisition of Our Student Loan Portfolio
On the closing date, the trust will acquire student loans originated under
the Federal Family Education Loan Program with $203,500,000 of the proceeds of
the offered notes (98.7% of the initial principal amount of the offered notes).
Characteristics of Our Student Loan Portfolio
The portfolio of student loans that we currently own and the student loans
that we expect to acquire on the closing date with the proceeds of the offered
notes are described below under "Characteristics of Our Student Loans" in this
prospectus supplement.
Book-Entry Registration
The offered notes will be delivered in book-entry form through the Same Day
Settlement System of The Depository Trust Company.
S-4
Federal Income Tax Consequences
Cadwalader, Wickersham & Taft will deliver an opinion that, for federal
income tax purposes, the offered notes will be treated as indebtedness, as
described in the prospectus. You will be required to include in your income
interest on the offered notes as the interest accrues or is paid, in accordance
with your method of tax accounting. See "Material U.S. Federal Income Tax
Considerations" in the prospectus.
ERISA Considerations
Notes that are treated as indebtedness without substantial equity features
are eligible for purchase by or on behalf of employee benefit plans, retirement
arrangements, individual retirement accounts and Keogh Plans, subject to the
considerations discussed under "ERISA Considerations" in the prospectus.
S-5
RISK FACTORS
The discussion under the heading "Risk Factors" in the prospectus describes
the risks associated with your investment in the notes. In addition, you should
consider the following factors:
Our Assets may not be Sufficient to Pay Our Notes
On the closing date, the aggregate principal balance of the student loans
we own and the other assets pledged as collateral for the notes will be only
approximately 0.15% greater than the aggregate principal balance of our
outstanding notes. As a result, if an event of default should occur under the
indenture and we were required to redeem all of our notes, unless we receive
liquidation proceeds equal to approximately 99.85% of the aggregate principle
value of the student loans, our liabilities may exceed our assets. If this were
to occur, we would be unable to repay in full all of the holders of our notes
and this would affect our Class B notes before affecting our Class A notes.
The Acquisition of Additional Student Loans After the Closing Date may Cause the
Characteristics of the Student Loans to Differ Significantly from those
Described in this Prospectus Supplement
Student loans may be added to the trust with the proceeds of the issuance
of additional notes by the trust. Following the transfer of additional student
loans to the trust after the closing date, the characteristics of the student
loans may differ significantly from the information as of the statistical
cut-off date presented in this prospectus supplement. The characteristics that
may differ include the composition of the student loans, changes in the relative
concentration of guarantors in the student loan pool, the distribution by loan
type, the distribution by interest rate, the distribution by principal balance
and the distribution by remaining term.
Adverse Changes in the Financial Condition of HESC may Cause Delay or
Losses on Payment of the Notes.
HESC, the New York State Higher Education Services Corporation, is a
federal guarantor and has guaranteed approximately 78.20% of the outstanding
principal balance of the student loans as of the statistical cut-off date. If
there should be a material adverse change in the financial condition of HESC, it
may fail to make its guaranteed payments to the eligible lender trustee.
Although in these circumstances we may submit claims directly to the Department
of Education, the Department of Education may determine that HESC is able to
meet its obligations and the Department of Education may not make those
payments. Even if the Department of Education determines to make those payments,
there may be delays in making the necessary determination. The loss or delay of
any such guaranteed payments, interest subsidy payments, or special allowance
payments could adversely affect our ability to pay timely interest and principal
on the notes. In such event, you may suffer a loss on your investment.
Military Events may Result in Delayed Payments from Borrowers Called to Active
Military Service
The Soldiers' and Sailors' Civil Relief Act of 1940, provides relief to
borrowers who enter active military service and to borrowers in reserve status
who are called to active duty after the origination of their student loans. The
response of the United States to terrorist attacks and issues in the Middle East
may increase the number of citizens who are in active military service,
including persons in reserve status who have been called or will be called to
active duty.
The Soldiers' and Sailors' Civil Relief Act of 1940 also limits the ability
of a lender in the Federal Family Education Loan Program to take legal action
against a borrower during the borrower's period of active duty and, in some
cases, during an additional three month period thereafter. As a result, there
may be delays in payment and increased losses on the student loans.
We do not know how many student loans have been or may be affected by the
application of the Soldiers' and Sailors' Civil Relief Act of 1940 and the
United States Department of Education's recent guidelines.
S-6
THE SELLER
We expect to use the proceeds of the offered notes to purchase a portfolio
of student loans having a principal balance of approximately $202,600,000 as of
statistical cut-off date, from The Student Loan Corporation.
The Student Loan Corporation has made representations and warranties with
respect to the student loans that we will purchase and has agreed to repurchase
any student loans for which any representation or warranty is later determined
to be materially incorrect. See "The Student Loan Program of SLC Student Loan
Trust-I" in the prospectus.
PREVIOUSLY ISSUED NOTES
Information concerning each outstanding series and class of notes that we
have previously issued under the indenture is provided below. The student loans
and other assets pledged to the indenture trustee will serve as collateral for
the outstanding notes and any additional notes that we may issue under the
indenture in the future, as well as the offered notes.
Outstanding
Original Principal Amount
Principal as of September Interest
Series Class Date Issued Amount 30, 2002 Rate/Mode Final Maturity
------ ----- ----------- ------ -------- --------- --------------
2002-1 A-1 March 27, 2002 $59,825,000 $57,975,000 Auction Rate December 1, 2035
2002-1 A-2 March 27, 2002 $59,825,000 $57,975,000 Auction Rate December 1, 2035
2002-1 A-3 March 27, 2002 $59,825,000 $57,975,000 Auction Rate December 1, 2035
2002-1 A-4 March 27, 2002 $64,925,000 $62,925,000 Auction Rate December 1, 2035
2002-1 B-1 March 27, 2002 $15,250,000 $15,250,000 Auction Rate December 1, 2035
Commercial Paper Rate
2002-1 R-1 March 27, 2002 $8,500,000 $8,500,000 (90-day) + 0.85% December 1, 2042
------------ ------------
Total $268,150,000 $260,600,000
We have paid in full all scheduled principal and interest due and payable
on the series of notes specified above. As of September 30, 2002, the student
loans that are in repayment and pledged to the indenture trustee as collateral
for the outstanding notes had delinquencies as follows:
o $3,297,352 was 31 to 60 days delinquent;
o $905,117 was 61 to 90 days delinquent;
o $643,878 was 91 to 120 days delinquent;
o $397,278 was 121 to 150 days delinquent;
o $261,626 was 151 to 180 days delinquent;
o $286,528 was 181 to 210 days delinquent; and
o $751,065 was 211 to 240 days delinquent.
As of September 30, 2002, there were $1,322,854 of our student loans in
claim status with a guarantee agency.
As of September 30, 2002, no losses of principal or interest of the student
loans was experienced by SLC Student Loan Trust-I.
The following administrative fees and expenses are payable annually to
third-party service providers with respect to the notes previously issued:
Auction Agent Broker Dealer
Series Trustee Fee Servicing Fee Fees Fees
------ ----------- ------------- ------------- -------------
2002-1 $10,000 $272,000 $25,000 $626,000
We have paid in full all fees and expenses due and payable on the Series
2002-1 notes.
S-7
CREDIT ENHANCEMENT
Reserve Fund
We will make a deposit to the Reserve Fund on the date the offered notes
are issued in an amount equal to $1,565,900 for capitalized interest and to
increase reserves to pay amounts due and payable on the notes, if required.
Subsequent to this deposit, the Reserve Fund will have a balance of
approximately $5,688,683. If funds available in the Revenue Fund are not
sufficient to make payments when due, moneys in the Reserve Fund may be used to
pay amounts due and payable on the notes. Money withdrawn from the Reserve Fund
will be restored to the required minimum balance through transfers from the
Revenue Fund or the Acquisition Fund as directed by us and as available up to
the maximum transfer amount of $515,500. The required minimum balance in the
Reserve Fund is the greater of $500,000 or .25% of the outstanding principal
balance of the notes.
On and after March 1, 2005, any amount on deposit in the Reserve Fund in
excess of the required minimum balance of the notes then outstanding will be
transferred from the Reserve Fund to the Revenue Fund for application on the
next payment date as described in the accompanying prospectus.
Subordinated Notes
We have previously issued Class B-1 notes. The rights of the Class B
noteholders to receive payments of interest and principal are subordinated to
the rights of the Class A noteholders to receive such payments to the extent
described in this prospectus supplement and the accompanying prospectus. This
subordination is intended to enhance the likelihood of regular receipt by the
Class A noteholders of the full amount of scheduled monthly payments of
principal and interest due them and to protect the Class A noteholders against
losses. The rights of the Class R-1 noteholder(s) to receive payment of interest
and principal are subordinate to the rights of the Class A and Class B
noteholders to receive such payments to the extent described in this prospectus
supplement and the accompanying prospectus.
Class A noteholders have a preferential right to receive, before any
distributions to Class B noteholders or the Class R-1 noteholder(s),
distributions from the trust estate created under the indenture and, if
necessary, the right to receive future distributions on our student loans that
would otherwise have been payable to the holders of Class B notes or the Class R
notes. The Class B notes are then entitled to the available amounts, if any,
remaining in the trust estate prior to payments of the Class R notes. See
"Description of Credit Enhancement-Subordinate Notes" in the prospectus.
USE OF PROCEEDS
Approximately $203,500,000 of the proceeds will be deposited to the
Acquisition Fund and used on the issue date to acquire a portfolio of student
loans. See "The Seller" in this prospectus supplement. Approximately $1,565,900
of the proceeds will be deposited to the Reserve Fund.
CHARACTERISTICS OF OUR STUDENT LOANS
The pool of student loans beneficially owned by the trust and to be
acquired with the proceeds of the offered notes will consist of Federal
Consolidation Loans originated after July 1, 2001.
At closing, the depositor will acquire additional Federal Consolidation
Loans from The Student Loan Corporation under a loan sale and contribution
agreement and will transfer the student loans to the trust. No selection
procedures believed by The Student Loan Corporation to be adverse to the
noteholders were used or will be used in selecting the student loans, except as
otherwise described in the accompanying prospectus under "The Student Loan
Program of SLC Student Loan Trust-I." As additional notes are issues and
additional student loans are added to the trust, the aggregate characteristics
of the entire pool of the student loans, including the composition of the
student loans, the distribution by loan type, the distribution by interest rate,
the distribution by principal balance and the distribution by remaining term to
scheduled maturity described in the following tables, may vary significantly
from the pool of student loans as of the statistical cut-off date.
S-8
In addition, the information described below with respect to the original
term to maturity and remaining term of maturity of the student loans as of the
cut-off date may vary significantly from the actual term to maturity of any of
the student loans as a result of the granting of deferral and forbearance
periods with respect thereto.
The information presented in this prospectus supplement relating to the
student loans is as of the "statistical cut-off date" which is September 30,
2002. The depositor believes that the information set forth below with respect
to the student loans as of the statistical cut-off date is representative of the
characteristics of the student loans as they will be constituted at the closing
date, although the actual loan balance and certain characteristics of the
student loans may vary.
Set forth below in the following tables is a description as of the
statistical cut-off date of certain characteristics of the student loans we
currently own and the student loans we expect to acquire with the proceeds of
the offered notes. The percentages set forth in the tables below may not always
add to 100% due to rounding.
Composition of Our Student Loan
Portfolio as of the Statistical Cut-Off Date
Aggregate outstanding principal balance
(including capitalized interest) $448,461,307
Number of borrowers 13,535
Average outstanding principal balance per borrower $33,133
Number of loans 24,653
Average outstanding principal balance per loan $18,191
Weighted average remaining term to maturity (1) 259.46 months
Weighted average annual borrower interest rate 6.34%
- ----------
(1) Determined from the statistical cut-off date to the stated maturity date of
the applicable student loans, assuming repayment commences promptly upon
expiration of the typical grace period following the expected graduation
date and without giving effect to any deferral or forbearance periods that
may be granted in the future. See "Description of the Federal Family
Education Loan Program" in the prospectus.
Distribution of Our Student Loans by
Interest Rate as of the Statistical Cut-Off Date
Number Outstanding Percent of Loans
Interest Rate of Loans Principal Balance by Outstanding Balance
------------- -------- ----------------- ----------------------
Less than 5.50% 283 $ 3,955,826 0.88%
5.50% to 5.99% 5,551 $ 99,145,234 22.11%
6.00% to 6.49% 9,286 $ 144,856,426 32.30%
6.50% to 6.99% 8,481 $ 172,067,201 38.37%
7.00% to 7.49% 643 $ 17,558,191 3.92%
7.50% to 7.99% 403 $ 10,566,930 2.36%
8.00% to 8.49% 6 $ 311,499 0.07%
------ -------------- ------
Total 24,653 $ 448,461,307 100.00%
====== ============== ======
S-9
Distribution of Our Student Loans by Remaining Term
to Scheduled Maturity as of the Statistical Cut-Off Date
Number of
Months Remaining Number Outstanding Percent of Loans
to Scheduled Maturity of Loans Principal Balance by Outstanding Balance
- --------------------- -------- ----------------- ----------------------
25 to 36 2 $ 35,144 0.01%
37 to 48 7 $ 73,995 0.02%
49 to 60 70 $ 662,025 0.15%
61 to 72 36 $ 471,176 0.11%
73 to 84 72 $ 885,369 0.20%
85 to 96 112 $ 1,527,485 0.34%
97 to 108 120 $ 1,799,114 0.40%
109 to 120 1,157 $ 16,619,631 3.71%
121 to 132 56 $ 925,289 0.21%
133 to 144 50 $ 817,904 0.18%
145 to 156 12 $ 167,813 0.04%
157 to 168 338 $ 3,097,037 0.69%
169 to 180 6,036 $ 60,432,222 13.48%
181 to 192 495 $ 5,273,222 1.18%
193 and above 16,090 $ 355,673,881 79.31%
------ -------------- ------
Total 24,653 $ 448,461,307 100.00%
====== ============== ======
Distribution of Our Student Loans by Borrower
Payment Status as of the Statistical Cut-Off Date
Borrower Number Outstanding Percent of Loans
Payment Status of Loans Principal Balance by Outstanding Balance
- -------------- -------- ----------------- ----------------------
Deferment 2,140 $ 47,675,074 10.63%
Forbearance 1,426 $ 30,767,399 6.86%
Repayment 21,006 $ 368,695,980 82.21%
Claim 81 $ 1,322,854 0.29%
------ -------------- ------
Total 24,653 $ 448,461,307 100.00%
====== ============== ======
Geographic Distribution of Our
Student Loans as of the Statistical Cut-Off Date
The following chart shows the geographic distribution of our student loans
based on the permanent billing addresses of the borrowers as shown on the
servicer's records:
Number Outstanding Percent of Loans
Location of Loans Principal Balance by Outstanding Balance
- -------- -------- ----------------- ----------------------
Alabama 259 $ 4,468,856 1.00%
Alaska 36 $ 525,242 0.12%
Arizona 474 $ 8,578,401 1.91%
Arkansas 97 $ 2,134,167 0.48%
California 3,273 $ 64,638,757 14.41%
Colorado 569 $ 10,447,409 2.33%
Connecticut 253 $ 4,263,033 0.95%
Delaware 62 $ 1,263,638 0.28%
District of Columbia 100 $ 1,941,002 0.43%
Florida 1,051 $ 19,825,718 4.42%
Georgia 633 $ 11,817,403 2.64%
Hawaii 76 $ 1,389,686 0.31%
S-10
Idaho 195 $ 3,075,375 0.69%
Illinois 1,014 $ 18,225,851 4.06%
Indiana 339 $ 6,170,267 1.38%
Iowa 287 $ 4,651,713 1.04%
Kansas 205 $ 3,719,412 0.83%
Kentucky 215 $ 3,921,263 0.87%
Louisiana 246 $ 5,289,680 1.18%
Maine 160 $ 2,697,695 0.60%
Maryland 534 $ 9,476,908 2.11%
Massachusetts 726 $ 13,329,062 2.97%
Michigan 828 $ 14,505,197 3.23%
Minnesota 786 $ 12,775,298 2.85%
Mississippi 10 $ 177,968 0.04%
Missouri 292 $ 5,778,948 1.29%
Montana 95 $ 1,465,028 0.33%
Nebraska 193 $ 3,320,783 0.74%
Nevada 176 $ 3,805,478 0.85%
New Hampshire 170 $ 2,923,448 0.65%
New Jersey 697 $ 13,310,464 2.97%
New Mexico 147 $ 2,565,093 0.57%
New York 1,673 $ 31,172,668 6.95%
North Carolina 857 $ 13,707,708 3.06%
North Dakota 87 $ 1,456,538 0.32%
Ohio 1,428 $ 23,255,127 5.19%
Oklahoma 170 $ 3,006,185 0.67%
Oregon 445 $ 8,078,802 1.80%
Pennsylvania 1,253 $ 23,048,732 5.14%
Puerto Rico 41 $ 729,016 0.16%
Rhode Island 101 $ 2,078,968 0.46%
South Carolina 227 $ 4,492,696 1.00%
South Dakota 44 $ 728,438 0.16%
Tennessee 254 $ 5,107,568 1.14%
Texas 1,356 $ 26,146,521 5.83%
Utah 97 $ 1,983,662 0.44%
Vermont 51 $ 1,006,055 0.22%
Virginia 743 $ 12,954,456 2.89%
Virgin Islands 7 $ 206,680 0.05%
Washington 673 $ 11,366,908 2.53%
West Virginia 137 $ 2,388,445 0.53%
Wisconsin 729 $ 11,723,570 2.61%
Wyoming 30 $ 433,461 0.10%
Other 52 $ 910,861 0.20%
------ -------------- ------
Total 24,653 $ 448,461,307 100.00%
====== ============== ======
S-11
Distribution of Our Student Loans by the
Number of Days of Delinquency as of the Statistical Cut-Off Date
Number Outstanding Percent of Loans
Days Delinquent of Loans Principal Balance by Outstanding Balance
- --------------- -------- ----------------- ----------------------
0 - 30 23,760 $ 433,732,950 96.72%
31 - 60 394 $ 7,062,022 1.57%
61 - 90 138 $ 1,931,736 0.43%
91 - 120 72 $ 1,198,862 0.27%
121 - 150 44 $ 729,223 0.16%
151 - 180 54 $ 714,337 0.16%
Over 180 191 $ 3,092,177 0.69%
------ -------------- ------
Total 24,653 $ 448,461,307 100.00%
====== ============== ======
Distribution of Our Student Loans by Range
of Principal Balance as of the Statistical Cut-Off Date
Number Outstanding Percent of Loans
Principal Balance Range of Borrowers Principal Balance by Outstanding Balance
- ----------------------- ------------ ----------------- ----------------------
Less than $10,000 179 $ 1,560,465 0.35%
$10,000 to $19,999 4,143 $ 63,991,861 14.27%
$20,000 to $29,999 3,851 $ 94,208,817 21.01%
$30,000 to $39,999 2,098 $ 72,374,503 16.14%
$40,000 to $49,999 1,113 $ 49,703,082 11.08%
$50,000 to $59,999 737 $ 40,588,427 9.05%
$60,000 to $69,999 426 $ 27,543,894 6.14%
$70,000 to $79,999 284 $ 21,201,216 4.73%
$80,000 to $89,999 210 $ 17,863,651 3.98%
$90,000 to $99,999 129 $ 12,208,693 2.72%
$100,000 or Greater 365 $ 47,216,698 10.53%
------ -------------- ------
Total 13,535 $ 448,461,307 100.00%
====== ============== ======
Information Relating to the Guarantee Agencies
General. Each student loan is required to be guaranteed as to principal and
interest by one of the guarantee agencies described below and reinsured by the
United States Department of Education under the Higher Education Act and must be
eligible for special allowance payments and, in the case of some student loans,
interest subsidy payments by the United States Department of Education.
Guarantee Agencies for the Student Loans. The eligible lender trustee has
entered into a separate guarantee agreement with each of the guarantee agencies
listed below, under which each of the guarantors has agreed to serve as
guarantor for specified student loans.
Under the Higher Education Amendments of 1992, if the United States
Department of Education has determined that a guarantee agency is unable to meet
its insurance obligations, a loan holder may submit claims directly to the
United States Department of Education and the United States Department of
Education is required to pay the full guarantee payment in accordance with
guarantee claim processing standards no more stringent than those of the
guarantee agency. We cannot assure you that the United States Department of
Education would ever make such a determination with respect to a guarantee
agency or, if such a determination was made, whether that determination or the
ultimate payment of guarantee claims would be made in a timely manner. See
"Description of the Guarantee Agencies" in the prospectus.
S-12
The following table provides information with respect to the portion of the
student loans guaranteed by each guarantor:
Distribution of the Student
Loans by Guarantee Agency
Name of Number Outstanding Percent of Loans
Guarantee Agency of Loans Principal Balance by Outstanding Balance
---------------- -------- ----------------- ----------------------
CSAC 2,165 $ 44,623,583 9.95%
BSFA 521 $ 9,004,971 2.01%
ISAC 2 $ 18,248 *
KEAA 271 $ 5,996,863 1.34%
LASFAC 99 $ 1,861,733 0.42%
ASA 477 $ 11,291,823 2.52%
FAME 93 $ 1,594,810 0.36%
MSLP 99 $ 2,127,198 0.47%
HESC 19,834 $ 350,692,725 78.20%
OGSLP 122 $ 2,503,482 0.56%
OSAC 44 $ 890,941 0.20%
RIHEAA 78 $ 1,411,095 0.31%
TGSLC 846 $ 16,410,847 3.66%
USAF 2 $ 32,989 0.01%
------ -------------- ------
Total 24,653 $ 448,461,307 100.00%
====== ============== ======
* Value is less than 0.01%
CSAC California Student Aid Commission
BSFA Florida Bureau of Student Financial Assistance
ISAC Illinois Student Assistance Commission
KEAA Kentucky Higher Education Assistance Authority
LASFAC Louisiana Student Financial Assistance Commission
ASA Massachusetts Higher Education Assistance Corporation
(d/b/a American Student Assistance)
FAME Finance Authority of Maine
MSLP Missouri Student Loan Program
HESC New York State Higher Education Services Corporation
OGSLP Oklahoma State Regents for Higher Education
OSAC Oregon Student Assistance Commission
RIHEAA Rhode Island Higher Education Assistance Authority
TGSLC Texas Guaranteed Student Loan Corporation
USAF United Student Aid Funds
Some historical information about HESC and CSAC, our two largest guarantee
agencies, is provided below. For purposes of the following tables we refer to
these guarantee agencies as "Significant Guarantors." The information shown for
each Significant Guarantor relates to all student loans guaranteed by that
Significant Guarantor.
We obtained the information in these tables from various sources, including
United States Department of Education publications and data or from the
Significant Guarantors. None of the issuer, the depositor, the seller and
servicer or the underwriters have audited or independently verified this
information for accuracy or completeness.
S-13
Guarantee Volume. The following table describes the approximate aggregate
principal amount of federally reinsured student loans, excluding consolidation
loans, that first became guaranteed by each Significant Guarantor, in each of
the five federal fiscal years shown:
Loans Guaranteed
----------------
Federal Fiscal Year
(in Millions)
-------------
Name of Guarantee Agency 1998 1999 2000 2001 2002
- ------------------------ ---- ---- ---- ---- ----
HESC $ 1,571 $ 1,622 $ 1,932 $ 1,926 $ 2,156
CSAC $ 1,963 $ 2,077 $ 2,371 $ 2,792 N/A
Reserve Ratio. Each Significant Guarantor's reserve ratio is determined by
dividing its cumulative cash reserves by the original principal amount of the
outstanding loans it has agreed to guarantee. For this purpose:
o Cumulative cash reserves are cash reserves plus (a) sources of funds,
including insurance premiums, state appropriations, federal advances,
federal reinsurance payments, administrative cost allowances,
collections on claims paid and investment earnings, minus (b) uses of
funds, including claims paid to lenders, operating expenses, lender
fees, the United States Department of Education's share of collections
on claims paid, returned advances and reinsurance fees.
o The original principal amount of outstanding loans consists of the
original principal amount of loans guaranteed by the Significant
Guarantor minus the original principal amount of loans cancelled,
claims paid, loans paid in full and loan guarantees transferred to the
Significant Guarantor from other guarantors.
The following table shows the reserve ratios of each Significant Guarantor
for the five federal fiscal years shown for which information is available:
Reserve Ratio as of
Close of Federal Fiscal Year
----------------------------
Name of Guarantee Agency 1998 1999 2000 2001 2002
- ------------------------ ---- ---- ---- ---- ----
HESC 1.09% 1.31% 1.13% 0.87% 0.62%
CSAC 1.78% 1.74% 1.36% 0.91% N/A
Recovery Rates. A guarantor's recovery rate, which provides a measure of
the effectiveness of the collection efforts against defaulting borrowers after
the guarantee claim has been satisfied, is determined for each year by dividing
the cumulative amount recovered from borrowers by the guarantor by the
cumulative aggregate amount of default claims paid by the guarantor. The table
below shows the cumulative recovery rates of each Significant Guarantor for the
five federal fiscal years shown for which information is available:
Recovery Rate
Federal Fiscal Year
-------------------
Name of Guarantee Agency 1998 1999 2000 2001 2002
- ------------------------ ---- ---- ---- ---- ----
HESC 53.0% 58.0% 63.0% 65.0% 66.0%
CSAC 41.8% 49.3% 56.4% 64.8% N/A
Claims Rate. The following table shows the claims rates of each Significant
Guarantor for each of the five federal fiscal years shown:
Claims Rate
Federal Fiscal Year
-------------------
Name of Guarantee Agency 1998 1999 2000 2001 2002
- ------------------------ ---- ---- ---- ---- ----
HESC 2.70% 1.85% 1.48% 1.53% 1.31%
CSAC 3.12% 2.60% 2.80% 2.59% N/A
S-14
The United States Department of Education is required to make reinsurance
payments to guarantors with respect to Federal Family Education Loan Program
loans in default that are subject to specified reductions when the guarantor's
claims rate for a fiscal year equals or exceeds certain trigger percentages of
the aggregate original principal amount of Federal Family Education Loan Program
loans guaranteed by that guarantor that are in repayment on the last day of the
prior fiscal year.
Each guarantee agency's guarantee obligations with respect to any student
loan is conditioned upon the satisfaction of all the conditions in the
applicable guarantee agreement. These conditions include, but are not limited
to, the following:
o the origination and servicing of the student loan being performed in
accordance with the Federal Family Education Loan Program, the Higher
Education Act, the guarantee agency's rules and other applicable
requirements;
o the timely payment to the guarantee agency of the guarantee fee
payable on the student loan; and
o the timely submission to the guarantee agency of all required
pre-claim delinquency status notifications and of the claim on the
student loan.
Failure to comply with any of the applicable conditions, including those
listed above, may result in the refusal of the guarantee agency to honor its
guarantee agreement on the student loan, in the denial of guarantee coverage for
certain accrued interest amounts or in the loss of certain interest subsidy
payments and special allowance payments.
Prospective investors may consult the United States Department of Education
Data Books for further information concerning the guarantors.
Subservicing Agreement
Our student loans will be subserviced by SunTech, Inc., a Mississippi
corporation, pursuant to a subservicing agreement with The Student Loan
Corporation. SunTech, Inc., began servicing education loans in 1990. Prior to
that time, the operation was a part of the Mississippi secondary market and had
serviced loans since 1984. SunTech, Inc. provides loan origination and loan
servicing for lenders and secondary markets. SunTech, Inc.'s headquarters and
operations are located in the Jackson, Mississippi area, where as of October 30,
2002 approximately 200 employees serviced a portfolio of almost $6.82 billion in
Federal Family Education Loan Program and private educational loans.
SunTech, Inc. utilizes extensive automation in its due diligence processes
for both notices and telephone contact. Internal controls include both automated
tests and regular reviews by internal auditors. SunTech, Inc.'s computer
software system was purchased externally in 1988 but has been enhanced and
maintained internally since that time.
Under the subservicing agreement, SunTech, Inc. is responsible for
servicing and performing all other related tasks with respect to all the student
loans acquired from time to time on behalf of the trust for which SunTech, Inc.
is retained as subservicer. SunTech, Inc. is responsible for performing all
services and duties customary to the servicing of student loans including all
collection practices, to do so in the same manner as SunTech, Inc. has serviced
student loans for parties other than the trust and to do so in compliance with,
and to otherwise comply with, all standards and procedures provided for in the
Higher Education Act, the guarantee agreements and all other applicable federal
and state laws. SunTech, Inc. is required to maintain its eligibility as a
third-party servicer under the Higher Education Act.
S-15
Capitalization of the Trust
The following table illustrates the capitalization of the trust as of the
cut-off date, as if the issuance and sale of the notes had taken place on that
date:
Floating Rate Class A-1 Student Loan-Backed Notes.... $57,975,000
Floating Rate Class A-2 Student Loan-Backed Notes.... $57,975,000
Floating Rate Class A-3 Student Loan-Backed Notes.... $57,975,000
Floating Rate Class A-4 Student Loan-Backed Notes.... $62,925,000
Floating Rate Class B-1 Student Loan-Backed Notes.... $15,250,000
Floating Rate Class R-1 Student Loan-Backed Notes.... $ 8,500,000
Floating Rate Class A-5 Student Loan-Backed Notes.... $65,350,000
Floating Rate Class A-6 Student Loan-Backed Notes.... $65,350,000
Floating Rate Class A-7 Student Loan-Backed Notes.... $65,350,000
Floating Rate Class B-2 Student Loan-Backed Notes.... $10,150,000
------------
Total............................................. $466,800,000
============
Fees and Expenses of the Trust
The following are the aggregated anticipated annual administrative fees and
expenses payable to third-party service providers with respect to outstanding
notes after issuance of the Series 2002-2 notes:
Trustee Fee Servicing Fee Auction Agent Fees Broker Dealer Fees
----------- ------------- ------------------ ------------------
$15,000 $494,000 $46,000 $1,138,000
The overall amount of fees and expenses payable by the trust in priority to
the notes is expected to increase as additional notes are issued and additional
student loans are added to the trust. In addition, Federal Family Education Loan
Program lenders must pay a monthly rebate fee to the Secretary of Education at
an annualized rate generally equal to 1.05% on principal of and interest on
Federal Consolidation Loans disbursed on or after October 1, 1993. See
"Description of the Federal Family Education Loan Program-Fees-Rebate Fee on
Federal Consolidation Loans" in the prospectus.
Eligible Lender Trustee
Deutsche Bank Trust Company Americas (formerly known as Bankers Trust
Company) is the eligible lender trustee for the trust under a trust agreement.
Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company)
is a New York banking corporation whose principal offices are located at 100
Plaza One, MS JCY 03-0606, Jersey City, New Jersey 07311. The eligible lender
trustee will acquire on behalf of the trust legal title to all of the student
loans acquired under a sale agreement. The eligible lender trustee on behalf of
the trust has entered into a separate guarantee agreement with each of the
guarantee agencies described in this prospectus supplement with respect to the
student loans. The eligible lender trustee qualifies as an eligible lender and
the holder of the student loans for all purposes under the Higher Education Act
and the guarantee agreements. Failure of the student loans to be owned by an
eligible lender would result in the loss of guarantor payments and United States
Department of Education payments on the student loans. See "Description of the
Federal Family Education Loan Program" in the prospectus.
The eligible lender trustee's liability in connection with the issuance and
sale of the notes is limited solely to the express obligations of the eligible
lender trustee in the trust agreement and the loan sale and contribution
agreement.
Special Note Regarding Forward Looking Statements
Statements in this prospectus supplement and the prospectus, including
those concerning our expectations as to our ability to purchase eligible student
loans, to structure and to issue competitive securities, our ability to pay our
notes, and certain other information presented in this prospectus supplement and
the prospectus, constitute forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Actual results may
S-16
vary materially from such expectations. For a discussion of the factors which
could cause our actual results to differ from expectations, please see the
caption entitled "Risk Factors" in this prospectus supplement and in the
prospectus.
Plan of Distribution
Subject to the terms and conditions set forth in the underwriting
agreement, between ourselves and Salomon Smith Barney Inc., as representative of
the underwriters named below, we have agreed to sell to each of the
underwriters, and each of the underwriters has agreed to purchase from us, the
principal amount of the notes set forth opposite its name.
Underwriter Class of Notes Principal Amount
----------- -------------- ----------------
Salomon Smith Barney Inc ................ A-5 $65,350,000
A-6 $ 65,350,000
B-2 $ 10,150,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .......................... A-7 $ 65,350,000
--------------------
Total ................................... $ 206,200,000
====================
We have been advised by the underwriters that they propose to offer the
notes to the public initially at the respective offering prices set forth on the
cover page of this prospectus supplement. Until the distribution of notes is
completed, the rules of the Securities and Exchange Commission may limit the
ability of the underwriters to bid for and purchase the notes. As an exception
to these rules, the underwriters are permitted to engage in transactions that
stabilize the price of the notes. These transactions consist of bids to purchase
and open market purchases and sales for the purpose of pegging, fixing or
maintaining the price of the notes.
The underwriters may over-allot the notes to create a short position for
the accounts of the underwriters by accepting orders for more notes than are to
be sold.
In addition, the underwriters may impose a penalty bid on the
broker-dealers who sell the notes. This means that if an underwriter purchases
notes in the open market to reduce a broker-dealer's short position or to
stabilize the prices of the notes, it may reclaim the selling concession from
the broker-dealer who sold those notes as part of the offering.
In general, over-allotment transactions and open market purchases of the
notes for the purpose of stabilization or to reduce a short position could cause
the price of a note to be higher than it might be in the absence of such
transactions.
Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the notes. In addition, neither we nor
any of the underwriters make any representation that the underwriters will
engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
We have been advised by the underwriters that they presently intend to make
a market in the notes; however, they are not obligated to do so. In addition,
any market-making may be discontinued at any time, and an active public market
for the notes may not develop.
Salomon Smith Barney Inc. is an affiliate of the seller and servicer, and
may be deemed our affiliate. From time to time, the underwriters or their
affiliates may perform investment banking and advisory services for, and may
provide general financing and banking services to the seller and servicer and
its affiliates. From time to time, we may invest funds in the Reserve Fund and
other accounts under the indenture in eligible instruments either acquired from
the underwriters or issued by their affiliates.
S-17
The underwriting agreement provides that we will indemnify the underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, and we have agreed to reimburse the underwriters for the fees and
expenses of their counsel.
This prospectus supplement and the prospectus may be used by affiliates of
the Seller, to the extent required, in connection with market making
transactions in the offered notes. The affiliates may act as principal or agent
in such transactions.
Legal Matters
Certain legal matters, including certain federal income tax matters, will
be passed upon by Cadwalader, Wickersham & Taft, New York, New York, counsel to
the trust, the depositor and the seller and servicer. Certain legal matters will
be passed upon for the underwriters by Stroock & Stroock & Lavan LLP, New York,
New York. Richards, Layton & Finger, P.A., as Delaware counsel for the trust,
will pass upon Delaware matters for the trust.
S-18
Annex I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Global Clearance and Settlement
Except in certain limited circumstances, the globally offered Notes of SLC
Student Loan Trust-I (the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of DTC, Clearstream or Euroclear. The Global Securities
will be tradable as home market instruments in both the European and U.S.
domestic markets. Initial settlements and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding Global Securities
through Clearstream and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior asset-backed securities issues.
Secondary cross-market trading between Clearstream or Euroclear and DTC
Participants holding Global Securities will be affected on a
delivery-against-payment basis through the applicable Depositaries of
Clearstream and Euroclear (in such capacity) and as DTC Participants.
Holders of Global Securities may be subject to U.S. withholding or backup
withholding taxes unless such holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or their
participants, as described below.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Clearstream or Euroclear (or through DTC if the holder has an address outside
the United States) may be subject to 30% U.S. withholding tax on interest paid
on the Global Securities, unless (i) each clearing system, bank or other
financial institution that holds customers' securities in the ordinary course of
its trade or business in the chain of intermediaries between such beneficial
owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) the beneficial owner takes one of the
following steps to obtain an exemption or reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8BEN). Beneficial owners of Global
Securities that are Non-U.S. Persons entitled to an exemption from U.S.
withholding tax can claim the exemption by filing a complete and executed Form
W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States tax
withholding). Non-U.S. Persons that are beneficial owners of Global Securities
entitled to an exemption or reduced rate of U.S. withholding tax under a tax
treaty with the United States can obtain an exemption or reduced tax rate
(depending on the treaty terms) by filing a complete and executed Form W-8BEN
(Certificate of Foreign Status of Beneficial Owners for United States Tax
Withholding) that properly claims such exemption or reduced tax rate. If the
information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within
30 days of such change.
Exemption for Non-U.S. Persons (Form W-8IMY). A Non-U.S. Person that is a
"nonwithholding partnership" that is treated as a foreign partnership or trust
for U.S. federal income tax purposes can claim an exemption by filing a complete
and executed Form W-8IMY (Certificate of Foreign Intermediary, Foreign
Flow-Through Entity, or Certain U.S. Branches for United States Tax
Withholding). Form W-8IMY generally requires additional Forms from beneficial
owners and the beneficial owners of such beneficial owners of such foreign
partnership or trust. Certain entities that have entered into agreements with
the Internal Revenue Service (for example "qualified intermediaries") may be
subject to different documentation requirements.
Exemption for Non-U.S. Persons with effectively connected income (Form
W-8ECI). A Non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch with respect to which the interest income is effectively connected with
its conduct of a trade or business in the United States, can claim an exemption
from the withholding tax by filing a complete and executed Form W-8ECI
(Certificate of Foreign Persons Claim of Exemption from Withholding on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption for U.S. Persons (Form W-9). U.S. Persons can claim a complete
exemption from backup withholding tax by filing a complete and executed Form W-9
(Payer's Request for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Global Securities holder
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8BEN and Form W-8ECI are effective until the third
succeeding calendar year from the date the form is signed.
U.S. Person. As used herein the term "U.S. Person" generally means a
beneficial owner of a Global Security that is for United States federal income
tax purposes (i) a citizen or resident of the United States, (ii) a corporation
or partnership that is created or organized in or under the laws of the United
States or any State (including the District of Columbia), (iii) an estate the
income of which is subject to United States federal income taxation regardless
of its source, (iv) a trust if a court within the United States is able to
exercise primary supervision over its administration and one or more United
States persons have the authority to control all substantial decisions of the
trust or (v) to the extent provided in Treasury regulations, certain trusts in
existence on August 20, 1996, that are treated as United States persons prior to
that date and that elect to continue to be treated as United States persons. As
used herein, the term "Non-U.S. Person" means a beneficial owner of a Global
Security that is not a U.S. Person.
PROSPECTUS
SLC Student Loan Trust-I
Issuer
SLC Student Loan Receivables I, Inc.
Depositor
The Student Loan Corporation
Seller and Servicer
$3,000,000,000
STUDENT LOAN ASSET-BACKED NOTES
We will periodically issue our notes in one or more series. The specific
terms of the notes included in each series will be described in a supplement to
this prospectus. Each issue of notes will have its own series designation and
consist of one or more classes of notes.
We will use proceeds from the sale of the notes to acquire portfolios of
student loans originated by eligible lenders under the Federal Family Education
Loan Program and to fund certain accounts for the benefit of the holders of the
notes. Those student loans and accounts will be pledged to a trust estate
established to secure repayment of the notes. The notes will be limited
obligations of SLC Student Loan Trust-I payable solely from that trust estate.
The notes are not guaranteed or insured by the United States of America or any
governmental agency.
You should read this prospectus and any prospectus supplement carefully
before you invest. This prospectus may be used to offer and sell the notes only
if it is accompanied by a prospectus supplement.
YOU SHOULD CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 6 IN
THIS PROSPECTUS AND THE "RISK FACTORS" IN THE RELATED PROSPECTUS SUPPLEMENT.
Offers of the notes may be made by different methods, including offerings
through underwriters, as more fully described under "Plan of Distribution" below
and in the related prospectus supplement. No market will exist for the notes of
any series before the notes are issued.
The date of this prospectus is November 11, 2002.
About This Prospectus
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission. We may sell our notes in one or more
offerings pursuant to the registration statement up to a total dollar amount of
$3,000,000,000.
We provide information about the notes in two separate documents: (a) this
prospectus, which provides general information, some of which may not apply to a
particular series of notes, and (b) a prospectus supplement, which describes the
specific terms of the series of notes being offered, including:
o a description of the aggregate principal amount, authorized
denominations and interest rate or rates, or the manner of determining
the rate or rates, of each class of the notes;
o information concerning the student loans underlying the notes;
o information with respect to any notes that we have previously issued
that also are secured by a common pool of assets that secures payment
of the notes being offered;
o information concerning the guarantee agencies providing guarantees for
the student loans that will secure payment of the notes described in
the prospectus supplement;
o information with respect to any credit enhancement;
o the credit ratings of the notes; and
o the method of selling the notes.
WHENEVER INFORMATION IN A PROSPECTUS SUPPLEMENT IS MORE SPECIFIC THAN THE
INFORMATION IN THIS PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
You should rely only on the information contained in or incorporated by
reference into this prospectus and any prospectus supplement. We have not
authorized anyone else to provide you with different information. We are not
making an offer of the notes in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date appearing on the front
cover of those documents.
TO UNDERSTAND THE STRUCTURE OF THESE SECURITIES, YOU MUST READ CAREFULLY
THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT IN THEIR ENTIRETY.
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TABLE OF CONTENTS TO PROSPECTUS
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Page
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About This Prospectus ..................................................... ii
Summary of the Offering ................................................... 1
Risk Factors .............................................................. 6
Special Note Regarding Forward Looking Statements ......................... 11
Description of the Notes .................................................. 11
Security and Sources of Payment for the Notes ............................. 17
Book-Entry Registration ................................................... 20
Additional Notes .......................................................... 23
Summary of the Indenture Provisions ....................................... 24
Description of Credit Enhancement ......................................... 34
The Student Loan Program of SLC Student Loan Trust-I ...................... 35
Description of the Federal Family Education Loan Program .................. 44
Description of the Guarantee Agencies ..................................... 54
Material U.S. Federal Income Tax Considerations ........................... 59
ERISA Considerations ...................................................... 62
Plan of Distribution ...................................................... 64
Legal Matters ............................................................. 64
Ratings ................................................................... 65
Incorporation of Documents by Reference; Where to Find More Information ... 65
Glossary of Terms ......................................................... 66
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Summary of the Offering
The following summary highlights selected information from this prospectus
but does not contain all of the information you should consider before making an
investment decision. Before deciding to purchase the notes, you should read the
more detailed information appearing in this prospectus and in the related
prospectus supplement.
Overview We will from time to time sell series of our notes. We will
acquire pools of student loans with the proceeds we receive
from these sales. We will pledge these student loans as
collateral for our notes. Unlike other issuers that create
separate trusts each time they sell securities, all of the
notes we sell will be secured by all student loans that we
acquire and pledge as collateral under the indenture, except
to the extent we may otherwise state for a particular series
of the notes in a prospectus supplement. We may from time to
time issue a particular series of notes in different
classes. The priority of payments of principal and interest
among the various classes and series of notes will be
described in the related prospectus supplement. These
payments will come principally from amounts received on the
student loans.
Principal Parties
o Issuer ........ SLC Student Loan Trust-I, a Delaware statutory trust, is the
issuer of the notes. The trustee of the trust is Wilmington
Trust Company. You may contact us through the administrator
at 750 Washington Boulevard, 9th Floor, Stamford, CT 06901,
or by phone at (203) 975-6112.
o Owner Trustee.. Wilmington Trust Company.
o Depositor...... SLC Student Loan Receivables I, Inc., will act as depositor.
The depositor is a wholly owned, special purpose subsidiary
of The Student Loan Corporation, formed to acquire student
loans originated or acquired by The Student Loan Corporation
and to transfer to, and deposit these student loans with,
SLC Student Loan Trust-I. Because the depositor and we are
not institutions eligible to hold legal title to student
loans, an eligible lender trustee will hold legal title to
the student loans on our behalf and on behalf of the
depositor. Deutsche Bank Trust Company Americas (formerly
known as Bankers Trust Company) will be the eligible lender
trustee, unless otherwise specified in the related
prospectus supplement.
o Seller and
Servicer ...... The Student Loan Corporation, a Delaware corporation, will
act as the seller and the servicer of our student loans. The
servicer may transfer its obligations to other entities. The
servicer may also contract with various other servicers or
subservicers. The related prospectus supplement will
describe any subservicers.
o Indenture
Trustee ....... Deutsche Bank Trust Company Americas (formerly known as
Bankers Trust Company) will serve as the indenture trustee
under the indenture governing the issuance of the notes.
Deutsche Bank Trust Company Americas (formerly known as
Bankers Trust Company) may be replaced by another qualified
indenture trustee. You may contact the indenture trustee at
100 Plaza One, MS JCY 03-0606, Jersey City, New Jersey
07311, or by phone at (201) 593-6793.
o Administrator .. The Student Loan Corporation will act as administrator of
the trust. The Student Loan Corporation may transfer its
obligations as administrator.
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Interest Rates The prospectus supplement will specify the interest
that will be paid on our notes. The interest rate may be
fixed for the full term of the notes, or the interest rate
may be subject to periodic adjustment as described below.
o Auction Rate Securities. We may issue classes of notes that
bear interest at a rate determined by auction. The initial
interest rate for these auction rate securities will be set
forth, or the method for determining the initial interest
rate will be described, in the related prospectus
supplement. The interest rates for the auction rate
securities will be reset at the end of each interest period
pursuant to the auction procedures. The auction procedures
are summarized and an example of an auction is included
under "Description of the Notes--Auction Rate Securities."
o Index Rate Notes. The interest rate for some of our notes
may be determined by reference to LIBOR or by reference
to United States Treasury Securities. These notes will
bear interest at an initial rate described in the
prospectus supplement. Thereafter, the interest rate for
LIBOR rate notes will be determined periodically by
reference to the designated LIBOR rate, and the interest
rate for treasury rate notes will be determined
periodically by reference to the rate of interest paid on
designated U.S. Treasury securities. See "Description of
the Notes--LIBOR Rate Notes" and "--Treasury Rate Notes."
o Accrual Notes. We may issue one or more classes of
accrual notes. Accrual notes will not be entitled to
receive payments of interest during the designated
accrual period. Instead, interest accrued on the accrual
notes will be capitalized and added to their principal
balance. The rate of interest to be accrued and the
accrual period will be specified in the prospectus
supplement. See "Description of the Notes--Accrual Notes."
Payments on Notes We will make payment of principal and interest due on the
notes solely from the assets pledged to the indenture
trustee in the trust estate created by the indenture. That
trust estate will consist of student loans, payments made on
the student loans and funds in accounts held by the
indenture trustee under the indenture. Interest on the notes
will be paid on the dates specified in the prospectus
supplement. The principal balance of the notes of each
series will be payable in full on the stated maturity date,
unless earlier redeemed or repaid as described in this
prospectus or in the related prospectus supplement.
Redemption
Provisions Each series of the notes will be subject to redemption as
described in the related prospectus supplement. Redemption
provisions that may apply to a series of the notes are
described below.
o Mandatory Redemption. We will be required under the
indenture to use the proceeds of the sale of each series
of notes that remain in the Acquisition Fund after a date
specified in the related prospectus supplement to redeem
notes. We will also be required to use the principal
payments that we receive on the student loans and, until
the principal balance of the student loans is not less
than the percentage of the principal balance of the
outstanding notes specified in the prospectus supplement,
interest received on the student loans after deducting
all required payments, to redeem notes.
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o Optional Redemption. We may redeem notes from interest
payments received on student loans that are not needed to
pay interest on the notes and to pay our expenses.
o Optional Redemption or Purchase. We may redeem or
purchase all of the notes in whole in our sole discretion
when the aggregate current principal balance of the notes
that remain outstanding is less than or equal to 10% of
the initial aggregate principal balance of all the notes
issued under the indenture on their respective date of
original issuance.
o Partial Redemption. If less than all of the notes of any
series are to be redeemed to the extent permitted by the
indenture, we will determine the classes of notes of that
series that we will redeem. Generally, Class A notes will
be redeemed before Class B notes and Class B notes will
be redeemed before Class C notes. However, we have the
option of redeeming some or all of the Class B notes
before all of the Class A notes are redeemed, and we may
redeem some or all of the Class C notes before all the
Class A notes and Class B notes are redeemed, if the
ratio of our assets to our liabilities exceeds levels
specified in the prospectus supplement. See "Description
of the Notes--Notice and Partial Redemption of Notes" in
this prospectus.
The Student Loans
We Acquire The student loans that we acquire will have been
originated under the Federal Family Education Loan Program
to students enrolled in qualified, accredited institutions
of higher education.
The characteristics of the portfolio of student loans we
expect to acquire with the proceeds of the notes of any
series, and the characteristics of the existing portfolio
pledged to the indenture trustee, will be described in the
prospectus supplement.
Student Loan
Guarantees The payment of principal and interest on all of our student
loans will be guaranteed by designated guarantee agencies
and will be reinsured by the Department of Education
pursuant to the Higher Education Act. This guarantee,
however, is contingent upon our compliance with a variety of
regulations concerning origination and servicing of the
loans. Failure to follow these regulations may result in the
guarantee claim for a loan being denied. Student loans
originated prior to October 1, 1993 generally are fully
guaranteed as to principal and accrued interest. Student
loans originated after October 1, 1993 are guaranteed as to
98% of principal and accrued interest.
The Higher Education Act provides that if the Secretary of
Education determines that a guarantee agency is unable to
meet its obligations to holders of loans, such as the trust,
then the holders may submit guarantee claims directly to the
Department of Education. The Department of Education is
required to pay the guarantee agency's full insurance
obligation to the holders until the obligations are
transferred to a new guarantee agency capable of meeting the
obligations, or until a qualified successor guarantee agency
assumes the obligations. Delays in receiving reimbursement
could occur if a guarantee agency fails to meet its
obligations.
Subordinated Notes The rights of the owners of Class B notes to receive
payments of principal and interest will be subordinated to
the rights of the owners of the Class A notes to receive
payments of principal and interest. The rights of the owners
of Class C notes to receive payments of principal and
interest will be subordinated to the
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rights of the owners of the Class A notes and the Class B
notes to receive payments of principal and interest. This
subordination is intended to enhance the likelihood that
the owners of the more senior notes will regularly
receive the full amount of scheduled payments of
principal and interest due them and to protect those
owners against losses.
We also may issue Class R notes secured by the loans held
in the trust estate. Class R notes will be subordinate to
the rights of the owners of the Class A, Class B and Class
C notes to receive payments of principal and interest and
to the deposit of the required Reserve Fund amounts. Class
R notes, if issued, will be issued to the depositor and
will not be offered for sale pursuant to this prospectus.
Any reference to "notes" in this prospectus refers only to
the Class A notes, the Class B notes and the Class C notes
and any reference to "noteholders" in this prospectus
refers only to the holders of the Class A, Class B and
Class C notes.
Funds o Revenue Fund. We will deposit all funds that we receive
with respect to the student loans in the Revenue
Fund. Generally, the funds on deposit in the Revenue Fund
will be used by us to pay the fees and expenses of the
trust estate and interest and principal on the notes and
the Class R notes. Certain amounts in the Revenue Fund
will be transferred to the Reserve Fund, but only to the
extent of any deficiency in the Reserve Fund.
o Acquisition Fund. When we sell a series of notes, we will
deposit into the Acquisition Fund most of the proceeds we
receive. These funds will be used to acquire the student
loans described in the related prospectus supplement and
pay certain costs related to the issuance of the series
of notes. On a date specified in the prospectus
supplement, we will redeem notes with the remaining
proceeds of the sale of notes that were deposited in the
Acquisition Fund.
If moneys in the Revenue Fund are insufficient to pay
interest, redeem notes, or pay expenses, we may fund the
insufficiency from transfers from the Acquisition Fund.
o Reserve Fund. When we issue a series of notes, we expect
to deposit into the Reserve Fund an amount specified in
the related prospectus supplement. At any later time, the
amount required to be deposited in the Reserve Fund with
respect to a series of notes shall be an amount specified
in a prospectus supplement. We will use money in the
Reserve Fund to pay interest and principal on the notes
if there are no funds left in the other funds and
accounts securing repayment of the notes under the
indenture, and for the purposes described in the
prospectus supplement. Money in the Reserve Fund may be
withdrawn as specified in the prospectus supplement.
o Operating Fund. When we issue a series of notes, we will
deposit into the Operating Fund an amount specified in
the related prospectus supplement. Money will also be
transferred to the Operating Fund from the Revenue Fund
from time to time. These amounts will be applied to pay
our administrative costs and will not secure repayment of
the notes.
Credit
Enhancement We may establish credit enhancement for a series of notes in
the form of insurance policies or surety bonds,
subordination of certain classes or subclasses, one or more
Reserve Funds, letters of credit, guarantees or other
arrangements to provide for coverage of risks of defaults or
losses, as described
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in the related prospectus supplement. See "Description of
Credit Enhancement" in this prospectus.
Derivative
Products We may enter into swap agreements and other derivative
products. Our obligation to make payments in connection with
a derivative product may be secured by a pledge of and lien
on the trust estate. We will not enter into a derivative
product unless the indenture trustee has received a
confirmation from each rating agency providing a rating for
our notes that the derivative product will not adversely
affect the rating on any series of the notes.
Reports to
Noteholders Periodic monthly reports concerning the notes and the
security for the notes will be provided to the noteholders.
Those reports will not be reviewed by a certified public
accounting firm. If notes are issued in book-entry form and
registered in the name of Cede & Co., the nominee of The
Depository Trust Company, then all reports will be provided
to that entity which will in turn provide the reports to its
participants. Those participants will then forward the
reports to the beneficial owners of notes. See "Book-Entry
Registration" in this prospectus.
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RISK FACTORS
You should consider the following factors before purchasing the notes.
The Notes are not Suitable Investments for All Investors
The notes are not a suitable investment if you require a regular or
predictable schedule of payments or payment on any specific date. The notes are
complex investments that should be considered only by investors who, either
alone or with their financial, tax and legal advisors, have the expertise to
analyze the prepayment, reinvestment, default and market risk, the tax
consequences of an investment, and the interaction of these factors.
The Notes are Payable Solely from the Trust Estate and You will have No Other
Recourse Against Us
We will pay interest and principal on the notes solely from the funds and
assets held in the trust estate created under the indenture. No insurance or
guarantee of the notes will be provided by any government agency or
instrumentality, by The Student Loan Corporation or any of its affiliates, by
any insurance company or by any other person or entity, except to the extent
that credit enhancement is provided for a series or class of notes as described
in a prospectus supplement. Therefore, your receipt of payments on the notes
will depend solely on:
o the amount and timing of payments and collections on the student loans
held in the trust estate (including payments by the guarantee
agencies) and interest paid or earnings on the funds held in the
accounts established pursuant to the indenture;
o amounts on deposit in the Reserve Fund and other funds held in the
trust estate; and
o any form of credit enhancement described in the prospectus supplement.
You will have no additional recourse against us or any of our other assets
if those sources of funds for repayment of the notes are insufficient.
You may Incur Losses or Delays in Payment on Your Notes if Borrowers Default on
Their Student Loans
In general, a guarantee agency reinsured by the Department of Education
will guarantee 98% of each student loan. As a result, if a borrower of a student
loan defaults, the trust will experience a loss of approximately 2% of the
outstanding principal and accrued interest on each of the defaulted loans. The
trust does not have any right to pursue the borrower for the remaining 2%
unguaranteed portion. If any credit enhancement described in the related
prospectus supplement is not sufficient, you may suffer a delay in payment or a
loss on your investment.
Our Student Loans are Unsecured and the Ability of the Guarantee Agencies to
Honor their Guarantees may Become Impaired
All student loans will be unsecured. As a result, the only security for
payment of a student loan is the guarantee provided by the guarantee agency.
A deterioration in the financial status of a guarantee agency and its
ability to honor guarantee claims on defaulted student loans could result in a
failure of that guarantor to make its guarantee payments to the eligible lender
trustee in a timely manner. The financial condition of a guarantee agency can be
adversely affected if it submits a large number of reimbursement claims to the
Department of Education, which results in a reduction of the amount of
reimbursement that the Department of Education is obligated to pay the guarantee
agency. The Department of Education may also require a guarantee agency to
return its reserve funds to the Department of Education upon a finding that the
reserves are unnecessary for the guarantee agency to pay its program expenses or
to serve the best interests of the federal student loan program. The inability
of any guarantee agency to meet its guarantee obligations could reduce the
amount of principal and interest paid to you as the owner of the notes or delay
those payments past their due date.
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If the Department of Education has determined that a guarantee agency is
unable to meet its guarantee obligations, the loan holder may submit claims
directly to the Department of Education and the Department of Education is
required to pay the full guaranty claim amount due with respect thereto. See
"Description of the Guarantee Agencies" in this prospectus. However, the
Department of Education's obligation to pay guarantee claims directly in this
fashion is contingent upon the Department of Education making the determination
that a guarantee agency is unable to meet its guarantee obligations. The
Department of Education may not ever make this determination with respect to a
guarantee agency and, even if the Department of Education does make this
determination, payment of the guarantee claims may not be made in a timely
manner.
Failure to Comply with Loan Origination and Servicing Procedures for Student
Loans may Result in Loss of Guarantee and Other Benefits
The Higher Education Act and its implementing regulations require holders
of student loans and guarantee agencies guaranteeing student loans to follow
specified procedures in making and collecting on student loans.
If we fail to follow these procedures, or if The Student Loan Corporation
or any other originator, servicer or subservicer of our student loans fails to
follow these procedures, the Department of Education and the guarantee agencies
may refuse to pay claims on defaulted loans submitted by the servicer on behalf
of the trust estate. If the Department of Education or a guarantee agency
refused to pay a claim, it would reduce the revenues of the trust estate and
impair our ability to pay principal and interest on your notes. See "Description
of the Federal Family Education Loan Program" in this prospectus.
If the Servicer or any Subservicer Fails to Comply with the Department of
Education's Third-Party Servicer Regulations, Payments on the Notes Could be
Adversely Affected
The Department of Education regulates each servicer of federal student
loans. Under these regulations, a third-party servicer, including the servicer
or any subservicer, is jointly and severally liable with its client lenders for
liabilities to the Department of Education arising from its violation of
applicable requirements. In addition, if the servicer or any subservicer fails
to meet standards of financial responsibility or administrative capability
included in the regulations, or violates other requirements, the Department of
Education may fine the servicer or any subservicer and/or limit, suspend, or
terminate the servicer's or subservicer's eligibility to contract to service
federal student loans. If a servicer or any subservicer were so fined or held
liable, or its eligibility were limited, suspended, or terminated, its ability
to properly service the student loans and to satisfy its obligation to purchase
student loans with respect to which it has breached its representations,
warranties or covenants could be adversely affected. In addition, if the
Department of Education terminates a servicer's or any subservicer's
eligibility, a servicing transfer will take place and there may be delays in
collections and temporary disruptions in servicing. Any servicing transfer may
temporarily adversely affect payments to you.
The Inability of The Student Loan Corporation to Meet Its Repurchase Obligations
may Result in Losses on Your Investment
Under some circumstances, the trust estate will have the right to require
The Student Loan Corporation to repurchase or substitute a student loan. This
right arises generally from a breach of the representations and warranties of
The Student Loan Corporation or if a claim for a loan is denied because of
events occurring before the sale. We cannot guarantee to you that The Student
Loan Corporation will have the financial resources to repurchase a student loan,
or will have available student loans to substitute a student loan, if a breach
occurs. In this case, you, rather than The Student Loan Corporation may bear any
resulting loss.
Bankruptcy or Insolvency of The Student Loan Corporation Could Result in Payment
Delays to You
We have taken steps to structure transfers of loans from The Student Loan
Corporation to the depositor as a "true sale" under applicable law. A true sale
helps to establish that the loans would not continue to be the property of The
Student Loan Corporation if The Student Loan Corporation becomes bankrupt or
insolvent. If a court disagrees with this position, we could experience delays
in receiving payments on our student loans and you could then expect delays in
receiving payments on your notes or even a reduction in payments on your notes.
A court
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could also subject the student loans to a superior tax or government lien
arising before the sale of the student loans to us.
The Characteristics of the Portfolio of Student Loans Held in the Trust Estate
will Change
As a master trust, we intend to issue from time to time several series of
notes and to use the proceeds to acquire additional student loans to add to the
trust estate. The prospectus supplement for a series of notes will describe the
characteristics of our student loan portfolio at that time. However, the actual
characteristics of the loans in our portfolio will change from time to time due
to factors such as the purchase of additional student loans from the proceeds of
the issuance of additional series of notes, the repayment of the loans in the
normal course of business and the occurrence of delinquencies or defaults.
Our cash flow, and our ability to make payments due on our notes, will be
reduced to the extent interest is not currently payable on our student loans.
The borrowers on most student loans are not required to make payments during the
period in which they are in school and for certain authorized periods thereafter
as described in the Higher Education Act. The Department of Education will make
all interest payments while payments are deferred under the Higher Education Act
on certain of the student loans. For most other student loans, interest
generally will be capitalized and added to the principal balance of the loans.
The trust estate will include student loans for which payments are deferred as
well as student loans for which the borrower is currently required to make
payments of principal and interest. The proportions of the loans in our
portfolio for which payments are deferred and currently in repayment will vary
during the period that the notes are outstanding.
If the Payments We Receive on Our Student Loans are Different from the Payments
that are Actually Due We may not be able to Pay Our Notes
For a variety of economic, social and other reasons, we may not receive all
the payments that are actually due on our student loans. Failures by borrowers
to make timely payments of the principal and interest due on the loans will
affect the revenues of the trust estate, which may reduce the amounts available
to pay principal and interest due on the notes.
The Rate of Payments on Our Student Loans may Affect the Maturity and Yield of
the Notes
Our student loans may be prepaid at any time without penalty. If we receive
prepayments on our student loans, we will use those amounts to redeem notes,
which could shorten the average life of the notes. Factors affecting prepayment
of loans include general economic conditions, prevailing interest rates and
changes in the borrower's job, including transfers and unemployment. Refinancing
opportunities which may provide more favorable repayment terms, including those
offered under consolidation loan programs like the federal direct consolidation
loan program, also affect prepayment rates. We do not have sufficient
information to be able to predict the rate of prepayment with respect to the
student loans in the trust estate.
Scheduled payments on, and the maturities of, our student loans may be
extended as authorized by the Higher Education Act. Also, periods of forbearance
or refinancings through consolidation loans having longer maturities may
lengthen the remaining term of the loans and the average life of the notes. Any
reinvestment risks resulting from a faster or slower incidence of prepayment of
loans will be borne entirely by you.
The rate of principal payments on the notes and the yield to maturity of
the notes will be directly related to the rate of payments of principal on our
student loans. Changes in the rate of prepayments may significantly affect your
actual yield to maturity, even if the average rate of principal prepayments is
consistent with your expectations. In general, the earlier a prepayment of
principal of a loan, the greater the effect on your yield to maturity. The
effect on your yield as a result of principal payments occurring at a rate
higher or lower than the rate anticipated by you during the period immediately
following the issuance of the notes will not be offset by a subsequent like
reduction, or increase, in the rate of principal payments.
If We Cannot Purchase Student Loans, We will Redeem Our Notes
We expect to use the proceeds of the notes to acquire student loans. The
Student Loan Corporation will make certain representations and warranties with
respect to each student loan. To the extent that The Student Loan
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Corporation cannot deliver student loans complying with the representations and
warranties or fails to deliver student loans, we will use those proceeds to
redeem notes.
The Use of Master Promissory Notes may Compromise the Indenture Trustee's
Security Interest in the Student Loans
On July 1, 1999, the master promissory note began to be used as evidence of
Federal Stafford Loans (subsidized and unsubsidized) made to borrowers under the
Federal Family Education Loan Program. If a master promissory note is used, a
borrower executes only one promissory note with each lender. Subsequent student
loans from that lender are evidenced by a confirmation sent to the student.
Therefore, if a lender originates multiple student loans to the same student,
all the student loans are evidenced by a single promissory note.
Under the Higher Education Act, each student loan made under a master
promissory note may be sold independently of any other student loan made under
that same master promissory note. Each student loan is separately enforceable on
the basis of an original or copy of the master promissory note. Also, a security
interest in these student loans may be perfected either through the secured
party taking possession of the original or a copy of the master promissory note,
or the filing of a financing statement. Prior to the master promissory note,
each student loan made under the Federal Family Education Loan Program was
evidenced by a separate note. Assignment of the original note was required to
effect a transfer and possession of a copy did not perfect a security interest
in the loan.
It is possible that student loans transferred to the trust estate may be
originated under a master promissory note. If the originator were to deliver a
copy of the master promissory note, in exchange for value, to a third party that
did not have knowledge of the indenture trustee's lien, that third party may
also claim an interest in the student loan. It is possible that the third
party's interest could be prior to or on a parity with the interest of the
indenture trustee.
Federal PLUS Loans and Federal Consolidation Loans are not originated with
master promissory notes. Each of these loans are made under standard loan
applications and promissory notes required by the Department of Education.
A Secondary Market for Your Notes may not Develop, and this Could Diminish Their
Value
Each series of notes will be a new issue without an established trading
market. We do not intend to list any series of notes on any national exchange.
As a result, we cannot assure you that a secondary market for the notes will
develop, and therefore it may be difficult for you to resell your notes at the
time and at a price you desire. If a secondary market does not develop, the
spread between the bid price and the asked price for the notes may widen,
thereby reducing the net proceeds to you from the sale of your notes.
Congressional Actions may Affect Our Student Loan Portfolio
The Department of Education's authority to provide interest subsidies and
federal insurance for loans originated under the Higher Education Act terminates
on a date specified in the Higher Education Act. The Higher Education Amendments
of 1998 extended the authorization for the Federal Family Education Loan Program
to loans made on or before September 30, 2004. While Congress has consistently
extended the effective date of the Higher Education Act and the Federal Family
Education Loan Program, it may elect not to reauthorize the Department's ability
to provide interest subsidies and federal insurance for loans. While this
failure to reauthorize would not affect the student loans we then owned, it
would reduce the number of loans available for us to acquire in the future.
Funds for payment of interest subsidies and other payments under the
Federal Family Education Loan Program are subject to annual budgetary
appropriation by Congress. In recent years, federal budget legislation has
contained provisions that restricted payments made under the Federal Family
Education Loan Program to achieve reductions in federal spending. Future federal
budget legislation may adversely affect expenditures by the Department of
Education, and the financial condition of the guarantee agencies.
Congressional amendments to the Higher Education Act or other relevant
federal laws, and rules and regulations promulgated by the Secretary of
Education, may adversely impact holders of student loans. For example, changes
might be made to the rate of interest paid on student loans, to the level of
insurance provided by
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guarantee agencies or to the servicing requirements for student loans. See
"Description of the Federal Family Education Loan Program" and "Description of
the Guarantee Agencies" in this prospectus.
Competition Created by the Federal Direct Student Loan Program may Impact Our
Student Loan Program
In 1992, Congress created the Federal Direct Student Loan Program. Under
this program, the Department of Education makes loans directly to student
borrowers through the educational institutions that they attend. The volume of
student loans made under the Federal Family Education Loan Program and available
to us for purchase may be reduced to the extent loans are made to students under
the Federal Direct Student Loan Program. If the Federal Direct Student Loan
Program expands, our servicer may experience increased costs due to reduced
economies of scale to the extent the volume of loans serviced by the servicer is
reduced. Those cost increases could affect the ability of the servicer to
satisfy its obligations to service our student loans. Loan volume reductions
could further reduce revenues received by the guarantee agencies available to
pay claims on defaulted student loans. The level of competition currently in
existence in the secondary market for loans made under the Federal Family
Education Loan Program could be reduced, resulting in fewer potential buyers of
student loans and lower prices available in the secondary market for those
loans. The Department of Education has implemented a direct consolidation loan
program, which may further reduce the volume of Federal Family Education Loan
Program loans available to purchase and may increase the rate of repayment of
our student loans. See "Description of the Federal Family Education Loan
Program" in this prospectus.
The Class B and Class C Notes are Subordinated to the Class A Notes
Payments of interest and principal on the Class B and Class C notes are
subordinated in priority of payment to payments of interest and principal due on
the Class A notes and payments of interest and principal on the Class C notes
are subordinated in priority of payment to payments of interest and principal
due on the Class B notes and Class A notes. Accordingly, holders of the
subordinate notes will bear a greater risk of loss than holders of senior notes
in the event of a shortfall in available funds or amounts in the Reserve Fund
due to losses or for any other reason. As a result, the subordinate notes will
be very sensitive to losses on the student loans and the timing of these losses.
If the actual rate and amount of losses on the student loans exceeds your
expectations, and if amounts in the Reserve Fund are insufficient to cover the
resulting shortfalls, the yield to maturity on subordinate notes may be lower
than you anticipate and you could suffer a loss.
Under certain redemption situations, principal on Class B notes may be
redeemed while Class A notes remain outstanding and the principal on the Class C
notes may be redeemed while the Class A notes and certain of the Class B notes
remain outstanding. See "Description of the Notes--Notice and Partial Redemption
of Notes." Class B notes are also subordinated to the Class A notes and the
Class C notes are also subordinate to the Class B notes as to the direction of
remedies upon an event of default.
We Intend to Issue Additional Notes Secured by the Trust Estate
We intend to issue additional notes that are secured by the same trust
estate that is securing your notes pursuant to a supplemental indenture, without
obtaining the consent or approval of the owners of any notes then outstanding.
Those additional notes may be issued on a parity with or subordinate to any of
the Class A notes and senior to, on a parity with or subordinate to the Class B
or Class C notes. Before issuing additional notes, we must receive written
evidence from each rating agency then rating any outstanding notes that the
rating or ratings will not be reduced or withdrawn as a result of the issuance
of the proposed additional notes. See "Additional Notes" in this prospectus.
Different Rates of Change in Interest Rate Indexes may Affect Our Cash Flow
The interest rates on our notes may fluctuate from one interest period to
another as a result of the auction procedures described in this prospectus or
changes in LIBOR or Treasury security rates. Our Stafford and PLUS student loans
bear interest at the rates which are effectively based upon the bond equivalent
yield of the 91-day Treasury Bill rate or the 90-day Commercial Paper rate.
Although some older Federal Consolidation Loans have a variable rate, loans made
on or after October 1, 1998 bear a fixed rate, which is determined at the time
the loan is made. See "Description of the Federal Family Education Loan Program"
in this prospectus. If there is a decline in the rates payable on our student
loans, the amount of interest received may be reduced. If the interest rates
payable
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on our notes do not decline in a similar manner and time, we may not have
sufficient funds to pay interest on the notes when it becomes due. Even if there
is a similar reduction in the rates applicable to the notes, there may not
necessarily be a reduction in the other amounts required to be paid out of the
trust estate, such as administrative expenses, causing interest payments to be
deferred to future periods. Sufficient funds may not be available in future
periods to make up for any shortfalls in the current payments of interest on the
notes or expenses of the trust estate.
The Notes may be Issued Only in Book-Entry Form
We expect that each class of notes of each series will be initially
represented by one or more certificates registered in the name of Cede & Co.,
the nominee for The Depository Trust Company, and will not be registered in your
name or the name of your nominee. If we elect to issue definitive notes
registered in the name of the holder for a class or series of the notes, we will
so state in the related prospectus supplement. Unless and until definitive
securities are issued, holders of the notes will not be recognized by the
indenture trustee as registered owners as that term is used in the indenture.
Unless and until definitive securities are issued, holders of the notes will
only be able to exercise the rights of registered owners indirectly through The
Depository Trust Company and its participating organizations. See "Book-Entry
Registration" in this prospectus.
The Ratings of the Notes are not a Recommendation to Purchase and may Change
It is a condition to our issuance of the notes that they be rated as
indicated in the related prospectus supplement. Ratings are based primarily on
the creditworthiness of the underlying student loans, the levels of
subordination, the amount of any credit enhancement and the legal structure of
the transaction. The ratings are not a recommendation to you to purchase, hold
or sell any class of notes. The ratings do not take into account the market
price or suitability for you as an investor. An additional rating agency may
rate the notes, and that rating may not be equivalent to the initial rating
described in the related prospectus supplement. Ratings may be lowered or
withdrawn by any rating agency if in the rating agency's judgment circumstances
so warrant. A lowered rating is likely to decrease the price a subsequent
purchaser will be willing to pay for your notes.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Statements in this prospectus and the prospectus supplement, including
those concerning our expectations as to our ability to acquire eligible student
loans, to structure and to issue competitive securities, and certain of the
information presented in this prospectus and the prospectus supplement,
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Actual results may vary materially
from our expectations. For a discussion of the factors which could cause actual
results to differ from expectations, please see the caption entitled "Risk
Factors" in this prospectus and in the prospectus supplement.
DESCRIPTION OF THE NOTES
The notes of each series will be issued pursuant to the indenture and
related supplemental indenture of trust that we will enter into with the
indenture trustee.
The following description of the notes is only a summary of their principal
terms. It is not complete. You should refer to the provisions of the indenture
and related supplemental indenture for a complete description of the terms of
the notes. Definitions of some of the terms used in this description can be
found in the Glossary of Terms appearing at page 66 of this prospectus.
Fixed Rate Notes
The fixed rate notes will have a stated maturity set forth in the
applicable prospectus supplement. The notes will bear interest from the date and
at the rate per annum specified in the applicable prospectus supplement. The
dates on which the holders of fixed rate notes will receive payments of
principal and interest will be specified in the applicable prospectus
supplement.
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Auction Rate Securities
The auction rate securities will have a stated maturity set forth in the
applicable prospectus supplement and will bear interest at the rate per annum
specified in the prospectus supplement through the first auction date. The
interest period for auction rate securities will initially consist of the number
of days set forth in the applicable prospectus supplement. The interest rate for
the auction rate securities will be reset at the interest rate determined
pursuant to the auction procedures described below, but the rate will not exceed
the maximum rate per annum set forth in the applicable prospectus supplement.
Interest on the auction rate securities will accrue daily and will be computed
for the actual number of days elapsed on the basis of a year consisting of 360
days or 365 days as specified in the prospectus supplement. Interest on the
auction rate securities will be payable on the first business day following the
expiration of each interest period for the notes.
Determination of Note Interest Rate. The procedures that will be used in
determining the interest rates on the auction rate securities are summarized in
the following paragraphs.
The interest rate on each class of auction rate securities will be
determined periodically by means of a "Dutch Auction." In this Dutch Auction,
investors and potential investors submit orders through an eligible
broker-dealer as to the principal amount of auction rate securities they wish to
buy, hold or sell at various interest rates. The broker-dealers submit their
clients' orders to the auction agent. The auction agent processes all orders
submitted by all eligible broker-dealers and determines the interest rate for
the upcoming interest period. The broker-dealers are notified by the auction
agent of the interest rate for the upcoming interest period and are provided
with settlement instructions relating to purchases and sales of auction rate
securities. Auction rate securities will be purchased and sold between investors
and potential investors at a price equal to their then-outstanding principal
balance plus any accrued interest. Deutsche Bank Trust Company Americas
(formerly known as Bankers Trust Company) will serve as auction agent for the
auction rate securities and Salomon Smith Barney Inc. will serve as a
broker-dealer, unless otherwise specified in the related prospectus supplement.
In the auction, the following types of orders may be submitted:
o "bid/hold orders"--specify the minimum interest rate that a current
investor is willing to accept in order to continue to hold auction
rate securities for the upcoming interest period;
o "sell orders"--an order by a current investor to sell a specified
principal amount of auction rate securities, regardless of the
upcoming interest rate; and
o "potential bid orders"--specify the minimum interest rate that a
potential investor, or a current investor wishing to purchase
additional auction rate securities, is willing to accept in order to
buy a specified principal amount of auction rate securities.
If an existing investor does not submit orders with respect to all its
auction rate securities, the investor will be deemed to have submitted a hold
order at the new interest rate for that portion of the auction rate securities
for which no order was received.
The following example helps illustrate how the auction procedures are used
in determining the interest rate on the auction rate securities.
(a) Assumptions:
1. Denominations (Units) = $50,000
2. Interest period = 28 days
3. Principal amount outstanding = $50 Million (1000 Units)
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(b) Summary of all orders received for the auction:
Bid/Hold Orders Sell Orders Potential Bid Orders
--------------- ----------- --------------------
20 Units at 2.90% 100 Units Sell 40 Units at 2.95%
60 Units at 3.02% 100 Units Sell 60 Units at 3.00%
120 Units at 3.05% 200 Units Sell 100 Units at 3.05%
200 Units at 3.10% ============== 100 Units at 3.10%
200 Units at 3.12% 400 Units 100 Units at 3.11%
================= 100 Units at 3.14%
600 Units 200 Units at 3.15%
==================
700 Units
The total units under bid/hold orders and sell orders always equal the
issue size (in this case 1000 units), less any units held by investors not
submitting a bid (in this case 0 units).
(c) Auction agent organizes orders in ascending order:
Cumulative Cumulative
Order Number of Total Order Number of Total
Number Units (Units) Percent Number Units (Units) Percent
------ --------- --------- ------- ------ --------- ---------- -------
1. 20 (W) 20 2.90% 7. 200(W) 600 3.10%
2. 40 (W) 60 2.95% 8. 100(W) 700 3.10%
3. 60 (W) 120 3.00% 9. 100(W) 800 3.11%
4. 60 (W) 180 3.02% 10. 200(W) 1000 3.12%
5. 100 (W) 280 3.05% 11. 100(L) 3.14%
6. 120 (W) 400 3.05% 12. 200(L) 3.15%
- ----------
(W) Winning Order (L) Losing Order
Order #10 is the order that clears the market of all available units. All
winning orders are awarded the winning rate (in this case, 3.12%) as the
interest rate for the next interest period, at the end of which another auction
will be held. Multiple orders at the winning rate are allocated units on a pro
rata basis. Regardless of the results of the auction, the interest rate will not
exceed the maximum rate specified in the applicable prospectus supplement.
The example assumes that a successful auction has occurred, that is, that
all sell orders and all bid/hold orders below the new interest rate were
fulfilled. However, there may be insufficient potential bid orders to purchase
all the auction rate securities offered for sale. In these circumstances, the
interest rate for the upcoming interest period will equal the maximum rate.
Also, if all the auction rate securities are subject to hold orders (i.e., each
holder of auction rate securities wishes to continue holding its auction rate
securities, regardless of the interest rate), the interest rate for the upcoming
interest period will equal the all hold rate, which is the LIBOR rate for a
period comparable to the auction period less 0.20%, or as otherwise specified in
the related prospectus supplement.
If a payment default has occurred, the rate will be the non-payment rate,
which will be specified in the related prospectus supplement.
Maximum Rate and Interest Carryovers. If the auction rate for a series of
auction rate securities is greater than the maximum rate described in the
related prospectus supplement or the net loan rate, then the interest rate
applicable to those auction rate securities will be the lesser of the maximum
rate or the net loan rate.
In such event, if the interest rate for a series of auction rate securities
is set at the net loan rate, the excess of the lower of the auction rate and the
maximum rate over the net loan rate will be carried over for that series of
auction rate securities. If there are insufficient bid orders to purchase all
the auction rate securities of a series offered for sale in an auction and the
interest rate for that series is set at the net loan rate, the excess of the
maximum rate over the net loan rate will be carried over for that series of
auction rate securities. The carryover amount will bear interest
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calculated at the One-Month LIBOR rate, or as otherwise specified in the related
prospectus supplement. The rating of the notes do not address the payment of
carryover amounts or interest on carryover amounts.
The carryover amount, and interest accrued thereon, for a class of auction
rate securities will be paid on an interest payment date if there are sufficient
moneys in the Revenue Fund to pay all interest due on the notes on that interest
payment date, and in the case of subordinate notes, payment of the interest
carryover on more senior notes. Any carryover amount, and any interest accrued
on the carryover amount, due on any auction rate note which is to be redeemed
will be paid to the registered owner on the redemption date to the extent that
moneys are available. The prospectus supplement for a series of notes will
specify whether or not the carryover amount will be included in the redemption
price if an auction rate security is redeemed.
Changes in the Auction Period. We may, from time to time, change the length
of the auction period for a class of auction rate securities in order to conform
with then current market practice with respect to similar securities or to
accommodate economic and financial factors that may affect or be relevant to the
length of the auction period and the interest rate borne by the auction rate
securities. We will initiate the auction period adjustment by giving written
notice to the indenture trustee, the auction agent, the applicable
broker-dealer, each rating agency and the registered owners of the notes at
least 10 days prior to auction date for the notes. Any adjusted auction period
will be at least 7 days but not more than 366 days. The auction period
adjustment will take effect only if approved by the market agent and if the
auction agent receives orders sufficient to complete the auction for the new
auction period at a rate of interest below the maximum rate.
Changes in the Auction Date. The applicable broker-dealer, with the written
consent of the administrator on behalf of SLC Student Loan Trust-I, may specify
a different auction date for a class of auction rate securities in order to
conform with then current market practice with respect to similar securities or
to accommodate economic and financial factors that may affect or be relevant to
the day of the week constituting an auction date for the auction rate
securities. If the administrator consents to the change, the broker-dealer agent
will provide notice of its determination to specify an earlier auction date in
writing at least 10 days prior to the proposed changed auction date to the
indenture trustee, the auction agent, SLC Student Loan Trust-I, each rating
agency and the registered owner.
LIBOR Rate Notes
The LIBOR rate notes will be dated their date of issuance and will have a
stated maturity set forth in the applicable prospectus supplement. Interest on
the LIBOR rate notes will be paid in arrears on each interest payment date. The
interest payment date for the LIBOR rate notes will be the first business day
following the end of the interest period for the notes specified in the
applicable prospectus supplement, unless another date is specified in the
prospectus supplement. The amount of interest payable to registered owners of
LIBOR rate notes for any interest period will be calculated by the indenture
trustee on the basis of a 360-day year for the number of days actually elapsed.
The rate of interest on the LIBOR rate notes for each interest period will
be determined by a calculation agent identified in the related prospectus
supplement. The interest rate will be the LIBOR rate for the interest period for
the notes plus the margin specified in the related prospectus supplement. The
interest rate payable on the LIBOR rate notes cannot exceed the adjusted student
loan rate specified in the prospectus supplement. The adjusted student loan rate
is the percentage equivalent of a fraction:
o the numerator of which is equal to the sum of the expected interest
collections on our student loans and payments we receive on a
derivative product, if any, less the sum of the amounts payable to the
Department of Education and guarantee agencies with respect to the
student loans, the servicing fee, the administration fee, and payments
we make on derivative products, if any, with respect to an interest
period; and
o the denominator of which is the aggregate principal amount of the
notes as of the last day of the interest period.
With respect to any interest period, expected interest collections include:
o the amount of interest accrued with respect to the student loans for
the interest period preceding the applicable interest payment date,
whether or not that interest is actually paid;
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o all interest subsidy payments and special allowance payments estimated
to have accrued for the interest period preceding the applicable
interest payment date, whether or not actually received; and
o investment earnings on assets in the trust estate for the interest
period preceding the applicable interest payment date.
If the interest rate for LIBOR rate notes determined by the calculation
agent is greater than the adjusted student loan rate or any other maximum
interest rate specified in the related prospectus supplement, the difference
will be carried forward and paid when moneys are available in the Revenue Fund.
However, no interest carryover will be payable unless the aggregate value of our
student loans and other assets in the trust estate determined in accordance with
the indenture exceeds the principal balance of the outstanding notes issued
under the indenture. Any interest carryover will be payable on an interest
payment date, but only out of funds remaining in the Revenue Fund after payment
of all interest due on the notes, and in the case of subordinate notes, payment
of the interest carryover on more senior notes.
Treasury Rate Notes
The treasury rate notes will be dated their date of issuance and will have
a stated maturity set forth in the applicable prospectus supplement. Interest on
the treasury rate notes will be paid in arrears on each interest payment date.
An interest payment date for the treasury rate notes means the first business
day following the end of the interest period specified in the applicable
prospectus supplement, or as otherwise specified in the related prospectus
supplement.
The amount of interest payable on the treasury rate notes will generally be
adjusted weekly on the calendar day following each auction of 91-day Treasury
Bills which are direct obligations of the United States with a maturity of 13
weeks. The rate will be calculated by a calculation agent to be the sum of the
bond equivalent yield for auctions of 91-day Treasury Bills on a rate
determination date for an interest period, plus a spread described in the
related prospectus supplement. Interest on the treasury rate notes will be
computed for the actual number of days elapsed on the basis of a year consisting
of 365 or 366 days, as applicable.
The interest rate payable on the treasury rate notes for any interest
period cannot at any time exceed the adjusted student loan rate. The adjusted
student loan rate will be determined in the same manner as described above for
LIBOR rate notes.
If the interest rate for the treasury rate notes determined by the
calculation agent is greater than the adjusted student loan rate or any other
maximum interest rate specified in the related prospectus supplement, the
difference will be carried forward and paid when moneys are available in the
Revenue Fund. However, no interest carryover will be payable unless the
aggregate value of our student loans and other assets in the trust estate
determined in accordance with the indenture exceeds the principal balance of the
outstanding notes issued under the indenture. Any interest carryover will be
payable on an interest payment date, but only out of funds remaining in the
Revenue Fund after payment of all interest due on the notes, and in the case of
subordinate notes, payment of the interest carryover on more senior notes.
Accrual Notes
Accrual notes will be entitled to payments of accrued interest commencing
only on the interest payment date, or under the circumstances specified in the
related prospectus supplement. Prior to the time interest is payable on any
class of accrual notes, the amount of accrued interest will be added to the note
principal balance thereof on each interest payment date. The principal balance
of the accrual notes will begin to be paid from available funds received with
respect to the student loans after the date that accrued interest is no longer
being added to the principal balance of the notes. Accrued interest for each
interest payment date will be equal to interest at the applicable interest rate
accrued for a specified period (generally the period between interest payment
dates) on the outstanding note principal balance thereof immediately prior to
such interest payment date.
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Payments on the Notes
The principal of the notes due at maturity or redemption in whole will be
payable at the principal office of the indenture trustee upon presentation and
surrender of the notes, if the notes were issued in definitive form. Payment of
principal on any notes in connection with a partial redemption and all interest
payments will be made to the registered owner by check or draft mailed on the
interest payment date by the indenture trustee to the registered owner at his
address as it last appears on the registration books kept by the indenture
trustee at the close of business on the record date for such interest payment
date. If interest is not timely paid, it will be paid to the registered owner of
the notes as of the close of business on a special record date for payment of
any of the defaulted interest. A special record date will be fixed by the
indenture trustee whenever moneys become available for payment of the defaulted
interest, and notice of the special record date will be given to the registered
owners of the notes. Payment of principal and interest to a securities
depository or its nominee, and to any other registered owner owning at least
$1,000,000 principal amount of the notes upon written request delivered to the
indenture trustee, will be paid by wire transfer within the United States to the
bank account number filed no later than the record date or special record date
with the indenture trustee. All payments on the notes will be made in United
States dollars.
Mandatory Redemption
The notes of a series are subject to mandatory redemption on the interest
payment date specified with respect to the series in the related prospectus
supplement, in an amount equal to the proceeds from sale of the notes, if any,
not previously used to acquire student loans that are held in the Acquisition
Fund. The notes are also subject to mandatory redemption from the proceeds of
principal payments on the student loans and, until the principal balance of the
student loans is not less than the percentage of the principal balance of
outstanding notes as is described in the applicable prospectus supplement, from
interest payments on the student loans remaining in the Revenue Fund after all
other required payments have been made. We are not required to provide any
direction to the indenture trustee with respect to a mandatory redemption. See
"Notice and Partial Redemption of Notes" below for a discussion of the order in
which notes of any series will be redeemed.
Optional Redemption
The notes of a series are subject to optional redemption, if so provided in
the applicable prospectus supplement, from funds received by the indenture
trustee constituting interest on student loans remaining in the Revenue Fund
after all other prior required payments have been made and not required for
mandatory redemptions. See "Notice and Partial Redemption of Notes" below for a
discussion of the order in which notes will be redeemed.
The notes are subject to optional redemption or purchase, in whole only, on
any interest payment date on which the aggregate current principal balance of
the notes is less than or equal to 10% of the initial aggregate principal
balance of all the notes issued under the indenture on their respective date of
issuance. The redemption or purchase will occur on the interest payment date
following the date on which funds sufficient to pay the redemption or purchase
price are deposited with the indenture trustee. All notes which are redeemed or
purchased shall be canceled by the indenture trustee and be disposed of in a
manner satisfactory to the indenture trustee and the administrator.
Redemption or Purchase Price
Upon redemption or optional purchase, the price to be paid to the holder of
a note will be an amount equal to the principal balance plus accrued interest to
the date fixed for redemption. The prospectus supplement for a series of notes
will specify whether or not the carryover amount will be included in the
redemption price.
Notice and Partial Redemption of Notes
Prior to any redemption or purchase the indenture trustee will provide
prior written notice to the registered owner of any note being redeemed or
purchased, and to the auction agent with respect to the auction rate securities
designated for redemption or purchase.
If less than all of the notes of any series are to be redeemed or
purchased, to the extent permitted by the indenture, we will determine the notes
of each class of that series to be redeemed or purchased. Generally, all of the
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Class A notes will be redeemed prior to redemption of any Class B notes, and all
of the Class B notes will be redeemed before any of the Class C notes are
redeemed. However, we may redeem Class B notes while Class A notes remain
outstanding if after the redemption of the Class B notes, the aggregate market
value of the assets held in the trust estate will equal the percentage of all
Class A notes then outstanding under the indenture that is specified in a
prospectus supplement. Similarly, we may redeem Class C notes while Class A
notes and Class B notes remain outstanding if after the redemption of the Class
C notes, the aggregate market value of the assets held in the trust estate will
equal the percentage of all Class A notes and Class B notes then outstanding
under the indenture that is specified in a prospectus supplement.
List of Noteholders
Unless otherwise specified in the related prospectus supplement, holders of
notes evidencing not less than 25% of the aggregate outstanding principal
balance of the notes may, by written request to the indenture trustee, obtain
access to the list of all noteholders maintained by the indenture trustee for
the purpose of communicating with other noteholders with respect to their rights
under the related indenture or the notes. The indenture trustee may elect not to
afford the requesting noteholders access to the list of noteholders if it agrees
to mail the desired communication or proxy, on behalf and at the expense of the
requesting noteholders, to all noteholders of the series.
SECURITY AND SOURCES OF PAYMENT FOR THE NOTES
General
The notes are limited obligations of SLC Student Loan Trust-I, secured by
and payable solely from the trust estate. The following assets serve as security
for the notes:
o revenues, consisting of all principal and interest payments, proceeds,
charges and other income received by the indenture trustee, SLC
Student Loan Trust-I or the servicer, on account of any student loan,
including interest benefit payments and any special allowance payments
with respect to any student loan, and investment income from all funds
created under the indenture and any proceeds from the sale or other
disposition of the student loans;
o all moneys and investments held in the funds created under the
indenture; and
o student loans purchased with money from the Acquisition Fund or
otherwise acquired or originated and pledged or credited to the
Acquisition Fund.
In addition, the trust estate may include rights that provide credit
enhancement (for example, the right to draw under any letter of credit or note
insurance) as described in this prospectus and in the related prospectus
supplement.
Flow of Funds
The following funds will be created by the indenture trustee under the
indenture for the benefit of the registered owners:
o Revenue Fund
o Acquisition Fund
o Reserve Fund
An Operating Fund will be established separately by SLC Student Loan
Trust-I, and will not constitute security for the notes under the indenture.
Neither the indenture trustee nor the registered owners will have any right,
title or interest in the Operating Fund.
All funds received with respect to the student loans will be deposited in
the Revenue Fund and allocated between principal and interest.
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Each trust fund will be maintained as either:
o a segregated account with a depository institution organized under the
laws of the United States of America or any one of the states thereof
or the District of Columbia (or any domestic branch of a foreign
bank), which has either a long-term unsecured debt rating, a
short-term unsecured debt rating or a certificate of deposit rating
acceptable to the rating agencies, and whose deposits are insured by
the Federal Deposit Insurance Corporation; or
o a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States
of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having corporate
trust powers and acting as trustee for funds deposited in the account,
so long as any unsecured notes of the depository institution have an
investment grade credit rating from each rating agency.
Acquisition Fund; Purchase and Sale of Student Loans
We will deposit proceeds from the sale of any notes into the Acquisition
Fund. Student loans pledged to the trust estate will be held by the indenture
trustee or its agent or bailee on behalf of the noteholders.
Money on deposit in the Acquisition Fund will be used to pay costs of
issuance of the notes, to redeem notes in accordance with the provisions of any
supplemental indenture, and to acquire student loans. If the administrator
determines that money held in the Acquisition Fund cannot be used to acquire
additional student loans, then we may redeem notes in accordance with any
supplemental indenture. See "Description of the Notes--Mandatory Redemption."
If on any note payment date the money on deposit in the Revenue Fund is not
sufficient to make payments of principal and interest due on the notes, then the
amount of the deficiency may be transferred from money available in the
Acquisition Fund.
The eligible lender trustee will be the legal owner of the student loans
transferred to the trust estate and the indenture trustee will have a security
interest in the student loans for and on behalf of the owners of the notes. The
student loans will be held in the name of the eligible lender trustee for the
account of SLC Student Loan Trust-I, but for the benefit of the holders of the
notes.
Revenue Fund
The indenture trustee will deposit into the Revenue Fund all revenues
derived from student loans, from money or assets on deposit in the Acquisition
Fund or the Reserve Fund, from net payments received on derivative products and
any other amounts as we may direct.
On each note payment date and derivative payment date, money in the Revenue
Fund will be used and transferred to other funds or persons in the following
order, or as otherwise specified in the related prospectus supplement:
o on a parity basis, to pay interest due on any Class A notes and any
derivative payment that is due and secured on a parity with the Class
A notes;
o on a parity basis, to pay the principal of and premium, if any, due on
any Class A notes;
o on a parity basis, to pay interest due on any Class B notes and any
derivative payment that is due and secured on a parity with the
Class B notes;
o on a parity basis, to pay the principal of and premium, if any, due on
any Class B notes;
o on a parity basis, to pay interest due on any Class C notes and any
derivative payment that is due and secured on a parity with the Class
C notes;
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o on a parity basis, to pay the principal of and premium, if any, due on
any Class C notes;
o to the Reserve Fund the amount, if any, described under "Reserve Fund"
below, up to the maximum transfer amount specified in the prospectus
supplement;
o to pay interest due on any Class R notes to the extent that, after
such payment the ratio of our assets to our liabilities (excluding the
Class R notes) is not less then the ratio specified in the related
prospectus supplement;
o to pay interest accrued on the carryover amounts of the Class A notes,
the carryover amounts of the Class A notes, to pay interest accrued on
the carryover amounts of the Class B notes, the carryover amounts of
the Class B notes, to pay interest accrued on the carryover amounts of
the Class C notes, the carryover amounts of the Class C notes, in that
order of priority, provided, however, such carryover amounts shall be
paid first in respect of any notes redeemed on such note payment date;
and
o to pay principal on the Class R notes to the extent that, after such
payment the ratio of our assets to our liabilities (excluding the
Class R notes) is not less then the ratio specified in the related
prospectus supplement; otherwise to pay principal and premium, if any,
on the Class A notes, or if no Class A notes are outstanding, to pay
principal and premium, if any, on the Class B notes, or if no Class A
notes or Class B notes are outstanding, to pay principal and premium,
if any, on the Class C notes provided, however, if no Class R notes
are outstanding, to the extent the indenture permits payments to SLC
Student Loan Trust-I free from the lien of the indenture at the option
of the trust and the trust has exercised its option to be paid, no
such principal and premium payments shall be required and the
remaining money in the Revenue Fund on such payment date shall be paid
to SLC Student Loan Trust-I.
All payments of principal on the notes shall be made by redemption of the
notes.
We may transfer moneys in the Revenue Fund to the Operating Fund, subject
to the limitation described under "Operating Fund" below.
Reserve Fund
Upon the sale of each class of notes, the indenture trustee will deposit to
the Reserve Fund the amount, if any, specified in each supplemental indenture.
On each interest payment date, to the extent money in the Revenue Fund is not
sufficient to make payment of the interest then due on the notes, the amount of
the deficiency shall be paid directly from the Reserve Fund, after any transfers
from the Acquisition Fund. Money in the Reserve Fund may be used to pay
principal on the notes only on the date of their maturity. To the extent set
forth in the prospectus supplement, money in the Reserve Fund may also be used
to fund additional student loans added to Federal Consolidation Loans in the
trust within 180 days after the date the Federal Consolidation Loans were made.
In addition, money in the Reserve Fund may be withdrawn to the extent specified
in the prospectus supplement.
If the Reserve Fund is used as described above, the indenture trustee will
restore the Reserve Fund to the level specified in a prospectus supplement by
transfers from the Revenue Fund up to the maximum transfer amount specified in
the prospectus supplement. If the full amount required to restore the Reserve
Fund to the required level is not available in the Revenue Fund on the next note
payment date, the indenture trustee shall continue to transfer funds from the
Revenue Fund as they become available until the deficiency in the Reserve Fund
has been eliminated up to the maximum transfer amount.
On any day that the amount in the Reserve Fund exceeds the required level
for any reason, the indenture trustee, at the direction of the administrator,
will transfer the excess to the Revenue Fund.
Operating Fund
The indenture trustee will deposit to the Operating Fund the amount, if
any, specified in each prospectus supplement. The Operating Fund is a special
fund created and used to pay program expenses of SLC Student Loan Trust-I.
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The amount deposited in the Operating Fund by transfer from the Revenue
Fund and, if necessary, from the Acquisition Fund, and the schedule of deposits
will be determined by the administrator. However, the amount so transferred in
any one fiscal year may not exceed the amount budgeted by SLC Student Loan
Trust-I for that fiscal year, unless the rating agency condition is satisfied.
Transfers to SLC Student Loan Trust-I
Transfers from the Revenue Fund may be made to SLC Student Loan Trust-I if
the balance in the Reserve Fund exceeds the required level specified in a
prospectus supplement. Additionally, transfers may be made to SLC Student Loan
Trust-I only if immediately after taking into account the transfer, the
aggregate market value of the assets in the trust estate will be equal to a
percentage of the unpaid principal amount of the notes outstanding that is
acceptable to each rating agency then rating the notes.
Investment of Funds Held by Indenture Trustee
Upon our order, the indenture trustee will invest amounts credited to any
fund established under the indenture in investment securities described in the
indenture. In the absence of an order from the administrator, and to the extent
practicable, the indenture trustee will invest amounts held under the indenture
in direct obligations of, or in obligations fully guaranteed by, the United
States.
Except as otherwise specified in the related prospectus supplement,
investment earnings on funds deposited in the trust accounts, net of losses and
investment expenses, will be deposited in the Revenue Fund on each payment date
and will be treated as collections of interest on the student loans.
The indenture trustee is not responsible or liable for any losses on
investments made by it or for keeping all funds held by it fully invested at all
times. Its only responsibility is to comply with our investment instructions in
a non-negligent manner.
BOOK-ENTRY REGISTRATION
Investors acquiring beneficial ownership interests in the notes issued in
book-entry form will hold their notes through The Depository Trust Company in
the United States, or Clearstream, Luxembourg or Euroclear (in Europe) if they
are participants of these systems, or indirectly through organizations which are
participants in these systems. The book-entry notes will be issued in one or
more instruments which equal the aggregate principal balance of the series of
notes and will initially be registered in the name of Cede & Co., the nominee of
The Depository Trust Company. Clearstream, Luxembourg and Euroclear will hold
omnibus positions on behalf of their participants through customers' securities
accounts in Clearstream, Luxembourg's and Euroclear's name on the books of its
respective depositary which in turn will hold positions in customers' securities
accounts in such depositary's name on the books of The Depository Trust Company.
Except as described below, no person acquiring a book-entry note will be
entitled to receive a physical certificate representing the notes. Unless and
until Definitive Certificates are issued, it is anticipated that the only holder
of the notes will be Cede & Co., as nominee of The Depository Trust Company.
The Depository Trust Company is a New York-chartered limited-purpose trust
company that performs services for its participants, some of which, and/or their
representatives, own The Depository Trust Company. In accordance with its normal
procedures, The Depository Trust Company is expected to record the positions
held by each of its participants in notes issued in book-entry form, whether
held for its own account or as nominee for another person. In general,
beneficial ownership of book-entry notes will be subject to the rules,
regulations and procedures governing The Depository Trust Company and its
participants as in effect from time to time.
Purchases of the notes under The Depository Trust Company system must be
made by or through direct participants, which are to receive a credit for the
notes on The Depository Trust Company's records. The ownership interest of each
actual purchaser of each series of notes, or beneficial owner, is in turn to be
recorded on the direct and indirect participants' records. Beneficial owners
shall not receive written confirmation from The Depository Trust Company of
their purchase, but beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participant
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through which the beneficial owner entered into the transaction. Transfers of
ownership interests in the notes are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners. Beneficial owners
shall not receive certificates representing their ownership interests in the
notes, except in the event that use of the book-entry system for the series of
any notes is discontinued.
To facilitate subsequent transfers, all notes deposited by participants
with The Depository Trust Company are registered in the name of The Depository
Trust Company's partnership nominee, Cede & Co. The deposit of such notes with
The Depository Trust Company and their registration in the name of Cede & Co.
effect no change in beneficial ownership. The Depository Trust Company has no
knowledge of the actual beneficial owners of notes; The Depository Trust
Company's records reflect only the identity of the direct participants to whose
accounts such notes are credited, which may or may not be the beneficial owners.
The participants remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by The Depository Trust
Company to direct participants, by direct participants to indirect participants,
and by direct participants and indirect participants to beneficial owners are
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of a class
of the notes of any series are being redeemed, The Depository Trust Company's
practice is to determine by lot the amount of the interest of each direct
participant in such class to be redeemed.
Neither The Depository Trust Company nor Cede & Co. will consent or vote
with respect to the notes of any series. Under its usual procedures, The
Depository Trust Company mails an omnibus proxy to SLC Student Loan Trust-I, or
the indenture trustee, as appropriate, as soon as possible after the record
date. The omnibus proxy assigns Cede & Co.'s consenting or voting rights to
those direct participants to whose accounts the notes are credited on the record
date.
Principal and interest payments on the notes are to be made to The
Depository Trust Company. The Depository Trust Company's practice is to credit
direct participant's accounts on the due date in accordance with their
respective holdings shown on The Depository Trust Company's records unless The
Depository Trust Company has reason to believe that it will not receive payment
on the due date. Payments by participants to beneficial owners are governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and shall be the responsibility of the participant and not of The
Depository Trust Company, the indenture trustee or SLC Student Loan Trust-I,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to The Depository Trust Company
is the responsibility of SLC Student Loan Trust-I, or the indenture trustee.
Disbursement of such payments to direct participants shall be the responsibility
of The Depository Trust Company, and disbursement of such payments to the
beneficial owners shall be the responsibility of direct and indirect
participants.
The Depository Trust Company may discontinue providing its services as
securities depository with respect to the notes of any series at any time by
giving reasonable notice to SLC Student Loan Trust-I or the indenture trustee.
In the event that a successor securities depository is not obtained, note
certificates are required to be printed and delivered.
Clearstream Banking, societe anonyme, Luxembourg, formerly Cedelbank
("Clearstream, Luxembourg"), has advised that it is incorporated under the laws
of the Grand Duchy of Luxembourg as a professional depository. Clearstream,
Luxembourg holds securities for its participating organizations. Clearstream,
Luxembourg facilitates the clearance and settlement of securities transactions
between Clearstream, Luxembourg participants through electronic book-entry
changes in accounts of Clearstream, Luxembourg participants, thereby eliminating
the need for physical movement of certificates. Clearstream, Luxembourg provides
to its Clearstream, Luxembourg participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg
interfaces with domestic markets in several countries. As a professional
depository, Clearstream, Luxembourg is subject to regulation by the Luxembourg
Commission for the Supervision of the Financial Sector (the "CSSF").
Clearstream, Luxembourg participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Indirect
access to
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Clearstream, Luxembourg is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream, Luxembourg participant, either directly or
indirectly.
Euroclear has advised that it was created in 1968 to hold securities for
participants of Euroclear and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, eliminating the need for physical movement of certificates and any risk
from lack of simultaneous transfers of securities and cash. Euroclear provides
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. Euroclear is operated by
Euroclear Bank S.A./NV (the "Euroclear operator"), under contract with Euroclear
Clearance Systems S.C., a Belgian cooperative corporation. All operations are
conducted by the Euroclear operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear operator,
not the cooperative. The cooperative establishes policy for Euroclear on behalf
of Euroclear participants. Euroclear participants include banks, central banks,
securities brokers and dealers and other professional financial intermediaries.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear participant, either
directly or indirectly.
The Euroclear operator has advised that it is licensed by the Belgian
Banking and Finance Commission to carry out banking activities on a global
basis. As a Belgian Bank, it is regulated by the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law.
The Terms and Conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear operator acts under the
Terms and Conditions only on behalf of Euroclear participants and has no record
of or relationship with persons holding through Euroclear participants.
Distributions with respect to notes held through Clearstream, Luxembourg or
Euroclear will be credited to the cash accounts of Clearstream, Luxembourg
participants or Euroclear participants in accordance with the relevant system's
rules and procedures, to the extent received by its depositary. Those
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. Clearstream, Luxembourg or the Euroclear
operator, as the case may be, will take any other action permitted to be taken
by a noteholder under the indenture on behalf of a Clearstream, Luxembourg
participant or Euroclear participant only in accordance with the relevant rules
and procedures and subject to the relevant Depositary's ability to effect such
actions on its behalf through The Depository Trust Company.
Noteholders may hold their notes in the United States through The
Depository Trust Company or in Europe through Clearstream, Luxembourg or
Euroclear if they are participants of such systems, or indirectly through
organizations which are participants in such systems.
Transfers between participants in The Depository Trust Company will occur
in accordance with The Depository Trust Company Rules. Transfers between
Clearstream, Luxembourg participants and Euroclear participants will occur in
accordance with their respective rules and operating procedures.
Because of time-zone differences, credits of securities received in
Clearstream, Luxembourg or Euroclear as a result of a transaction with a
participant will be made during subsequent securities settlement processing and
dated the business day following The Depository Trust Company settlement date.
Such credits or any transactions in such securities settled during such
processing will be reported to the relevant Euroclear or Clearstream, Luxembourg
participants on such business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of securities by or through a Clearstream,
Luxembourg participant or Euroclear participant to a participant in The
Depository Trust Company will be received with value on The Depository Trust
Company settlement date but will be available in the relevant Clearstream,
Luxembourg or Euroclear cash account only as of the business day following
settlement in The Depository Trust Company.
Cross-market transfers between persons holding directly or indirectly
through Depository Trust Company, on the one hand, and directly or indirectly
through Clearstream, Luxembourg participants or Euroclear participants, on
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the other, will be effected in The Depository Trust Company in accordance with
The Depository Trust Company Rules on behalf of the relevant European
international clearing system by its depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in The Depository Trust Company, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to The Depository Trust Company. Clearstream, Luxembourg participants
and Euroclear participants may not deliver instructions to the depositaries.
The Depository Trust Company has advised SLC Student Loan Trust-I that it
will take any action permitted to be taken by a noteholder under the indenture
only at the direction of one or more participants to whose accounts with The
Depository Trust Company the notes are credited. Clearstream, Luxembourg or
Euroclear will take any action permitted to be taken by a noteholder under the
indenture on behalf of a participant only in accordance with their relevant
rules and procedures and subject to the ability of the relevant depositary to
effect these actions on its behalf through The Depository Trust Company.
Although The Depository Trust Company, Clearstream, Luxembourg and
Euroclear have agreed to the foregoing procedures in order to facilitate
transfers of interests in the notes among participants of The Depository Trust
Company, Clearstream, Luxembourg and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Neither SLC Student Loan Trust-I, The Student Loan Corporation, the
depositor, the subservicers, the indenture trustee nor the underwriters will
have any responsibility or obligation to any The Depository Trust Company
participants, Clearstream, Luxembourg participants or Euroclear participants or
the persons for whom they act as nominees with respect to:
o the accuracy of any records maintained by The Depository Trust
Company, Clearstream, Luxembourg or Euroclear or any participant;
o the payment by The Depository Trust Company, Clearstream, Luxembourg
or Euroclear or any participant of any amount due to any beneficial
owner in respect of the principal amount or interest on the notes;
o the delivery by any The Depository Trust Company participant,
Clearstream, Luxembourg participant or Euroclear participant of any
notice to any beneficial owner which is required or permitted under
the terms of the indenture or the trust agreement to be given to
noteholders; or
o any other action taken by The Depository Trust Company as the
noteholder.
The administrator may decide to discontinue use of the system of book-entry
transfers through The Depository Trust Company or a successor securities
depository. In that event, note certificates are to be printed and delivered.
ADDITIONAL NOTES
We may, pursuant to the provisions of the indenture, issue from time to
time additional notes secured by the trust estate on a parity with or
subordinate to either the Class A notes, the Class B notes or the Class C notes,
if any, then outstanding. In addition, we may issue Class R notes secured by the
student loans pledged to the indenture trustee. The payment of interest and
principal on the Class R notes is subordinate to payments of interest and
principal on the Class A notes, the Class B notes, the Class C notes and
required Reserve Fund amounts. We may enter into any derivative product we deem
necessary or desirable with respect to any or all of the notes. We may take
those actions without the approval of the holders of any outstanding notes.
We will not issue additional notes or Class R notes unless the following
conditions have been satisfied:
o SLC Student Loan Trust-I and the indenture trustee have entered into a
supplemental indenture providing the terms and forms of the additional
notes or Class R notes.
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o The indenture trustee has received a rating confirmation from each
rating agency which has assigned a rating to any outstanding notes
that such rating will not be reduced or withdrawn as a result of the
issuance of the proposed additional notes or Class R notes.
o The indenture trustee has received an opinion of counsel to the effect
that all of the foregoing conditions to the issuance of the proposed
additional notes or Class R notes (and any other conditions to such
actions included in the indenture or any other supplemental indenture)
have been satisfied.
The indenture trustee is authorized under the indenture to establish any
additional funds or accounts which it deems necessary or convenient in
connection with the issuance and delivery of any additional notes or Class R
notes.
SUMMARY OF THE INDENTURE PROVISIONS
We will issue the notes pursuant to an indenture of trust among us, the
indenture trustee and the eligible lender trustee. Each series of notes will be
issued pursuant to a supplemental indenture of trust applicable to that series
as indicated in a prospectus supplement. The following is a summary of some of
the provisions of the indenture. This summary is not comprehensive and reference
should be made to the indenture for a full and complete statement of its
provisions.
Parity and Priority of Lien
The provisions of the indenture are generally for the equal benefit,
protection and security of the registered owners of all of the notes. However,
the Class A notes have priority over the Class B notes and the Class C notes
with respect to payments of principal and interest, and the Class B notes have
priority over the Class C notes with respect to payments of principal and
interest.
Sale of Student Loans Held in Trust Estate
Student loans may be sold or otherwise disposed of by the indenture trustee
free from the lien of the indenture to the extent required by the Higher
Education Act or other applicable laws.
Prior to any sale, we will provide an order to the indenture trustee
stating the sale price and directing that student loans be sold or otherwise
disposed of and delivered. We will also deliver to the indenture trustee a
certificate signed by an authorized representative of the administrator to the
effect that the disposition price is equal to or in excess of the principal
amount of the student loans to be sold or disposed of (plus accrued interest) or
equal to or in excess of the purchase price paid by SLC Student Loan Trust-I for
such student loans (less principal payments received with respect to such
student loans), whichever is lower, or that the sale of the student loans was
required to be made by applicable law at a time when such price was not
obtainable and that the administrator has used commercially reasonable efforts
to maximize proceeds of such sale.
Segregation of Funds; Priority of Lien
We will not commingle the funds created under the indenture with funds,
proceeds or investment of funds relating to other issues or series of notes
issued by us, except to the extent such commingling is required by the indenture
trustee for ease in administration of its duties and responsibilities. Should
the indenture trustee require this permitted commingling, it will keep complete
records in order that the funds, proceeds or investments under the indenture may
at all times be identified by source and application, and if necessary,
separated.
The revenues and other money, student loans and other assets pledged under
the indenture are and will be owned by SLC Student Loan Trust-I free and clear
of any pledge, lien, charge or encumbrance, except as otherwise expressly
provided in the indenture. Except as otherwise provided in the indenture, SLC
Student Loan Trust-I:
o will not create or voluntarily permit to be created any debt, lien or
charge on the student loans which would be on a parity with,
subordinate to, or prior to the lien of the indenture;
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o will not take any action or fail to take any action that would result
in the lien of the indenture or the priority of that lien for the
obligations thereby secured being lost or impaired; and
o will pay or cause to be paid, or will make adequate provisions for the
satisfaction and discharge, of all lawful claims and demands which if
unpaid might by law be given precedence to or any equality with the
indenture as a lien or charge upon the student loans.
Derivative Products and Derivative Payments
We are authorized under the indenture to enter into a derivative product,
defined to mean a written contract under which we become obligated to pay to a
counterparty on specified payment dates certain amounts in exchange for the
counterparty's obligation to make payments to us on specified payment dates in
specified amounts. Our obligation to make payments in connection with a
derivative product may be secured by a pledge of and lien on the trust estate.
We will not enter into a derivative product unless the indenture trustee has
received a confirmation from each rating agency providing a rating for our notes
that the derivative product will not adversely affect the rating on any of the
notes.
If any payment to a counterparty under a derivative product would result in
a deficiency in the amounts required to make payments to the registered owners
of the notes on a note payment date, then the indenture trustee will delay the
making of the payment to the counterparty until the first date on which
sufficient funds are available to make the payment or until the next note
payment date, whichever is earlier.
Representations and Warranties of SLC Student Loan Trust-I
We represent and warrant in the indenture that:
o we are duly authorized under the laws of the State of Delaware to
create and issue the notes and to execute and deliver the indenture
and any derivative product, and to pledge collateral under the
indenture to the payment of notes and any company derivative payments
under the indenture;
o all necessary action for the creation and issuance of the notes and
the execution and delivery of the indenture and any derivative product
has been duly and effectively taken; and
o the notes in the hands of the registered owners of the notes and any
derivative product are and will be valid and enforceable special
limited obligations of SLC Student Loan Trust-I secured by and payable
solely from the trust estate.
Further Covenants
We will file financing statements and continuation statements in any
jurisdiction necessary to perfect and maintain the security interest we have
granted under the indenture.
Upon written request of the indenture trustee, we will permit the indenture
trustee or its agents, accountants and attorneys, to examine and inspect the
property, books of account, records, reports and other data relating to the
student loans, and will furnish the indenture trustee such other information as
it may reasonably request. The indenture trustee shall be under no duty to make
any examination unless requested in writing to do so by the registered owners of
not less than a majority of the principal amount of the notes, and unless those
registered owners have offered the indenture trustee security and indemnity
satisfactory to it against any costs, expenses and liabilities which might be
incurred in making any examination.
We will cause an annual audit to be made by an independent auditing firm of
national reputation and file one copy of the audit with the indenture trustee
and each rating agency within 150 days of the close of each fiscal year. The
indenture trustee is not obligated to review or otherwise analyze those audits.
Each month, the administrator will provide to the indenture trustee for the
indenture trustee to forward to each registered owner, a statement setting forth
information with respect to the notes and student loans as of the ending of the
preceding month, including the following:
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o the amount of principal payments made with respect to each class of
notes during the preceding month;
o the amount of interest payments made with respect to each class of
notes during the preceding month;
o the principal balance of financial student loans as of the close of
business on the last day of the preceding month;
o the aggregate outstanding principal amount of the notes of each class;
o the interest rate for the applicable class of notes with respect to
each interest payment;
o the number and principal amount of student loans that are delinquent
or for which claims have been filed with a guarantee agency; and
o the aggregate market value of the trust estate and the outstanding
principal amount of the notes as of the close of business on the last
day of the preceding month.
A copy of these reports may be obtained by any noteholder by a written
request to the indenture trustee.
Enforcement of Servicing Agreement
We will diligently enforce all terms, covenants and conditions of the
servicing agreement, including the prompt payment of all amounts due from the
servicer under the servicing agreement. We will not permit the release of the
obligations of the servicer under the servicing agreement except in conjunction
with permitted amendments or modifications and will not waive any default by the
servicer under the servicing agreement without the written consent of the
indenture trustee. We will not consent or agree to or permit any amendment or
modification of any servicing agreement which will in any manner materially
adversely affect the rights or security of the registered owners of the notes.
Additional Covenants with Respect to the Higher Education Act
We will verify that the indenture trustee is, or replace the indenture
trustee with, an eligible lender under the Higher Education Act, and will
acquire or cause to be acquired student loans only from an eligible lender.
We are responsible, directly or through the servicer, for each of the
following actions with respect to the Higher Education Act:
o Dealing with the Secretary of Education with respect to the rights,
benefits and obligations under the certificates of insurance and the
contract of insurance, and dealing with the guarantee agencies with
respect to the rights, benefits and obligations under the guarantee
agreements with respect to the student loans;
o Diligently enforcing, and taking all reasonable steps necessary or
appropriate for the enforcement of all terms, covenants and conditions
of all student loans and agreements in connection with the student
loans, including the prompt payment of all principal and interest
payments and all other amounts due under the student loans;
o Causing the student loans to be serviced by entering into a servicing
agreement with the servicer for the collection of payments made for,
and the administration of the accounts of, the student loans;
o Complying with, and causing all of its officers, directors, employees
and agents to comply, with the provisions of the Higher Education Act
and any regulations or rulings under the Act, with respect to the
student loans; and
o Causing the benefits of the guarantee agreements, the interest subsidy
payments and the special allowance payments to flow to the indenture
trustee.
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Continued Existence; Successor
We will preserve and keep in full force and effect our existence, rights
and franchises as a Delaware statutory trust. We will not sell or otherwise
dispose of all or substantially all of our assets, consolidate with or merge
into any corporation or other entity, or permit one or more other corporations
or entities to consolidate with or merge with us. These restrictions do not
apply to a transfer of student loans that is made in connection with a discharge
of the indenture or to a transaction where the transferee or the surviving or
resulting corporation or entity, if other than SLC Student Loan Trust-I, by
proper written instrument for the benefit of the indenture trustee, irrevocably
and unconditionally assumes the obligation to perform and observe the agreements
and obligations of SLC Student Loan Trust-I under the indenture and the rating
agencies rating the notes confirm in writing that the transaction will not
result in a downgrade of the rating of any notes.
Events of Default
For purposes of the indenture, each of the following events is defined as
an event of default:
o default in the due and punctual payment of the principal of or
interest on any of the Class A notes when due or failure to make any
payment due under any other senior obligations under the indenture
when due;
o if no senior obligations are outstanding under the indenture, default
in the due and punctual payment of the principal of or interest on any
of the Class B notes when due;
o if no senior obligations or subordinate obligations are outstanding
under the indenture, default in the due and punctual payment of the
principal of or interest on any of the Class C notes when due;
o if no senior obligations or subordinate obligations are outstanding
under the indenture, failure to make any payment due under any other
junior-subordinate obligations under the indenture when due;
o default by SLC Student Loan Trust-I in the performance or observance
of any other of the covenants, agreements or conditions contained in
the indenture or in the notes, and continuation of such default for a
period of 30 days after written notice thereof by the indenture
trustee to SLC Student Loan Trust-I; and
o the occurrence of an Event of Bankruptcy with respect to the SLC
Student Loan Trust-I.
Failure to pay carryover amounts or interest on carryover amounts shall not
constitute an event of default.
Additional events of default may be added to the indenture by any
supplemental indenture.
Remedies on Default
Possession of Trust Estate. Upon the happening of any event of default, the
indenture trustee may take possession of any portion of the trust estate that
may be in the custody of others, and all property comprising the trust estate,
and may hold, use, operate, manage and control those assets. The indenture
trustee may also, in the name of SLC Student Loan Trust-I or otherwise, conduct
the business of SLC Student Loan Trust-I and collect and receive all charges,
income and revenues of the trust estate. After deducting all expenses incurred
and all other proper outlays authorized in the indenture, and all payments which
may be made as just and reasonable compensation for its own services, and for
the services of its attorneys, agents, and assistants, the indenture trustee
will apply the rest of the money received by the indenture trustee as follows,
or as otherwise specified in the related prospectus supplement:
If the principal of none of the obligations under the indenture shall have
become due,
o first, to the payment of the interest in default on the Class A notes
and to the payment of all derivative payments secured on a parity with
the Class A notes then due, in order of the maturity of the interest
or derivative payment installments, with interest on the overdue
installments, which payments will be made ratably to the parties
entitled to the payments without discrimination or preference;
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o second, to the payment of the interest in default on the Class B notes
and to the payment of all derivative payments secured on a parity with
the Class B notes then due, in order of the maturity of the interest
or derivative payment installments, with interest on the overdue
installments, which payments will be made ratably to the parties
entitled to the payments without discrimination or preference;
o third, to the payment of the interest in default on the Class C notes
and to the payment of all derivative payments secured on a parity with
the Class C notes, if any, then due, in order of the maturity of the
interest or derivative payment installments, with interest on the
overdue installments, which payments will be made ratably to the
parties entitled to the payments without discrimination or preference;
and
o fourth, to the payment of the interest in default on any Class R notes
and to the payment of all derivative payments secured on a parity with
any Class R notes, if any, then due, in order of the maturity of the
interest or derivative payment installments, with interest on the
overdue installments, which payments will be made ratably to the
parties entitled to the payments without discrimination or preference.
If the principal of any of the obligations under the indenture shall have
become due by declaration of acceleration or otherwise,
o first, to the payment of the interest in default on the Class A notes
and all derivative payments secured on a parity with the Class A notes
then due, in the order of the maturity of the interest or derivative
payment installments, with interest on overdue installments,
o second, to the payment of the principal of all Class A notes then due
and all derivative payments secured on a parity with the Class A
notes, which payments will be made ratably to the parties entitled to
the payments without discrimination or preference,
o third, to the payment of the interest in default on the Class B notes
and all derivative payments secured on a parity with the Class B notes
then due, in the order of the maturity of the interest or derivative
payment installments, with interest on overdue installments,
o fourth, to the payment of the principal of all Class B notes then due
and all derivative payments secured on a parity with the Class B
notes, which payments will be made ratably to the parties entitled to
the payments without discrimination or preference,
o fifth, to the payment of the interest in default on the Class C notes
and all company derivative payments secured on a parity with such
Class C notes then due, in the order of the maturity of the interest
or derivative payment installments, with interest on overdue
installments,
o sixth, to the payment of the principal of all Class C notes then due
and any derivative payment on a parity with the Class C notes which
payments will be made ratably to the parties entitled to the payments
without discrimination or preference,
o seventh, to the payment of the interest in default on any Class R
notes and all company derivative payments secured on a parity with
such Class R notes then due, in the order of the maturity of the
interest or derivative payment installments, with interest on overdue
installments,
o eighth, to the payment of the principal of all Class R notes then due
and any derivative payment on a parity with any Class R notes which
payments will be made ratably to the parties entitled to the payments
without discrimination or preference, and
o ninth, to pay interest accrued on the carryover amounts of the Class A
notes, the carryover amounts of the Class A notes, to pay interest
accrued on the carryover amounts of the Class B notes, the carryover
amounts of the Class B notes, to pay interest accrued on the carryover
amounts of the Class C notes, the carryover amounts of the Class C
notes, in that order of priority.
Sale of Trust Estate. Upon the happening of any event of default and if the
principal of all of the outstanding notes shall have been declared due and
payable, then the indenture trustee may sell the trust estate to the highest
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bidder in accordance with the requirements of applicable law. In addition, the
indenture trustee may proceed to protect and enforce the rights of the indenture
trustee or the registered owners in the manner as counsel for the indenture
trustee may advise, whether for the specific performance of any covenant,
condition, agreement or undertaking contained in the indenture, or in aid of the
execution of any power therein granted, or for the enforcement of such other
appropriate legal or equitable remedies as may in the opinion of such counsel,
be more effectual to protect and enforce the rights aforesaid. The indenture
trustee is required to take any of these actions if requested to do so in
writing by the registered owners of at least a majority of the principal amount
of the highest priority obligations outstanding under the indenture.
Appointment of Receiver. If an event of default occurs, and all of the
outstanding obligations under the indenture have been declared due and payable,
and if any judicial proceedings are commenced to enforce any right of the
indenture trustee or of the registered owners under the indenture, then as a
matter of right, the indenture trustee shall be entitled to the appointment of a
receiver for the trust estate.
Accelerated Maturity. If an event of default occurs, the indenture trustee
may declare, or upon the written direction by the registered owners of at least
a majority of the principal amount of the highest priority obligations then
outstanding under the indenture shall declare, the principal of all then
outstanding obligations issued under the indenture, and the interest thereon,
immediately due and payable. A declaration of acceleration upon the occurrence
of a default other than a default in making payments when due requires the
consent of a majority of the registered owners of each priority of obligations
then outstanding.
Direction of Indenture Trustee. If an event of default occurs, the
registered owners of at least a majority of the principal amount of the highest
priority obligations then outstanding under the indenture shall have the right
to direct and control the indenture trustee with respect to any proceedings for
any sale of any or all of the trust estate, or for the appointment of a
receiver. The registered owners may not cause the indenture trustee to institute
any proceedings, which in the indenture trustee's opinion, would be unjustly
prejudicial to non-assenting registered owners of obligations outstanding under
the indenture.
Right to Enforce in Indenture Trustee. No registered owner of any
obligation issued under the indenture shall have any right as a registered owner
to institute any suit, action or proceedings for the enforcement of the
provisions of the indenture or for the appointment of a receiver or for any
other remedy under the indenture. All rights of action under the indenture are
vested exclusively in the indenture trustee, unless and until the indenture
trustee fails to institute an action or suit after
o the registered owners of at least 25% of the notes shall have
previously given to the indenture trustee written notice of a default
under the indenture, and of the continuance thereof,
o the registered owners of at least 25% of the notes shall have made a
written request upon the indenture trustee and the indenture trustee
shall have been afforded reasonable opportunity to institute an
action, suit or proceeding in its own name, and
o the indenture trustee shall have been offered reasonable indemnity and
security satisfactory to it against the costs, expenses, and
liabilities to be incurred on an action, suit or proceeding in its own
name.
In addition, the indenture trustee and the noteholders will covenant that
they will not at any time institute against the trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
With respect to the trust, the indenture trustee, the depositor, the
seller, the administrator, the servicer or the eligible lender trustee in its
individual capacity, or any of their respective owners, beneficiaries, agents,
officers, directors, employees, successors or assigns will not be personally
liable for the payment of the principal of or interest on the notes or for the
agreements of the trust contained in the indenture.
Waivers of Events of Default. The indenture trustee may in its discretion
waive any event of default under the indenture and rescind any declaration of
acceleration of the obligations due under the indenture. The indenture trustee
will waive an event of default upon the written request of the registered owners
of at least a majority of the principal amount of the highest priority
obligations then outstanding under the indenture. A waiver of any event of
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default in the payment of the principal or interest due on any obligation issued
under the indenture may not be made unless prior to the waiver or rescission,
provisions are made for payment of all arrears of interest or all arrears of
payments of principal, and all expenses incurred by the indenture trustee in
connection with such default. A waiver or rescission of one default will not
affect any subsequent or other default, or impair any rights or remedies
consequent to any subsequent or other default.
The Indenture Trustee
Acceptance of Trust. The indenture trustee has accepted the trusts imposed
upon it by the indenture, and will perform those trusts, but only upon and
subject to the following terms and conditions:
o Except during the continuance of an event of default, the indenture
trustee undertakes to perform only those duties as are specifically
set forth in the indenture. In the absence of bad faith on its part,
the indenture trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the indenture trustee and
conforming to the requirements of the indenture.
o In case an event of default has occurred and is continuing, the
indenture trustee, in exercising the rights and powers vested in it by
the indenture, will use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
o Before taking any action under the indenture requested by registered
owners, the indenture trustee may require that it be furnished an
indemnity bond or other indemnity and security satisfactory to it by
the registered owners for the reimbursement of all expenses it may
incur and to protect it against liability arising from any action
taken by the indenture trustee.
Indenture Trustee may Act Through Agents. The indenture trustee may execute
any of the trusts or powers under the indenture and perform any duty thereunder
either itself or by or through its attorneys, agents, or employees. The
indenture trustee will not be answerable or accountable for any default, neglect
or misconduct of any such attorneys, agents or employees, if reasonable care has
been exercised in the appointment, supervision, and monitoring of the work
performed. All reasonable costs incurred by the indenture trustee and all
reasonable compensation to all such persons as may reasonably be employed in
connection with the trusts will be paid by SLC Student Loan Trust-I.
Duties of Indenture Trustee. The indenture trustee is generally under no
obligation or duty to perform any act at the request of registered owners or to
institute or defend any suit to protect the rights of the registered owners
under the indenture unless properly indemnified and provided with security to
its satisfaction. The indenture trustee is not required to take notice of any
event of default under the indenture unless and until it shall have been
specifically notified in writing of the event of default by the registered
owners or an authorized representative of the SLC Student Loan Trust-I.
However, the indenture trustee may begin suit, or appear in and defend
suit, execute any of the trusts, enforce any of its rights or powers, or do
anything else in its judgment proper, without assurance of reimbursement or
indemnity. In that case the indenture trustee will be reimbursed or indemnified
by the registered owners requesting that action, if any, or SLC Student Loan
Trust-I in all other cases, for all fees, costs, expenses, liabilities, outlays,
counsel fees and other reasonable disbursements properly incurred, unless such
disbursements are adjudicated to have resulted from the negligence or willful
misconduct of the indenture trustee.
If SLC Student Loan Trust-I or the registered owners, as appropriate, fail
to make such reimbursement or indemnification, the indenture trustee may
reimburse itself from any money in its possession under the provisions of the
indenture, subject only to the prior lien of the notes for the payment of the
principal and interest thereon from the Revenue Fund.
Compensation of Indenture Trustee. SLC Student Loan Trust-I will pay to the
indenture trustee compensation for all services rendered by it under the
indenture, and also all of its reasonable expenses, charges, and other
disbursements.
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Resignation of Indenture Trustee. The indenture trustee may resign and be
discharged from the trust created by the indenture by giving to SLC Student Loan
Trust-I written notice specifying the date on which such resignation is to take
effect. A resignation will only take effect on the day specified in such notice
if a successor indenture trustee shall have been appointed pursuant to the
provisions of the indenture and is qualified to be the indenture trustee under
the requirements of the provisions of the indenture.
Removal of Indenture Trustee. The indenture trustee may be removed at any
time:
o by the registered owners of a majority of the principal amount of the
highest priority obligations then outstanding under the indenture;
o by SLC Student Loan Trust-I for cause or upon the sale or other
disposition of the indenture trustee or its trust functions; or
o by SLC Student Loan Trust-I without cause so long as no event of
default exists or has existed within the last 30 days.
In the event an indenture trustee is removed, removal shall not become
effective until:
o a successor indenture trustee shall have been appointed; and
o the successor indenture trustee has accepted that appointment.
Successor Indenture Trustee. If the indenture trustee resigns, is removed,
dissolved or otherwise is disqualified to act or is incapable of acting, or in
case control of the indenture trustee is taken over by any public officer or
officers, a successor indenture trustee may be appointed by SLC Student Loan
Trust-I. In this case SLC Student Loan Trust-I will cause notice of the
appointment of a successor indenture trustee to be mailed to the registered
owners at the address of each registered owner appearing on the note
registration books.
Every successor indenture trustee
o will be a bank or trust company in good standing, organized and doing
business under the laws of the United States or of a state therein;
o will have a reported capital and surplus of not less than $50,000,000;
o will be authorized under the law to exercise corporate trust powers,
be subject to supervision or examination by a federal or state
authority; and
o will be an eligible lender under the Higher Education Act, so long as
such designation is necessary to maintain guarantees and federal
benefits under the Higher Education Act, with respect to the student
loans originated under the Higher Education Act.
Merger of the Indenture Trustee. Any corporation into which the indenture
trustee may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the indenture trustee shall
be a party, or any corporation succeeding to all or substantially all of the
corporate trust business of the indenture trustee, shall be the successor of the
indenture trustee under the indenture, provided such corporation shall be
otherwise qualified and eligible under the indenture, without the execution or
filing of any paper of any further act on the part of any other parties thereto.
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Supplemental Indentures
Supplemental Indentures not Requiring Consent of Registered Owners. SLC
Student Loan Trust-I and the indenture trustee may, without the consent of or
notice to any of the registered owners of any obligations outstanding under the
indenture, enter into any indentures supplemental to the indenture for any of
the following purposes:
o to cure any ambiguity or defect or omission in the indenture;
o to grant to or confer upon the indenture trustee for the benefit of
the registered owners any additional benefits, rights, remedies,
powers or authorities;
o to subject to the indenture additional revenues, properties or
collateral;
o to modify, amend or supplement the indenture or any indenture
supplemental thereto in such manner as to permit the qualification
under the Trust-Indenture Act of 1939 or any similar federal statute
or to permit the qualification of the notes for sale under the
securities laws of the United States of America or of any of the
states of the United States of America, and, if they so determine, to
add to the indenture or any indenture supplemental thereto such other
terms, conditions and provisions as may be permitted by the
Trust-Indenture Act of 1939 or similar federal statute which, in the
opinion of the indenture trustee or its counsel are not to the
material prejudice of the registered owner of any of the obligations
outstanding under the indenture;
o to evidence the appointment of a separate or co-indenture trustee or a
co-registrar or transfer agent or the succession of a new indenture
trustee under the indenture, or any additional or substitute guarantee
agency or servicer;
o to add provisions to or to amend provisions of the indenture as may,
in the opinion of counsel, be necessary or desirable to assure
implementation of SLC Student Loan Trust-I's student loan program in
conformance with the Higher Education Act;
o to make any change as shall be necessary in order to obtain and
maintain for any of the notes an investment grade rating from a
nationally recognized rating service, which changes, in the opinion of
the indenture trustee are not to the material prejudice of the
registered owner of any of the obligations outstanding under the
indenture;
o to make any changes necessary to comply with the Higher Education Act
and the regulations thereunder or the Code and the regulations
promulgated thereunder;
o to provide for the issuance of notes or subordinate indebtedness
pursuant to the provisions of the indenture, including the creation of
appropriate funds and accounts, with respect to such notes or
subordinate indebtedness;
o to make the terms and provisions of the indenture, including the lien
and security interest granted therein, applicable to a derivative
product;
o to create any additional funds or accounts under the indenture deemed
by the indenture trustee to be necessary or desirable;
o to amend the indenture to allow for any of the notes to be supported
by a letter of credit or insurance policy or a liquidity agreement,
including amendment to provide for repayment to the provider of the
credit support on a parity with any notes or derivative product and
providing rights to the provider under the indenture, including with
respect to defaults and remedies;
o to amend the indenture to provide for use of a surety bond or other
financial guaranty instrument in lieu of cash and investment
securities in all or any portion of the Reserve Fund, so long as such
action shall not adversely affect the ratings on any of the notes;
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o to correct any typographical error or cure any ambiguity, or to cure,
correct or supplement any defective or inconsistent provision in the
indenture or in the notes; or
o to make any other change which, in the judgment of the indenture
trustee, is not to the material prejudice of the registered owners of
any obligations outstanding under the indenture.
The indenture trustee will provide the rating agencies with written notice
of any of the changes or amendments described above.
Supplemental Indentures Requiring Consent of Registered Owners. Any
amendment of the indenture other than those listed above must be approved by the
registered owners of a majority of the principal amount of each class of
affected notes then outstanding under the indenture.
None of the changes described below may be made in a supplemental indenture
without the consent of at least a majority of the registered owners of each
class of affected note and each affected derivative product then outstanding: o
an extension of the maturity date of the principal of or the interest on any
obligation, or o a reduction in the principal amount of any obligation or the
rate of interest thereon, or o a privilege or priority of any obligation under
the indenture over any other obligation, or o a reduction in the aggregate
principal amount of the obligations required for consent to such supplemental
indenture, or o the creation of any lien other than a lien ratably securing all
of the obligations at any time outstanding under the indenture.
Trust Irrevocable
The trust created by the terms and provisions of the indenture is
irrevocable until the principal of and the interest due on all obligations under
the indenture and all derivative payments are fully paid or provision is made
for its payment, as provided in the indenture.
Satisfaction of Indenture
If the registered owners of the notes and any other obligations issued
under the indenture are paid all the principal of and interest due on the notes
and any other obligations, at the times and in the manner stipulated in the
indenture, and if each counterparty on a derivative product is paid all of
derivative payments then due, then the pledge of the trust estate will thereupon
terminate and be discharged. The indenture trustee will execute and deliver to
SLC Student Loan Trust-I instruments to evidence the discharge and satisfaction,
and the indenture trustee will pay all money held by it under the indenture to
the party entitled to receive it under the indenture.
Notes and any other obligations issued under the indenture will be
considered to have been paid if money for their payment or redemption has been
set aside and is being held in trust by the indenture trustee. Any outstanding
note will be considered to have been paid if the note is to be redeemed on any
date prior to its stated maturity and notice of redemption has been given as
provided in the indenture and on said date there shall have been deposited with
the indenture trustee either money or governmental obligations the principal of
and the interest on which when due will provide money sufficient to pay the
principal of and interest to become due on the note.
Any derivative payments will be considered to have been paid and the
applicable derivative product terminated when payment of all derivative payments
due and payable to each counterparty under derivative products has been made or
duly provided for to the satisfaction of each counterparty and the respective
derivative product has been terminated.
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DESCRIPTION OF CREDIT ENHANCEMENT
General
Credit enhancement may be provided with respect to one or more classes of
the notes of any series. The amounts and types of credit enhancement
arrangements and the provider of the credit enhancement, if any, will be set
forth in the related prospectus supplement. Credit enhancement may be in the
form of a letter of credit, the subordination of one or more classes of notes,
the use of an insurance policy or surety bonds, the establishment of one or more
reserve funds, interest rate swaps, or any combination of the foregoing.
The presence of a reserve fund and other forms of credit enhancement for
the benefit of any class or series of notes is intended to enhance the
likelihood that noteholders of a class or series will receive the full amount of
principal and interest due on the notes and to decrease the likelihood that such
noteholders will experience losses. The credit enhancement will not provide
protection against all risks of loss and will not guarantee payment to such
noteholders of all amounts to which they are entitled unless a guarantee against
losses is described in the related prospectus supplement. If losses or
shortfalls occur that exceed the amount covered by the credit enhancement or
that are not covered by the credit enhancement, noteholders will bear their
allocable share of deficiencies. Moreover, if a form of credit enhancement
covers more than one series of notes, holders of notes of one series will be
subject to the risk that the credit enhancement will be exhausted by the claims
of the holders of notes of one or more other series.
Subordinate Notes
The notes will be designated Class A notes, Class B notes or Class C notes
in the related prospectus supplement. To the extent specified in the related
prospectus supplement, the rights of the Class B noteholders to receive
distributions on any note payment date will be subordinated to the corresponding
rights of the Class A noteholders, and the rights of the Class C noteholders to
receive distributions on any note payment date will be subordinated to the
corresponding rights of the Class B noteholders and the Class A noteholders. If
so provided in the related prospectus supplement, the subordination of a class
may apply only in the event of, or may be limited to, specific types of losses
or shortfalls. The related prospectus supplement will set forth information
concerning the amount of subordination provided by a class or classes of notes
in a series, the circumstances under which such subordination will be available
and the manner in which the amount of subordination will be made available.
Letter of Credit
If so specified in the prospectus supplement with respect to a series,
deficiencies in amounts otherwise payable on the notes or certain classes of the
notes will be covered by one or more letters of credit. The bank or financial
institution issuing the letter of credit will be identified in a prospectus
supplement. Under a letter of credit, the issuer will be obligated to honor
draws in an aggregate fixed dollar amount generally equal to a percentage
specified in the related prospectus supplement of the principal balance of the
student loans on a specified date or of the initial aggregate principal balance
of one or more classes of notes. If so specified in the related prospectus
supplement, the letter of credit may permit draws only in the event of certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments under
the letter of credit and may otherwise be reduced as described in the related
prospectus supplement. The obligations of the issuer of the letter of credit
will expire at the earlier of the date specified in the related prospectus
supplement or the termination of the trust estate.
Note Insurance and Surety Bonds
If so specified in the prospectus supplement with respect to a series,
deficiencies in amounts otherwise payable on the notes or certain classes of the
notes will be covered by insurance policies or surety bonds provided by one or
more insurance companies or sureties. The insurance policies or surety bonds may
cover timely distributions of interest and full distributions of principal on
the basis of a schedule of principal distributions set forth in or determined in
the manner specified in the related prospectus supplement.
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Reserve Fund
In addition to the Reserve Fund described in this prospectus under
"Security and Sources of Payment for the Notes-Reserve Fund," one or more
reserve funds may be established with respect to a series of the notes. Cash,
eligible investments, a demand note, letters of credit, other contingent
investments or a combination thereof, in the amounts so specified in the related
prospectus supplement, may be deposited in such Reserve Fund. The Reserve Fund
for a series may also be funded over time by depositing in the Reserve Fund a
specified amount of the distributions received on the related receivables as
specified in the related prospectus supplement.
Amounts on deposit in any Reserve Fund for a series, together with the
reinvestment income on those amounts, will be applied by the indenture trustee
for the purposes, in the manner and to the extent described in the related
prospectus supplement. A Reserve Fund may be provided to increase the likelihood
of timely payments of principal of and interest on the notes, if required as a
condition to the rating of the notes of that series. If so specified in the
related prospectus supplement, a Reserve Fund may be established to provide
limited protection, in an amount satisfactory to each rating agency rating the
notes, against certain types of losses not covered by insurance policies or
other credit support. Following each interest payment date, amounts in a Reserve
Fund in excess of any specified Reserve Fund requirement may be released from
the Reserve Fund under the conditions specified in the related prospectus
supplement and will not be available for further application by the indenture
trustee.
Additional information concerning any Reserve Fund is to be set forth in
the related prospectus supplement, including the initial balance of the Reserve
Fund, the Reserve Fund balance to be maintained, the purposes for which funds in
the Reserve Fund may be applied to make distributions to noteholders and use of
investment earnings, if any, from the Reserve Fund.
THE STUDENT LOAN PROGRAM OF SLC STUDENT LOAN TRUST-I
General
The Student Loan Corporation, as seller, will transfer the student loans to
SLC Student Loan Receivables I, Inc. in a transaction which will be part sale
and part contribution to capital. Student Loan Receivables I, Inc., as
depositor, will transfer the loans to the SLC Student Loan Trust-I, a trust
established by the depositor in exchange for the net proceeds from the sale of
the notes and the equity interest in the SLC Student Loan Trust-I. On the
closing date of each student loan sale, The Student Loan Corporation will sell
and assign to the related eligible lender trustee on behalf of the depositor,
without recourse, except as provided in the loan sale and contribution
agreement, its entire interest in the student loans and all collections received
and to be received with respect thereto for the period on and after the cut-off
date provided for pursuant to the loan sale and contribution agreement.
Immediately upon giving effect to that sale, the depositor will transfer and
assign to the eligible lender trustee on behalf of the SLC Student Loan Trust-I,
without recourse, except as provided in the loan sale and contribution
agreement, its entire interest in the same student loans and all collections
received and to be received with respect thereto for the period on and after the
cut-off date and all of its rights under its loan sale and contribution
agreement with The Student Loan Corporation.
The student loans serving as collateral for the series of notes issued from
time to time pursuant to the indenture or any supplement indenture will be
selected from the portfolio of student loans held by The Student Loan
Corporation by several criteria, including:
o each student loan is guaranteed as to principal and interest by a
guarantor and is reinsured by the Department of Education under
Federal Family Education Loan Program;
o each student loan was originated in the United States of America, its
territories or its possessions in accordance with Federal Family
Education Loan Program;
o each student loan was originated not less than 90 days prior to being
transferred to the trust; o each student loan contains terms required
by the program and the applicable guarantee agreements;
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o each student loan provides for periodic payments that will fully
amortize the amount financed over its term to maturity, exclusive of
any deferral or forbearance periods; and
o each student loan satisfies any other criteria set forth in the
related prospectus supplement.
The same eligible lender trustee will act as eligible lender for both the
depositor and the SLC Student Loan Trust-I. Each student loan will be identified
in a schedule appearing as an exhibit to the loan sale and contribution
agreement.
The Student Loan Corporation will make representations, warranties and
covenants with respect to the student loans sold pursuant to its respective
student loan sale and contribution agreement, including the following:
o each loan has been duly executed and delivered and constitutes the
legal, valid and binding obligation of the maker and the endorser, if
any, thereof, enforceable in accordance with its terms;
o The Student Loan Corporation is the sole owner and holder of each loan
and has full right and authority to sell and assign the same free and
clear of all liens, pledges or encumbrances;
o the information provided with respect to the student loans is true and
correct as of the cut-off date or the statistical cut-off date, as
appropriate;
o each student loan, on the date on which it was transferred to the
trust, is free and clear of all security interests, liens, charges and
encumbrances and no offsets, defenses or counterclaims with respect
thereto have been asserted or threatened;
o each loan to be sold under the student loan sale and contribution
agreement is guaranteed by a guarantee agency under the Federal Family
Education Loan Program;
o The Student Loan Corporation and any independent servicer have each
exercised and shall continue to exercise, until the scheduled sale and
contribution date, due diligence and reasonable care in making,
administering, servicing and collecting the loans;
o The Student Loan Corporation, or the lender that originated a loan,
has reported the amount of origination fees, if any, authorized to be
collected with respect to the loan pursuant to Section 438(c) of the
Higher Education Act to the Secretary of Education for the period in
which the fee was authorized to be collected; and
o The Student Loan Corporation or originating lender has made any refund
of an origination fee collected in connection with any loan which may
be required pursuant to the Higher Education Act.
At the request of SLC Student Loan Trust-I or the indenture trustee, The
Student Loan Corporation will be obligated to repurchase or substitute any loan
transferred to the depositor from The Student Loan Corporation and transferred
to SLC Student Loan Trust-I if:
o certain representations or warranties made or furnished by The Student
Loan Corporation in or pursuant to its respective student loan sale
and contribution agreement shall prove to have been materially
incorrect as to the loan;
o the Secretary of Education or a guarantee agency, as the case may be,
refuses to honor all or part of a claim filed with respect to a loan,
including any claim for interest subsidy, special allowance payments,
insurance, reinsurance or guarantee payments on account of any
circumstance or event that occurred prior to the transfer of the loan
to SLC Student Loan Trust-I; or
o on account of any wrongful or negligent act or omission of The Student
Loan Corporation, the originating lender or its or their servicing
agents that occurred prior to the transfer of a loan to SLC Student
Loan Trust-I, a defense that makes the loan unenforceable is asserted
by a maker or endorser, if any, of the loan with respect to his or her
obligation to pay all or any part of the loan.
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Upon the occurrence of any of the conditions set forth above and upon the
request of SLC Student Loan Trust-I or the indenture trustee, The Student Loan
Corporation will be required to pay to the indenture trustee 100% of an amount
equal to the sum of the then outstanding principal balance of such loan, plus
100% of all interest accrued and unpaid on such loan, plus 100% of the
applicable special allowance payments accrued and unpaid with respect to such
loan from the applicable loan purchase date to and including the date of
repurchase, plus all amounts owed to the Secretary of Education with respect to
the repurchased loan or such greater amount as may be specified in the
prospectus supplement.
Additional Fundings
Following the closing date, using the note proceeds, the depositor will be
obligated from time to time to purchase from The Student Loan Corporation
certain student loans, subject to the criteria set forth in "The Student Loan
Program of SLC Student Loan Trust-I - General" in this prospectus. The trust
will be obligated to purchase from the depositor any additional student loans
purchased by the depositor in accordance with its obligations.
During the period from the closing date until the first to occur of (a) the
payment date on which the amount on deposit in the Acquisition Fund is less than
$100,000, (b) an event of default occurring under the indenture, a servicer
default occurring under the servicing agreement or an administrator default
occurring under the administration agreement, (c) an Event of Bankruptcy
occurring with respect to the depositor or The Student Loan Corporation, or (d)
the last day of the collection period preceding the payment date specified in
the prospectus supplement, each purchase of a student loan will be funded by
means of a transfer from the Acquisition Fund of an amount equal to the sum of
the principal balance of such loan owed by the related borrower plus accrued
borrower interest thereon.
As described under "Federal Family Education Loan Program--Federal
Consolidation Loan Program" in this prospectus, borrowers may consolidate
additional student loans with an existing Federal Consolidation Loan within 180
days from the date that the existing Federal Consolidation Loan was made. As a
result of the addition of any additional student loans, the related student loan
may, in certain cases, have a different interest rate and a different final
payment date. Any additional student loans added to Federal Consolidation Loans
in the trust will be funded by means of a transfer from the Reserve Fund of the
amount required to repay in full any student loans that are being discharged in
the consolidation process.
SLC Student Loan Trust-I
SLC Student Loan Trust-I, is a bankruptcy remote, limited purpose Delaware
statutory trust organized by the depositor under the laws of the State of
Delaware, for the transactions described in this prospectus and in the related
prospectus supplement. The property of the trust will consist of:
o a pool of student loans consisting of education loans to students and
parents of students, legal title to which is held by the related
eligible lender trustee on behalf of the trust;
o all funds collected or to be collected in respect of the student
loans, including any payments made under the guarantee agreements
covering the loans, on or after the applicable cut-off date specified
in the related prospectus supplement, including interest accrued on
the student loans prior to the cut-off date whether or not to be
capitalized (but excluding special allowance payments and interest
subsidy payments accrued prior to the cut-off date); and
o all moneys and investments on deposit in the revenue account, any
reserve account and any other trust accounts or any other form of
credit or cash flow enhancement that may be obtained for the benefit
of holders of one or more classes of the notes.
To the extent provided in the applicable prospectus supplement, the notes
will be secured by the property of the trust. To facilitate servicing and to
minimize administrative burden and expense, the servicer or subservicer will be
appointed the custodian of the promissory notes representing the student loans
for the trust and the eligible lender trustee.
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Eligible Lender Trustee
The eligible lender trustee for the trust will be the entity specified
in the related prospectus supplement. The eligible lender trustee on behalf of
the trust will acquire legal title to all the related student loans acquired
under the related loan sale and contribution agreement and will enter into a
guarantee agreement with each of the guarantors with respect to the student
loans. The eligible lender trustee will qualify as an eligible lender and owner
of all the federal student loans held by the trust for all purposes under the
Higher Education Act and the guarantee agreements. Failure of the federal
student loans to be owned by an eligible lender would result in the loss of any
guarantee payments from any guarantor and any federal assistance with respect to
the federal student loans. An eligible lender trustee's liability in connection
with the issuance and sale of the notes is limited solely to the express
obligations of the eligible lender trustee set forth in the related trust
agreement and the related loan sale and contribution agreement. An eligible
lender trustee may resign at any time, in which event the administrator, or its
successor, will be obligated to appoint a successor trustee.
The administrator of a trust may also remove the eligible lender trustee,
in which event the administrator will be obligated to appoint a qualified
successor trustee. Any resignation or removal of an eligible lender trustee and
appointment of a successor trustee will not become effective until acceptance of
the appointment by the successor trustee.
SLC Student Loan Receivables I, Inc.
SLC Student Loan Receivables I, Inc., the depositor, is a bankruptcy remote
wholly owned, special purpose subsidiary of The Student Loan Corporation, formed
to purchase student loans originated or acquired by The Student Loan Corporation
and to transfer these student loans to SLC Student Loan Trust-I. Because the
depositor is not an institution eligible to hold legal title to student loans,
an interim eligible lender trustee specified in the related prospectus
supplement will hold legal title to the student loans on behalf of the
depositor.
By forming the depositor to acquire the student loans being transferred to
the trust, The Student Loan Corporation has taken steps intended to prevent any
application for relief under any insolvency law from resulting in consolidation
of the assets and liabilities of the depositor with those of The Student Loan
Corporation. As a separate, limited-purpose entity, the depositor's
incorporation documents contain limitations including:
o restrictions on the nature of its business; and
o a restriction on its ability to commence a voluntary case or
proceeding under any insolvency law without the unanimous affirmative
vote of all of its directors.
Among other things, the depositor will maintain its separate corporate
identity by:
o maintaining records and books of accounts separate from those of The
Student Loan Corporation;
o refraining from commingling its assets with the assets of The Student
Loan Corporation; and
o refraining from holding itself out as having agreed to pay, or being
liable for, the debts of The Student Loan Corporation.
We have structured the transactions described in this prospectus to
assure that the transfer of the student loans by The Student Loan Corporation to
the depositor constitutes a "true sale" of the student loans to the depositor.
If the transfer constitutes a "true sale" the student loans and related proceeds
would not be property of The Student Loan Corporation should it become subject
to any insolvency law.
Upon each issuance of notes, the transferring depositor will receive the
advice of counsel that, subject to various facts, assumptions and
qualifications, the transfer of the student loans by The Student Loan
Corporation to the depositor would be characterized as a "true sale" and the
student loans and related proceeds would not be property of The Student Loan
Corporation under the insolvency laws.
The transferring depositor will also represent and warrant that each
transfer of student loans by the depositor to the trust is a valid sale and
contribution of those loans. The transferring depositor and The Student Loan
Corporation
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will take all actions that are required so the eligible lender trustee will be
treated as the legal owner of the student loans while they are held beneficially
by either the depositor or the trust.
The Student Loan Corporation
The Student Loan Corporation, the seller and servicer, originates, holds
and services federally insured student loans through a trust agreement with
Citibank (New York State), a subsidiary of Citicorp, an indirect wholly-owned
subsidiary of Citigroup Inc. The Student Loan Corporation is one of the nation's
largest originators/holders of loans originated under the Federal Family
Education Loan Program, authorized by the Department of Education under the
Federal Higher Education Act. The Student Loan Corporation also holds student
loans that are not insured under the Federal Higher Education Act.
The Student Loan Corporation was incorporated under the laws of the State
of Delaware on November 4, 1992 and commenced operations on December 22, 1992.
For more than 25 years prior to December 22, 1992, The Student Loan Corporation
operated as a division of Citibank (New York State). On December 22, 1992, the
assets of The Student Loan Corporation, as a division of Citibank (New York
State), were exchanged with Citibank (New York State) for 20 million shares of
The Student Loan Corporation's common stock and The Student Loan Corporation's
agreement to pay approximately $2.8 billion to Citibank (New York State) and to
assume certain obligations of Citibank (New York State). On December 23, 1992,
Citibank (New York State) sold four million shares of its holdings of The
Student Loan Corporation common stock in an initial public offering and
currently Citibank (New York State) continues to own 80% of The Student Loan
Corporation's outstanding common stock.
Servicing of Student Loans
THE ELIGIBLE LENDER TRUSTEE IS ACTING AS "ELIGIBLE LENDER" WITH RESPECT TO
THE STUDENT LOANS AS AN ACCOMMODATION TO SLC STUDENT LOAN TRUST-I AND NOT FOR
THE BENEFIT OF ANY OTHER PARTY. NOTWITHSTANDING ANY RESPONSIBILITY THAT THE
ELIGIBLE LENDER TRUSTEE MAY HAVE TO THE SECRETARY OF EDUCATION OR ANY GUARANTEE
AGENCY UNDER THE HIGHER EDUCATION ACT, THE ELIGIBLE LENDER TRUSTEE SHALL NOT
HAVE ANY RESPONSIBILITY FOR ANY ACTION OR INACTION OF SLC STUDENT LOAN TRUST-I
OR ANY OTHER PARTY IN CONNECTION WITH THE STUDENT LOANS AND THE DOCUMENTS,
AGREEMENTS, UNDERSTANDINGS AND ARRANGEMENTS RELATING TO THE STUDENT LOANS.
The Servicing Agreement
We have entered into a servicing agreement with The Student Loan
Corporation which continues until the earlier of:
o termination of the indenture;
o early termination after material default by the servicer as provided
for in the servicing agreement; or
o the student loans serviced under the servicing agreement having been
paid in full.
Under the servicing agreement, the servicer is responsible for servicing,
and performing all other related tasks with respect to, all the student loans
acquired from time to time on behalf of the trust. The servicer is responsible
for performing all services and duties customary to the servicing of student
loans including all collection practices, to do so in the same manner as the
servicer has serviced student loans for parties other than the trust and to do
so in compliance with, and to otherwise comply with, all standards and
procedures provided for in the Higher Education Act, the Guarantee Agreements
and all other applicable federal and state laws. The servicer is required to
maintain its eligibility as a third-party servicer under the Higher Education
Act. The servicer may perform its servicing obligations under the servicing
agreement through one or more subservicing agreements with other eligible third-
party servicers under the Higher Education Act, provided that the indenture
trustee has received a rating confirmation from each rating agency which has
assigned a rating to any outstanding notes that such rating will not be reduced
or withdrawn as a result of the use of one or more eligible third-party
servicers.
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Without limiting the foregoing, the duties of the servicer with respect to
the trust under the servicing agreement include, but are not limited to, the
following:
o collecting and depositing into the Revenue Fund all payments with
respect to the student loans, including claiming and obtaining any
guarantee payments, any interest subsidy payments and special
allowance payments with respect to the student loans;
o responding to inquiries of borrowers on the student loans;
o investigating delinquencies;
o pursuing, filing and collecting any program payments;
o accounting for collections;
o furnishing monthly and annual statements to the trustees; and
o paying taxes, accounting fees, outside auditor fees, data processing
costs and other costs incurred in administering the student loans.
Servicer Covenants
The servicer will agree that:
o it will satisfy all of its obligations relating to the student loans,
maintain in effect all qualifications required in order to service the
student loans and comply in all material respects with all
requirements of law if a failure to comply would have a materially
adverse effect on the interest of the trust;
o it will not permit any rescission or cancellation of a student loan
except as ordered by a court or other government authority or as
consented to by the eligible lender trustee and the indenture trustee,
except that it may write off any delinquent loan if the remaining
balance of the borrower's account is less than $50;
o it will do nothing to impair the rights of the noteholders; and
o it will not reschedule, revise, defer or otherwise compromise payments
due on any student loan except during any applicable interest only,
deferral or forbearance periods or otherwise in accordance with all
applicable standards and requirements for servicing of the student
loans.
Upon the discovery of a breach of certain covenants that have a materially
adverse effect on the interest of the trust, the servicer will be obligated to
purchase or substitute that student loan unless the breach is cured within the
applicable cure period specified in the servicing agreement. Any breach that
relates to compliance with the requirements of the Higher Education Act or the
applicable guarantor but that does not affect that guarantor's obligation to
guarantee payment of a student loan will not be considered to have a material
adverse effect.
The purchase or substitution and reimbursement obligations of the servicer
will constitute the sole remedy available to the trust for any uncured breach.
The servicer's purchase or substitution and reimbursement obligations are
contractual obligations that the trust may enforce, but the breach of these
obligations will not constitute an event of default under the indenture.
Servicing Compensation
The servicer will receive a servicing fee for each period in an amount
specified in the prospectus supplement. The servicer will also receive any other
administrative fees, expenses and similar charges specified in the prospectus
supplement. The servicing fee may also include specified amounts payable to the
servicer for tasks it performs. The servicing fee may be subject to a maximum
monthly amount. If that is the case, the related prospectus supplement will
state the maximum together with any conditions to its application. The servicing
fee, including any unpaid amounts from prior payment dates, will have a payment
priority over the notes.
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Matters Regarding the Servicer
The servicing agreement provides that the servicer may not resign from its
obligations and duties as servicer thereunder, except upon determination that
the servicer's performance of the duties is no longer permissible under
applicable law. No resignation will become effective until the indenture trustee
or a successor servicer has assumed the servicer's servicing obligations and
duties under the servicing agreement, provided that the indenture trustee has
received a rating confirmation from each rating agency which has assigned a
rating to any outstanding notes that such rating will not be reduced or
withdrawn as a result of such assumption of the servicer's obligations and
duties.
The servicing agreement further provides that neither the servicer nor any
of its directors, officers, employees or agents will be under any liability to
the trust or the noteholders for taking any action or for refraining from taking
any action pursuant to the servicing agreement, or for errors in judgment;
provided, however, that, unless otherwise limited in the related prospectus
supplement, neither the servicer nor any person will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or negligence in the performance of the servicer's duties thereunder or by
reason of reckless disregard of its obligations and duties thereunder. In
addition, the servicing agreement will provide that the servicer is under no
obligation to appear in, prosecute, or defend any legal action that is not
incidental to its servicing responsibilities under the servicing agreement and
that, in its opinion, may cause it to incur any expense or liability. Each
servicing agreement will, however, provide that the servicer may undertake any
reasonable action that it deems necessary or desirable in respect of the
servicing agreement and the interests of the noteholders.
Under the circumstances specified in the servicing agreement, any entity
into which the servicer may be merged or consolidated, or any entity resulting
from any merger or consolidation to which the servicer is a party, or any entity
succeeding to the business of the servicer, which corporation or other entity in
each of the foregoing cases assumes the obligations of the servicer, will be the
successor of the servicer under the servicing agreement.
Servicer Default
A servicer default under the servicing agreement will consist of:
o any failure by the servicer to deliver to the indenture trustee for
deposit in any of the trust accounts any required payment, which
failure continues unremedied for 3 business days after written notice
of such failure is received by the servicer from the eligible lender
trustee, the indenture trustee or the administrator or after discovery
of such failure by an officer of the servicer; or
o any breach of a representation or warranty of the servicer contained
in the servicing agreement or failure by the servicer to observe or to
perform in any material respect any term, covenant or agreement set
forth in the servicing agreement, which breach or failure shall (i)
materially and adversely affect the rights of the noteholders or any
derivative product counterparties and (ii) continue unremedied for a
period of 60 days after the date of discovery of such failure by an
officer of the servicer or on which written notice of such breach or
failure, requiring the same to be remedied, shall have been given (A)
to the servicer, by the indenture trustee, the eligible lender trustee
or the administrator, or (B) to the servicer, the indenture trustee
and the eligible lender trustee by holders of 25% or more of the
notes; or
o the occurrence of an Event of Bankruptcy involving the servicer; or
o any failure by the servicer to comply with any requirements under the
Higher Education Act resulting in a loss of its eligibility as a
third-party servicer.
A servicer default does not include any failure of the servicer to service
a student loan in accordance with the Higher Education Act so long as the
servicer is in compliance with its obligations under the servicing agreement to
purchase any adversely affected student loans and to pay to the trust the amount
of any program payments lost as a result of the servicer's actions.
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Rights Upon Servicer Default
As long as a servicer default remains unremedied, the indenture trustee or
holders of not less than 25% of the outstanding notes, by notice then given in
writing to the servicer (and to the indenture trustee and the eligible lender
trustee if given by the noteholders) may terminate all the rights and
obligations of the servicer. Only the indenture trustee or the noteholders, and
not the eligible lender trustee, will have the ability to remove the servicer if
a default occurs while the notes are outstanding. Following a termination, a
successor servicer appointed by the indenture trustee or the indenture trustee
itself will succeed to all the responsibilities, duties and liabilities of the
servicer under the servicing agreement and will be entitled to similar
compensation arrangements, provided that the indenture trustee has received a
rating confirmation from each rating agency which has assigned a rating to any
outstanding notes that such rating will not be reduced or withdrawn as a result
of the appointment of such successor servicer.
The predecessor servicer shall cooperate with the successor servicer, the
indenture trustee and the eligible lender trustee in effecting the termination
of the responsibilities and rights of the servicer under the servicing
agreement, including the transfer to the successor servicer for administration
by it of all cash amounts held by the servicer for deposit at the time of
transfer. All reasonable costs and expenses incurred in connection with
transferring the student loans to the successor servicer shall be paid by the
predecessor servicer upon presentation of reasonable documentation of such costs
and expenses.
If the indenture trustee is unwilling or unable to act, it may appoint, or
petition a court for the appointment of, a successor whose regular business
includes the servicing of student loans. If, however, a bankruptcy trustee or
similar official has been appointed for the servicer, and no servicer default
other than that appointment has occurred, the trustee may have the power to
prevent the indenture trustee or the noteholders from effecting the transfer.
Waiver of Past Defaults
The holders of a majority of the outstanding notes, in the case of any
servicer default which does not adversely affect the indenture trustee or the
noteholders, may, on behalf of all noteholders, waive any default by the
servicer, except a default in making any required deposits to or payments from
any of the trust accounts in accordance with the servicing agreement. Upon any
such waiver of a past default, such default shall cease to exist, and any
servicer default arising therefrom shall be deemed to have been remedied for
every purpose of the servicing agreement. No waiver will impair the noteholders'
rights as to subsequent defaults.
SLC Student Loan Trust-I may designate another servicer with respect to its
student loans. Any servicer, other than The Student Loan Corporation, may be
appointed only if the rating agencies rating the notes provide written
confirmation that the appointment of the new servicer will not adversely affect
the rating on any of the notes.
Administration of the Student Loans
We have entered into an administration agreement with The Student Loan
Corporation. Under the administration agreement, the administrator will agree to
provide various notices and to perform other administrative obligations required
by the indenture, trust agreement and loan sale and contribution agreement.
These services include:
o directing the indenture trustee to make the required distributions
from the trust accounts on each monthly servicing payment date and
each distribution date;
o preparing, based on periodic data received from the servicer, and
providing annual distribution statements to the eligible lender
trustee and the indenture trustee and any related federal income tax
reporting information; and
o providing the notices and performing other administrative obligations
required by the indenture, the trust agreement and the loan sale and
contribution agreement.
As compensation, the administrator will receive an administration fee
specified in the prospectus supplement.
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The Student Loan Corporation may assign its obligations and duties as
administrator to an affiliate if the rating agencies confirm that the assignment
will not result in a downgrading or a withdrawal of the ratings then applicable
to the notes. No resignation will become effective until a successor
administrator has assumed The Student Loan Corporation's duties under the
administration agreement.
Administrator Default
An administrator default under the administration agreement will consist
of:
o any failure by the administrator to direct the indenture trustee to
make any required distributions from any of the trust accounts on any
monthly servicing payment date or any distribution date, if the
failure continues for 5 business days after notice or discovery; or
o any failure by the administrator to observe or perform in any material
respect any other term, covenant or agreement in the administration
agreement or a related agreement that materially and adversely affects
the rights of noteholders and continues for 60 days after written
notice of the failure is given to the administrator; or
o the occurrence of an Event of Bankruptcy involving the administrator;
or
o any representation or warranty made by the administrator in the
administration agreement or a related agreement, shall prove to be
untrue or incomplete in any material respect.
Rights Upon Administrator Default
As long as any administrator default remains unremedied, the indenture
trustee or holders of not less than 25% of the outstanding notes may terminate
all the rights and obligations of the administrator. Following the termination
of the administrator, a successor administrator appointed by the indenture
trustee or the indenture trustee itself will succeed to all the
responsibilities, duties and liabilities of the administrator under the
administration agreement.
The predecessor administrator shall cooperate with the successor
administrator, the indenture trustee and the eligible lender trustee in
effecting the termination of the responsibilities and rights of the predecessor
administrator under the administration agreement. All reasonable costs and
expenses incurred in connection with such transfer of responsibilities shall be
paid by the predecessor administrator upon presentation of reasonable
documentation of such costs and expenses. The successor administrator will be
entitled to similar compensation arrangements or any other compensation as set
forth in the related prospectus supplement.
If the indenture trustee is unwilling or unable to act, it may appoint, or
petition a court for the appointment of, a successor whose regular business
includes the servicing or administration of student loans. The indenture trustee
may make arrangements for compensation to be paid, which cannot be greater than
the compensation to the administrator unless the compensation arrangements will
not result in a downgrading of the notes.
Evidence as to Compliance
The administration agreement will provide that a firm of independent public
accountants will furnish to the trust, the eligible lender trustee, indenture
trustee and any derivative product counterparties an annual report attesting to
the administrator's compliance with the terms of the administration agreement,
including all statutory provisions incorporated in the agreement. The accounting
firm will base this report on its examination of various documents and records
and on accounting and auditing procedures considered appropriate under the
circumstances.
The administration agreement will require the administrator to deliver to
the trust, the eligible lender trustee, indenture trustee and any derivative
product counterparties concurrently with each compliance report, a certificate
signed by an officer of the administrator stating that, to the officer's
knowledge, the administrator has fulfilled its obligations under that
administration agreement. If there has been a material default the officer's
certificate will describe the default. The administrator has agreed to give the
indenture trustee and eligible lender trustee notice of administrator defaults
under the administration agreement.
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You may obtain copies of these reports and certificates by a request in
writing to the indenture trustee.
Waiver of Past Defaults
The holders of a majority of the outstanding notes, in the case of any
administrator default which does not adversely affect the indenture trustee or
the noteholders, may, on behalf of all noteholders, waive any default by the
administrator. Upon any such waiver of a past default, such default shall cease
to exist, and any administrator default arising therefrom shall be deemed to
have been remedied for every purpose of the administration agreement. No waiver
will impair the noteholders' rights as to subsequent defaults.
DESCRIPTION OF THE FEDERAL FAMILY EDUCATION LOAN PROGRAM
The Federal Family Education Loan Program
The Higher Education Act provides for a program of direct federal insurance
for student loans as well as reinsurance of student loans guaranteed or insured
by state agencies or private non-profit corporations.
The Higher Education Act currently authorizes certain student loans to be
covered under the Federal Family Education Loan Program. The 1998 Amendments to
the Higher Education Act extended the authorization for the Federal Family
Education Loan Program through September 30, 2004. Congress has extended similar
authorization dates in prior versions of the Higher Education Act. However, the
current authorization dates may not again be extended and the other provisions
of the Higher Education Act may not be continued in their present form.
Generally, a student is eligible for loans made under the Federal Family
Education Loan Program only if he or she:
o has been accepted for enrollment or is enrolled in good standing at an
eligible institution of higher education;
o is carrying or planning to carry at least one-half the normal
full-time workload for the course of study the student is pursuing as
determined by the institution;
o has agreed to promptly notify the holder of the loan of any address
change; and
o meets the applicable "needs" requirements.
Eligible institutions include higher educational institutions and
vocational schools that comply with specific federal regulations. Each loan is
to be evidenced by an unsecured note.
The Higher Education Act also establishes maximum interest rates for each
of the various types of loans. These rates vary not only among loan types, but
also within loan types depending upon when the loan was made or when the
borrower first obtained a loan under the Federal Family Education Loan Program.
The Higher Education Act allows lesser rates of interest to be charged.
Types of Loans
Four types of loans are currently available under the Federal Family
Education Loan Program:
o Subsidized Federal Stafford Loans,
o Unsubsidized Federal Stafford Loans,
o Federal PLUS Loans and
o Federal Consolidation Loans
These loan types vary as to eligibility requirements, interest rates, repayment
periods, loan limits and eligibility for interest subsidies and special
allowance payments. Some of these loan types have had other names in the past.
References to these various loan types include, where appropriate, their
predecessors.
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The primary loan under the Federal Family Education Loan Program is the
Subsidized Federal Stafford Loan. Students who are not eligible for Subsidized
Federal Stafford Loans based on their economic circumstances may be able to
obtain Unsubsidized Federal Stafford Loans. Parents of students may be able to
obtain Federal PLUS Loans. Federal Consolidation Loans are available to
borrowers with existing loans made under the Federal Family Education Loan
Program and other federal programs to consolidate repayment of the borrower's
existing loans. Prior to July 1, 1994, the Federal Family Education Loan Program
also offered Federal Supplemental Loans for Students ("Federal SLS Loans") to
graduate and professional students and independent undergraduate students and,
under certain circumstances, dependent undergraduate students, to supplement
their Subsidized Federal Stafford Loans.
Subsidized Federal Stafford Loans
General. Subsidized Federal Stafford Loans are eligible for reinsurance
under the Higher Education Act if the eligible student to whom the loan is made
has been accepted or is enrolled in good standing at an eligible institution of
higher education or vocational school and is carrying at least one-half the
normal full-time workload at that institution. Subsidized Federal Stafford Loans
have limits as to the maximum amount which may be borrowed for an academic year
and in the aggregate for both undergraduate and graduate/professional study.
Both aggregate limitations exclude loans made under the Federal SLS and Federal
PLUS Programs. The Secretary of Education has discretion to raise these limits
to accommodate students undertaking specialized training requiring exceptionally
high costs of education.
Subsidized Federal Stafford Loans are generally made only to student
borrowers who meet the needs tests provided in the Higher Education Act.
Provisions addressing the implementation of needs analysis and the relationship
between unmet need for financing and the availability of Subsidized Federal
Stafford Loan Program funding have been the subject of frequent and extensive
amendment in recent years. Further amendment to such provisions may materially
affect the availability of Subsidized Stafford Loan funding to borrowers or the
availability of Subsidized Federal Stafford Loans for secondary market
acquisition.
Interest Rates for Subsidized Federal Stafford Loans. For a Subsidized
Federal Stafford Loan made prior to July 1, 1994, the applicable interest rate
for a borrower who, on the date the promissory note was signed, did not have an
outstanding balance on a previous Federal Family Education Loan Program loan:
(1) is 7% per annum for a loan covering a period of instruction beginning
before January 1,1981;
(2) is 9% per annum for a loan covering a period of instruction beginning
on or before January 1, 1981, but before September 13, 1983;
(3) is 8% per annum for a loan covering a period of instruction beginning
on or after September 13, 1983, but before July 1, 1988;
(4) is 8% per annum for the period from the disbursement of the loan to
the date which is four years after the loan enters repayment, for a
loan made prior to October 1, 1992, covering a period of instruction
beginning on or after July 1, 1988, and thereafter shall be adjusted
annually, and for any 12-month period commencing on a July 1 shall be
equal to the bond equivalent rate of 91-day U.S. Treasury bills
auctioned at the final auction prior to the preceding June 1, plus
3.25% per annum (but not to exceed 10% per annum); or
(5) for a loan made on or after October 1, 1992 shall be adjusted
annually, and for any 12-month period commencing on a July 1 shall be
equal to the bond equivalent rate of 91-day U.S. Treasury bills
auctioned at the final auction prior to the preceding June 1, plus
3.1% per annum (but not to exceed 9% per annum).
For a Subsidized Federal Stafford Loan made prior to July 1, 1994, the
applicable interest rate for a borrower who, on the date the promissory note
evidencing the loan was signed, had an outstanding balance on a previous loan
made insured or guaranteed under the Federal Family Education Loan Program:
(6) for a loan made prior to July 23, 1992 is the applicable interest rate
on the previous loan or, if the previous loan is not a Subsidized
Federal Stafford Loan 8% per annum or
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(7) for a loan made on or before July 23, 1992 shall be adjusted annually,
and for any twelve month period commencing on a July 1 shall be equal
to the bond equivalent rate of 91-day U.S. Treasury bills auctioned at
the final auction prior to the preceding June 1, plus 3.1% per annum
but not to exceed:
o 7% per annum in the case of a Subsidized Federal Stafford Loan
made to a borrower who has a loan described in clause (1) above;
o 8% per annum in the case of
o a Subsidized Federal Stafford Loan made to a borrower who
has a loan described in clause (3) above,
o a Subsidized Federal Stafford Loan which has not been in
repayment for four years and which was made to a borrower
who has a loan described in clause (4) above,
o a Subsidized Federal Stafford Loan for which the first
disbursement was made prior to December 20, 1993 to a
borrower whose previous loans do not include a Subsidized
Federal Stafford Loan or an Unsubsidized Federal Stafford
Loan;
o 9% per annum in the case of a Subsidized Federal Stafford Loan
made to a borrower who has a loan described in clauses (2) or (5)
above or a Subsidized Federal Stafford Loan for which the first
disbursement was made on or after December 20, 1993 to a borrower
whose previous loans do not include a Subsidized Federal Stafford
Loan or an Unsubsidized Federal Stafford Loan; and
o 10% per annum in the case of a Subsidized Federal Stafford Loan
which has been in repayment for four years or more and which was
made to a borrower who has a loan described in clause (4) above.
The interest rate on all Subsidized Federal Stafford Loans made on or after
July 1, 1994 but prior to July 1, 1998, regardless of whether the borrower is a
new borrower or a repeat borrower, is the rate described in clause (7) above,
except that the interest rate shall not exceed 8.25% per annum. For any
Subsidized Federal Stafford Loan made on or after July 1, 1995, the interest
rate is further reduced prior to the time the loan enters repayment and during
any deferment periods. During deferment periods, the formula described in clause
(7) above is applied, except that 2.5% is substituted for 3.1%, and the rate
shall not exceed 8.25% per annum.
For Subsidized Federal Stafford Loans made on or after July 1, 1998 but
before July 1, 2006, the applicable interest rate shall be adjusted annually,
and for any twelve month period commencing on a July 1 shall be equal to the
bond equivalent rate of 91-day U.S. Treasury bills auctioned at the final
auction prior to the proceeding June 1, plus 1.7% per annum prior to the time
the loan enters repayment and during any deferment periods, and 2.3% per annum
during repayment, but not to exceed 8.25% per annum.
For loans made after July 1, 2006, the applicable interest rate shall be
equal to 6.8% per annum. There can be no assurance that the interest rate
provisions for these loans will not be further amended.
Unsubsidized Federal Stafford Loans
General. The Unsubsidized Federal Stafford Loan Program was created by
Congress in 1992 for students who do not qualify for Subsidized Federal Stafford
Loans due to parental and/or student income and assets in excess of permitted
amounts. These students are entitled to borrow the difference between the
Stafford Loan maximum and their Subsidized Federal Stafford Loan eligibility
through the Unsubsidized Federal Stafford Loan program. The general requirements
for Unsubsidized Federal Stafford Loans are essentially the same as those for
Subsidized Federal Stafford Loans. The interest rate, the annual loan limits and
the special allowance payment provisions of the Unsubsidized Federal Stafford
Loans are the same as the Subsidized Federal Stafford Loans. However, the terms
of the Unsubsidized Federal Stafford Loans differ materially from Subsidized
Federal Stafford Loans in that the federal government will not make interest
subsidy payments and the loan limitations are determined without respect to the
expected family contribution. The borrower will be required to either pay
interest from the time the loan is disbursed or capitalize the interest until
repayment begins. Unsubsidized Federal Stafford Loans were not available before
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October 1, 1992. A student meeting the general eligibility requirements for a
loan under the Federal Family Education Loan Program is eligible for an
Unsubsidized Federal Stafford Loan without regard to need.
Interest Rates for Unsubsidized Federal Stafford Loans. Unsubsidized
Federal Stafford Loans are subject to the same interest rate provisions as
Subsidized Federal Stafford Loans.
Federal PLUS Loans
General. Federal PLUS Loans are made only to borrowers who are parents and,
under certain circumstances, spouses of remarried parents, of dependent
undergraduate students. For Federal PLUS Loans made on or after July 1, 1993,
the parent borrower must not have an adverse credit history as determined
pursuant to criteria established by the Department of Education. The basic
provisions applicable to Federal PLUS Loans are similar to those of Subsidized
Federal Stafford Loans with respect to the involvement of guarantee agencies and
the Secretary of Education in providing federal reinsurance on the loans.
However, Federal PLUS Loans differ significantly from Subsidized Federal
Stafford Loans, particularly because federal interest subsidy payments are not
available under the Federal PLUS Loan program and special allowance payments are
more restricted.
Interest Rates for Federal PLUS Loans. The applicable interest rate depends
upon the date of issuance of the loan and the period of enrollment for which the
loan is to apply. The applicable interest rate on a Federal PLUS Loan:
o made on or after January 1, 1981, but before October 1, 1981, is 9%
per annum;
o made on or after October 1, 1981, but before November 1, 1982, is 14%
per annum;
o made on or after November 1, 1982, but before July 1, 1987, is 12% per
annum;
o made on or after July 1, 1987, but before October 1, 1992 shall be
adjusted annually, and for any 12-month period beginning on July 1
shall be equal to the bond equivalent rate of 52-week U.S. Treasury
bills auctioned at the final auction prior to the preceding June 1,
plus 3.25% per annum (but not to exceed 12% per annum);
o made on or after October 1, 1992, but before July 1, 1994, shall be
adjusted annually, and for any 12-month period beginning on July 1
shall be equal to the bond equivalent rate of 52-week U.S. Treasury
bills auctioned at the final auction prior to the preceding June 1,
plus 3.1% per annum (but not to exceed 10% per annum);
o made on or after July 1, 1994, but before July 1, 1998, is the same as
that for a loan made on or after October 1, 1992, but before July 1,
1994, except that such rate shall not exceed 9% per annum;
o made on or after July 1, 1998, but before July 1, 2006, shall be
adjusted annually, and for any 12-month period beginning on July 1
shall be equal to the bond equivalent rate of 91-day U.S. Treasury
bills auctioned at the final auction prior to the preceding June 1,
plus 3.1% per annum (but not to exceed 9% per annum); or
o made after July 1, 2006, if any, is 7.9% per annum.
For any 12-month period beginning on July 1, 2001 or any succeeding year,
the weekly average 1-year constant maturity Treasury yield, as published by the
Board of Governors of the Federal Reserve System, for the last calendar week
before such June 26, will be substituted for the 52-week Treasury bill as the
index for interest rate calculations.
Federal SLS Loans
General. Federal SLS Loans were limited to graduate or professional
students, independent undergraduate students, and dependent undergraduate
students, if the students' parents were unable to obtain a Federal PLUS Loan and
were also unable to provide the students' expected family contribution. Except
for dependent undergraduate students, eligibility for Federal SLS Loans was
determined without regard to need. Federal SLS Loans are similar to
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Subsidized Federal Stafford Loans with respect to the involvement of guarantee
agencies and the Secretary of Education in providing federal reinsurance on the
loans. However, Federal SLS Loans differ significantly from Subsidized Federal
Stafford Loans, particularly because federal interest subsidy payments are not
available under the Federal SLS Loan program and special allowance payments are
more restricted.
Interest Rates for Federal SLS Loans. The applicable interest rates on
Federal SLS Loans made prior to October 1, 1992 are identical to the applicable
interest rates on Federal PLUS Loans made at the same time. For Federal SLS
Loans made on or after October 1, 1992, the applicable interest rate is the same
as the applicable interest rate on Federal PLUS Loans, except that the ceiling
is 11% per annum instead of 10% per annum.
Federal Consolidation Loans
General. The Higher Education Act authorizes a program under which
borrowers may be eligible to consolidate their various student loans into a
single loan that is insured and reinsured on a basis similar to Federal Stafford
Loans and PLUS loans. Federal Consolidation Loans may be obtained in an amount
sufficient to pay outstanding principal, unpaid interest and late charges on
various individual student loans. Loans that can be consolidated include the
Federal Family Education Loan Program Loans, Perkins Loans, Health Professional
Student Loan Programs, Nursing Student Loans and Health Education Assistance
Loans. To be eligible for a Consolidation Loan, a borrower must:
o have outstanding indebtedness on student loans made under the Federal
Family Education Loan Program and/or certain other federal student
loan programs, and
o be in repayment status or in a grace period, or
o be a defaulted borrower who has made arrangements to repay any
defaulted loan satisfactory to the holder of the defaulted loan.
A married couple who agree to be jointly liable on a Federal Consolidation
Loan, for which the application is received on or after January 1, 1993, may be
treated as an individual for purposes of obtaining a Consolidation Loan. For
Federal Consolidation Loans disbursed prior to July 1, 1994 the borrower was
required to have outstanding student loan indebtedness of at least $7,500. Prior
to the adoption of the Higher Education Technical Amendments Act of 1993,
Federal PLUS Loans could not be included in the Consolidation Loan. For Federal
Consolidation Loans for which the applications were received prior to January 1,
1993, the minimum student loan indebtedness was $5,000 and the borrower could
not be delinquent more than 90 days in the payment of such indebtedness. For
applications received on or after January 1, 1993, borrowers may add additional
loans to a Federal Consolidation Loan during the 180-day period following the
origination of the Federal Consolidation Loan.
Interest Rates for Federal Consolidation Loans. A Federal Consolidation
Loan made prior to July 1, 1994 bears interest at a rate equal to the weighted
average of the interest rates on the loans retired, rounded to the nearest whole
percent, but not less than 9% per annum. Except as described in the next
sentence, a Federal Consolidation Loan made on or after July 1, 1994 bears
interest at a rate equal to the weighted average of the interest rates on the
loans retired, rounded upward to the nearest whole percent, but with no minimum
rate. For a Federal Consolidation Loan for which the application is received by
an eligible lender on or after November 13, 1997 and before October 1, 1998, the
interest rate shall be adjusted annually, and for any twelve-month period
commencing on a July 1 shall be equal to the bond equivalent rate of 91-day U.S.
Treasury bills auctioned at the final auction prior to the preceding June 1,
plus 3.1% per annum, but not to exceed 8.25% per annum. Notwithstanding these
general interest rates, the portion, if any, of a Federal Consolidation Loan
that repaid a loan made under title VII, Sections 700-721 of the Public Health
Services Act, as amended, has a different variable interest rate. Such portion
is adjusted on July 1 of each year, but is the sum of the average of the T-Bill
Rates auctioned for the quarter ending on the preceding June 30, plus 3.0%,
without any cap on the interest rate. Federal Consolidation Loans made on or
after October 1, 1998 will bear interest at a fixed per annum rate equal to the
lesser of 8.25% or the weighted average of the interest rates on the loans being
consolidated, rounded up to the nearest 1/8th of 1%. For a discussion of
required payments that reduce the return on Federal Consolidation Loans, see
"Fees--Rebate Fees on Federal Consolidation Loans" in this prospectus.
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Maximum Loan Amounts
Each type of loan is subject to limits on the maximum principal amount,
both with respect to a given year and in the aggregate. Federal Consolidation
Loans are limited only by the amount of eligible loans to be consolidated. All
of the loans are limited to the difference between the cost of attendance and
the other aid available to the student. Federal Stafford Loans are also subject
to limits based upon needs analysis. Additional limits are described below.
Loan Limits for Subsidized Federal Stafford Loans and Unsubsidized Federal
Stafford Loans. Subsidized Federal Stafford Loans and Unsubsidized Federal
Stafford Loans are generally treated as one loan type for loan limit purposes. A
student who has not successfully completed the first year of a program of
undergraduate education may borrow up to $2,625 in an academic year. A student
who has successfully completed the first year, but who has not successfully
completed the second year may borrow up to $3,500 per academic year. An
undergraduate student who has successfully completed the first and second year,
but who has not successfully completed the remainder of a program of
undergraduate education, may borrow up to $5,500 per academic year. For students
enrolled in programs of less than an academic year in length, the limits are
generally reduced in proportion to the amount by which the programs are less
than one year in length. A graduate or professional student may borrow up to
$8,500 in an academic year. The maximum aggregate amount of Subsidized Federal
Stafford Loans and Unsubsidized Federal Stafford Loans, including that portion
of a Federal Consolidation Loan used to repay such loans, which an undergraduate
student may have outstanding is $23,000. The maximum aggregate amount for a
graduate and professional student, including loans for undergraduate education,
is $65,500. The Secretary of Education is authorized to increase the limits
applicable to graduate and professional students who are pursuing programs which
the Secretary of Education determines to be exceptionally expensive.
Prior to the enactment of the Higher Education Amendments of 1992, an
undergraduate student who had not successfully completed the first and second
year of a program of undergraduate education could borrow Federal Stafford Loans
in amounts up to $2,625 in an academic year. An undergraduate student who had
successfully completed the first and second year, but who had not successfully
completed the remainder of a program of undergraduate education could borrow up
to $4,000 per academic year. The maximum for graduate and professional students
was $7,500 per academic year. The maximum aggregate amount of Federal Stafford
Loans which a borrower could have outstanding, including that portion of a
Federal Consolidation Loan used to repay such loans, was $17,250. The maximum
aggregate amount for a graduate or professional student, including loans for
undergraduate education, was $54,750. Prior to the 1986 changes, the annual
limits were generally lower.
Loan Limits for Federal PLUS Loans. For Federal PLUS Loans made on or after
July 1, 1993, the amounts of Federal PLUS Loans are limited only by the
student's unmet need. Prior to that time Federal PLUS Loans were subject to
limits similar to those of Federal SLS Loans applied with respect to each
student on behalf of whom the parent borrowed.
Loan Limits for Federal SLS Loans. A student who had not successfully
completed the first and second year of a program of undergraduate education can
borrow an Federal SLS Loan in an amount of up to $4,000. A student who had
successfully completed the first and second year, but who had not successfully
completed the remainder of a program of undergraduate education could borrow up
to $5,000 per year. Graduate and professional students can borrow up to $10,000
per year. Federal SLS Loans were subject to an aggregate maximum of $23,000
($73,000 for graduate and professional students). Prior to the 1992 changes,
Federal SLS Loans were available in amounts of $4,000 per academic year, up to a
$20,000 aggregate maximum. Prior to the 1986 changes, a graduate or professional
student could borrow $3,000 of Federal SLS Loans per academic year, up to a
$15,000 maximum, and an independent undergraduate student could borrow $2,500 of
Federal SLS Loans per academic year minus the amount of all other Federal Family
Education Loan Program loans to such student for such academic year, up to the
maximum amount of all Federal Family Education Loan Program loans to that
student of $12,500. In 1989, the amount of Federal SLS Loans for students
enrolled in programs of less than an academic year in length were limited in a
manner similar to the limits described above under "Federal Stafford Loans".
Disbursement Requirements
The Higher Education Act now requires that virtually all Federal Stafford
Loans and Federal PLUS Loans be disbursed by eligible lenders in at least two
separate installments. The proceeds of a loan made to any
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undergraduate first-year student borrowing for the first time under the program
must be delivered to the student no earlier than 30 days after the enrollment
period begins.
Repayment
Repayment Periods. Loans made under the Federal Family Education Loan
Program, other than Federal Consolidation Loans, must provide for repayment of
principal in periodic installments over a period of not less than five nor more
than ten years. After the 1998 Amendments, lenders are required to offer
extended repayment schedules to new borrowers who accumulate outstanding Federal
Family Education Loan Program loans of more than $30,000, in which case the
repayment period may extend up to 25 years subject to certain minimum repayment
amounts. A Federal Consolidation Loan must be repaid during a period agreed to
by the borrower and lender, subject to maximum repayment periods which vary
depending upon the principal amount of the borrower's outstanding student loans,
but may not be longer than 30 years. For Federal Consolidation Loans for which
the application was received prior to January 1, 1993, the repayment period
could not exceed 25 years. Repayment of principal on a Stafford Loan does not
commence while a student remains a qualified student, but generally begins upon
expiration of the applicable grace period. Grace periods may be waived by
borrowers. For Federal Stafford Loans for which the applicable rate of interest
is 7% per annum, the repayment period commences not more than twelve months
after the borrower ceases to pursue at least a half-time course of study. For
other Subsidized Federal Stafford Loans and Unsubsidized Federal Stafford Loans,
the repayment period commences not more than six months after the borrower
ceases to pursue at least a half-time course of study. The six month or twelve
month periods are the "grace periods".
In the case of Federal SLS, PLUS and Consolidation Loans, the repayment
period commences on the date of final disbursement of the loan, except that the
borrower of an Federal SLS Loan who also has a Stafford Loan may defer repayment
of the Federal SLS Loan to coincide with the commencement of repayment of the
Subsidized Federal Stafford Loan or Unsubsidized Federal Stafford Loan. During
periods in which repayment of principal is required, payments of principal and
interest must in general be made at a rate of not less than the greater of $600
per year or the interest that accrues during the year, except that a borrower
and lender may agree to a lesser rate at any time before or during the repayment
period. A borrower may agree, with concurrence of the lender, to repay the loan
in less than five years with the right subsequently to extend his minimum
repayment period to five years. Borrowers may accelerate, without penalty, the
repayment of all or any part of the loan.
Each student loan provides for amortization of its outstanding principal
balance over a series of regular payments. Each regular payment consists of an
installment of interest which is calculated on the basis of the outstanding
principal balance of the student loan multiplied by the applicable interest rate
and further multiplied by the period elapsed (as a fraction of a calendar year)
since the preceding payment of interest was made. As payments are received in
respect of the student loan, the amount received is applied first to interest
accrued to the date of payment and the balance is applied to reduce the unpaid
principal balance. Accordingly, if a borrower pays a regular installment before
its scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be less than it would have been
had the payment been made as scheduled, and the portion of the payment applied
to reduce the unpaid principal balance will be correspondingly greater.
Conversely, if a borrower pays a monthly installment after its scheduled due
date, the portion of the payment allocable to interest for the period since the
preceding payment was made will be greater than it would have been had the
payment been made as scheduled, and the portion of the payment applied to reduce
the unpaid principal balance will be correspondingly less. In either case,
subject to any applicable deferral periods or forbearance periods, the borrower
pays a regular installment until the final scheduled payment date, at which time
the amount of the final installment is increased or decreased as necessary to
repay the then outstanding principal balance of the student loan.
Income Sensitive Repayment Schedules. Since 1992, lenders of Federal
Consolidation Loans have been required to establish graduated or
income-sensitive repayment schedules and lenders of Stafford and Federal SLS
Loans have been required to offer borrowers the option of repaying in accordance
with graduated or income-sensitive repayment schedules. SLC Student Loan Trust-I
may implement graduated repayment schedules and income-sensitive repayment
schedules. Use of income-sensitive repayment schedules may extend the ten-year
maximum term for up to five years. In addition, if the repayment schedule on a
loan that has been converted to a variable interest rate does not provide for
adjustments to the amount of the monthly installment payments, the ten-year
maximum term may be extended for up to three years.
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Deferment Periods. No principal repayments need be made during certain
periods of deferment prescribed by the Higher Education Act. For loans to a
borrower who first obtained a loan which was disbursed before July 1, 1993,
deferments are available:
o during a period not exceeding three years while the borrower is a
member of the Armed Forces, an officer in the Commissioned Corps of
the Public Health Service or, with respect to a borrower who first
obtained a student loan disbursed on or after July 1, 1987, or a
student loan to cover the cost of instruction for a period of
enrollment beginning on or after July 1, 1987, an active duty member
of the National Oceanic and Atmospheric Administration Corps;
o during a period not in excess of three years while the borrower is a
volunteer under the Peace Corps Act;
o during a period not in excess of three years while the borrower is a
full-time volunteer under the Domestic Volunteer Act of 1973;
o during a period not exceeding three years while the borrower is in
service, comparable to the service described above as a full-time
volunteer for an organization which is exempt from taxation under
Section 501(c)(3) of the Code;
o during a period not exceeding two years while the borrower is serving
an internship necessary to receive professional recognition required
to begin professional practice or service, or a qualified internship
or residency program;
o during a period not exceeding three years while the borrower is
temporarily totally disabled, as established by sworn affidavit of a
qualified physician, or while the borrower is unable to secure
employment by reason of the care required by a dependent who is so
disabled;
o during a period not to exceed twenty-four months while the borrower is
seeking and unable to find full-time employment;
o during any period that the borrower is pursuing a full-time course of
study at an eligible institution (or, with respect to a borrower who
first obtained a student loan disbursed on or after July 1, 1987, or a
student loan to cover the cost of instruction for a period of
enrollment beginning on or after July 1, 1987, is pursuing at least a
half-time course of study for which the borrower has obtained a loan
under the Federal Family Education Loan Program), or is pursuing a
course of study pursuant to a graduate fellowship program or a
rehabilitation training program for disabled individuals approved by
the Secretary of Education;
o during a period, not in excess of 6 months, while the borrower is on
parental leave; and
o only with respect to a borrower who first obtained a student loan
disbursed on or after July 1, 1987, or a student loan to cover the
cost of instruction for a period of enrollment beginning on or after
July 1, 1987, during a period not in excess of three years while the
borrower is a full-time teacher in a public or nonprofit private
elementary or secondary school in a "teacher shortage area" (as
prescribed by the Secretary of Education), and during a period not in
excess of 12 months for mothers, with preschool age children, who are
entering or re-entering the work force and who are compensated at a
rate not exceeding $1 per hour in excess of the federal minimum wage.
For loans to a borrower who first obtains a loan on or after July 1, 1993,
deferments are available:
o during any period that the borrower is pursuing at least a half-time
course of study at an eligible institution or a course of study
pursuant to a graduate fellowship program or rehabilitation training
program approved by the Secretary of Education;
o during a period not exceeding three years while the borrower is
seeking and unable to find full-time employment; and
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o during a period not in excess of three years for any reason which the
lender determines, in accordance with regulations under the Higher
Education Act, has caused or will cause the borrower economic
hardship. Economic hardship includes working full time and earning an
amount not in excess of the greater of the minimum wage or the poverty
line for a family of two. Additional categories of economic hardship
are based on the relationship between a borrower's educational debt
burden and his or her income.
Prior to the 1992 changes, only certain of the deferment periods described
above were available to Federal PLUS Loan borrowers, and only certain deferment
periods were available to Federal Consolidation Loan borrowers. Prior to the
1986 changes, Federal PLUS Loan borrowers were not entitled to certain deferment
periods. Deferment periods extend the maximum term.
Forbearance Period. The Higher Education Act also provides for periods of
forbearance during which the borrower, in case of temporary financial hardship,
may defer any payments. A borrower is entitled to forbearance for a period not
to exceed three years while the borrower's debt burden under Title IV of the
Higher Education Act (which includes the Federal Family Education Loan Program)
equals or exceeds 20% of the borrower's gross income, and also is entitled to
forbearance while he or she is serving in a qualifying medical or dental
internship program or in a "national service position" under the National and
Community Service Trust Act of 1993. In addition, mandatory administrative
forbearances are provided in exceptional circumstances such as a local or
national emergency or military mobilization, or when the geographical area in
which the borrower or endorser resides has been designated a disaster area by
the President of the United States or Mexico, the Prime Minister of Canada, or
by the governor of a state. In other circumstances, forbearance is at the
lender's option. Forbearance also extends the ten year maximum term.
Interest Payments During Grace, Deferment and Forbearance Periods. The
Secretary of Education makes interest payments on behalf of the borrower of
certain eligible loans while the borrower is in school and during grace and
deferment periods. Interest that accrues during forbearance periods and, if the
loan is not eligible for interest subsidy payments, while the borrower is in
school and during the grace and deferment periods, may be paid monthly or
quarterly or capitalized not more frequently than quarterly.
Fees
Guarantee Fee. A guarantee agency is authorized to charge a premium, or
guarantee fee, of up to 1% of the principal amount of the loan, which must be
deducted proportionately from each installment payment of the proceeds of the
loan to the borrower. Guarantee fees may not currently be charged to borrowers
of Federal Consolidation Loans. However, borrowers may be charged an insurance
fee to cover the costs of increased or extended liability with respect to
Federal Consolidation Loans. For loans made prior to July 1, 1994, the maximum
guarantee fee was 3% of the principal amount of the loan, but no such guarantee
fee was authorized to be charged with respect to Unsubsidized Federal Stafford
Loans.
Origination Fee. An eligible lender is authorized to charge the borrower of
a Subsidized Federal Stafford Loan, an Unsubsidized Federal Stafford Loan or
Federal PLUS Loan an origination fee in an amount not to exceed 5% of the
principal amount of the loan, and is required to charge the borrower of an
Unsubsidized Federal Stafford Loan an or a Federal PLUS Loan origination fee in
the amount of 3% of the principal amount of the loan. These fees must be
deducted proportionately from each installment payment of the loan proceeds
prior to payment to the borrower. These fees are not retained by the lender, but
must be passed on to the Secretary of Education.
Lender Origination Fee. The lender of any loan under the Federal Family
Education Loan Program made on or after October 1, 1993 is required to pay to
the Secretary of Education a fee equal to 0.5% of the principal amount of such
loan.
Rebate Fee on Federal Consolidation Loans. The holder of any Federal
Consolidation Loan made on or after October 1, 1993 is required to pay to the
Secretary of Education a monthly fee equal to .0875% (1.05% per annum) of the
principal amount of, and accrued interest on the Federal Consolidation Loan. For
loans made pursuant to applications received on or after October 1, 1998, and on
or before January 31, 1999 the fee on consolidation loans of 1.05% is reduced to
..62%.
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Interest Subsidy Payments
Interest subsidy payments are interest payments paid with respect to an
eligible loan before the time that the loan enters repayment and during grace
and deferment periods. The Secretary of Education and the guarantee agencies
enter into interest subsidy agreements whereby the Secretary of Education agrees
to pay interest subsidy payments to the holders of eligible guaranteed loans for
the benefit of students meeting certain requirements, subject to the holders'
compliance with all requirements of the Higher Education Act. Only Subsidized
Federal Stafford Loans and Federal Consolidation Loans for which the application
was received on or after January 1, 1993, are eligible for interest subsidy
payments. Federal Consolidation Loans made after August 10, 1993 are eligible
for interest subsidy payments only if all loans consolidated thereby are
Subsidized Federal Stafford Loans, except that Federal Consolidation Loans for
which the application is received by an eligible lender on or after November 13,
1997 and before October 1, 1998, are eligible for interest subsidy payments on
that portion of the Federal Consolidation Loan that repays Subsidized Federal
Stafford Loans or similar subsidized loans made under the direct loan program.
In addition, to be eligible for interest subsidy payments, guaranteed loans must
be made by an eligible lender under the applicable guarantee agency's guarantee
program, and must meet requirements prescribed by the rules and regulations
promulgated under the Higher Education Act.
The Secretary of Education makes interest subsidy payments quarterly on
behalf of the borrower to the holder of a guaranteed loan in a total amount
equal to the interest which accrues on the unpaid principal amount prior to the
commencement of the repayment period of the loan or during any deferment period.
A borrower may elect to forego interest subsidy payments, in which case the
borrower is required to make interest payments.
Special Allowance Payments
The Higher Education Act provides for special allowance payments to be made
by the Secretary of Education to eligible lenders. The rates for special
allowance payments are based on formulas that differ according to the type of
loan, the date the loan was originally made or insured and the type of funds
used to finance the loan (taxable or tax-exempt).
Federal Subsidized Federal Stafford Loans and Unsubsidized Federal Stafford
Loans. The effective formulas for special allowance payment rates for Subsidized
Federal Stafford Loans and Unsubsidized Federal Stafford Loans are summarized in
the following chart. The T-Bill Rate mentioned in the chart refers to the
average of the bond equivalent yield of the 91-day Treasury bills auctioned
during the preceding quarter.
Date of Loans Annualized SAP Rate
- ------------- -------------------
On or after October 1, 1981 T-Bill Rate less Applicable Interest Rate + 3.5%
On or after November 16, 1986 T-Bill Rate less Applicable Interest Rate + 3.25%
On or after October 1, 1992 T-Bill Rate less Applicable Interest Rate + 3.1%
On or after July 1, 1995 T-Bill Rate less Applicable Interest Rate + 2.5%(1)
On or after July 1, 1998 T-Bill Rate less Applicable Interest Rate + 2.8%(2)
On or after January 1, 2000 3-Month Commercial Paper Rate less Applicable
Interest Rate + 2.34%(3)
- ----------
(1) Applies to Subsidized Federal Stafford Loans and Unsubsidized Federal
Stafford Loans prior to the time such loans enter repayment and during any
Deferment Periods
(2) Substitute 2.2% in this formula while such loans are in the grace period.
(3) Substitute 1.74% in this formula while such loans are in-school, grace or
deferment.
The effective formulas for special allowance payment rates for Subsidized
Federal Stafford Loans and Unsubsidized Federal Stafford Loans differ depending
on whether loans to borrowers were acquired or originated with the proceeds of
tax-exempt obligations. There are minimum special allowance payment rates for
Subsidized Federal Stafford Loans and Unsubsidized Federal Stafford Loans
acquired with proceeds of tax-exempt obligations, which rates effectively ensure
an overall minimum return of 9.5% on such loans. However, loans acquired with
the
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proceeds of tax-exempt obligations originally issued after September 30, 1993
are not assured of a minimum special allowance payment.
Federal PLUS and Federal SLS Loans. For Federal PLUS and Federal SLS Loans
which bear interest at rates adjusted annually, special allowance payments are
made only in years during which the interest rate ceiling on such loans operates
to reduce the rate that would otherwise apply based upon the applicable formula.
See "Interest Rates for Federal PLUS Loans" and "Interest Rates for Federal SLS
Loans" in this prospectus. Special allowance payments are paid with respect to
Federal PLUS Loans made on or after October 1, 1992 only if the rate that would
otherwise apply exceeds 10% per annum. For Federal PLUS Loans made after July 1,
1998 and before July 1, 2003, special allowance is paid only if the sum of the
91-day Treasury bill rate determined at an auction held on June 1 of each year
plus 3.1% exceeds 9.0%. The portion, if any, of a Federal Consolidation Loan
that repaid a loan made under Title VII, Sections 700-721 of the Public Health
Services Act, as amended, is ineligible for special allowance payments.
The Higher Education Act provides that if special allowance payments or
interest subsidy payments have not been made within 30 days after the Secretary
of Education receives an accurate, timely and complete request therefor, the
special allowance payable to such holder shall be increased by an amount equal
to the daily interest accruing on the special allowance and interest subsidy
payments due the holder.
Special allowance payments and interest subsidy payments are reduced by the
amount which the lender is authorized or required to charge as an origination
fee. In addition, the amount of the lender origination fee is collected by
offset to special allowance payments and interest subsidy payments.
DESCRIPTION OF THE GUARANTEE AGENCIES
The student loans in the trust estate will be guaranteed by any one or more
guarantee agencies identified in the related prospectus supplement. The
following discussion relates to guarantee agencies under the Federal Family
Education Loan Program.
A guarantee agency guarantees loans made to students or parents of students
by lending institutions such as banks, credit unions, savings and loan
associations, certain schools, pension funds and insurance companies. A
guarantee agency generally purchases defaulted student loans which it has
guaranteed with its reserve fund. A lender may submit a default claim to the
guarantee agency after the student loan has been delinquent for at least 270
days. The default claim package must include all information and documentation
required under the Federal Family Education Loan Program regulations and the
guarantee agency's policies and procedures.
In general, a guarantee agency's reserve fund has been funded principally
by administrative cost allowances paid by the Secretary of Education, guarantee
fees paid by lenders, investment income on moneys in the reserve fund, and a
portion of the moneys collected from borrowers on guaranteed loans that have
been reimbursed by the Secretary of Education to cover the guarantee agency's
administrative expenses.
Various changes to the Higher Education Act have adversely affected the
receipt of revenues by the guarantee agencies and their ability to maintain
their reserve funds at previous levels, and may adversely affect their ability
to meet their guarantee obligations. These changes include:
o the reduction in reinsurance payments from the Secretary of Education
because of reduced reimbursement percentages;
o the reduction in maximum permitted guarantee fees from 3% to 1% for
loans made on or after July 1, 1994;
o the replacement of the administrative cost allowance with a student
loan processing and issuance fee equal to 65 basis points (40 basis
points for loans made on or after October 1, 1993) paid at the time a
loan is guaranteed, and an account maintenance fee of 12 basis points
(10 basis points for fiscal years 2001-2003) paid annually on
outstanding guaranteed student loans;
o the reduction in supplemental preclaims assistance payments from the
Secretary of Education; and
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o the reduction in retention by a guarantee agency of collections on
defaulted loans from 27% to 24% (23% beginning on October 1, 2003).
Additionally, the adequacy of a guarantee agency's reserve fund to meet its
guarantee obligations with respect to existing student loans depends, in
significant part, on its ability to collect revenues generated by new loan
guarantees. The Federal Direct Student Loan Program discussed below may
adversely affect the volume of new loan guarantees. Future legislation may make
additional changes to the Higher Education Act that would significantly affect
the revenues received by guarantee agencies and the structure of the guarantee
agency program.
The Higher Education Act gives the Secretary of Education various oversight
powers over guarantee agencies. These include requiring a guarantee agency to
maintain its reserve fund at a certain required level and taking various actions
relating to a guarantee agency if its administrative and financial condition
jeopardizes its ability to meet its obligations. These actions include, among
others, providing advances to the guarantee agency, terminating the guarantee
agency's federal reimbursement contracts, assuming responsibility for all
functions of the guarantee agency, and transferring the guarantee agency's
guarantees to another guarantee agency or assuming such guarantees. The Higher
Education Act provides that a guarantee agency's reserve fund shall be
considered to be the property of the United States to be used in the operation
of the Federal Family Education Loan Program or the Federal Direct Student Loan
Program, and, under certain circumstances, the Secretary of Education may demand
payment of amounts in the reserve fund.
The 1998 Amendments mandate the recall of guarantee agency reserve funds by
the Secretary of Education amounting to $85 million in fiscal year 2002, $82.5
million in fiscal year 2006, and $82.5 million in fiscal year 2007. However,
certain minimum reserve levels are protected from recall, and under the 1998
Amendments, guarantee agency reserve funds were restructured to provide
guarantee agencies with additional flexibility in choosing how to spend certain
funds they receive. The new recall of reserves for guarantee agencies increases
the risk that resources available to guarantee agencies to meet their guarantee
obligation will be significantly reduced. Relevant federal laws, including the
Higher Education Act, may be further changed in a manner that may adversely
affect the ability of a guarantee agency to meet its guarantee obligations.
Under the Higher Education Act, if the Department of Education has
determined that a guarantee agency is unable to meet its insurance obligations,
the holders of loans guaranteed by such guarantee agency must submit claims
directly to the Department of Education, and the Department of Education is
required to pay the full guarantee payment due with respect thereto in
accordance with guarantee claims processing standards no more stringent than
those applied by the guarantee agency.
There are no assurances as to the Secretary of Education's actions if a
guarantee agency encounters administrative or financial difficulties or that the
Secretary of Education will not demand that a guarantee agency transfer
additional portions or all of its reserve fund to the Secretary of Education.
Information relating to the particular guarantee agencies guaranteeing our
student loans will be set forth in the prospectus supplement.
Federal Agreements
General. A guarantee agency's right to receive federal reimbursements for
various guarantee claims paid by such guarantee agency is governed by the Higher
Education Act and various contracts entered into between guarantees agencies and
the Secretary of Education. Each guarantee agency and the Secretary of Education
have entered into federal reimbursement contracts pursuant to the Higher
Education Act, which provide for the guarantee agency to receive reimbursement
of a percentage of insurance payments that the guarantee agency makes to
eligible lenders with respect to loans guaranteed by the guarantee agency prior
to the termination of the federal reimbursement contracts or the expiration of
the authority of the Higher Education Act. The federal reimbursement contracts
provide for termination under certain circumstances and also provide for certain
actions short of termination by the Secretary of Education to protect the
federal interest.
In addition to guarantee benefits, qualified student loans acquired under
the Federal Family Education Loan Program benefit from certain federal
subsidies. Each guarantee agency and the Secretary of Education have entered
into an Interest Subsidy Agreement under the Higher Education Act which entitles
the holders of eligible loans
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guaranteed by the guarantee agency to receive interest subsidy payments from the
Secretary of Education on behalf of certain students while the student is in
school, during a six to twelve month grace period after the student leaves
school, and during certain deferment periods, subject to the holders' compliance
with all requirements of the Higher Education Act.
United States Courts of Appeals have held that the federal government,
through subsequent legislation, has the right unilaterally to amend the
contracts between the Secretary of Education and the guarantee agencies
described herein. Amendments to the Higher Education Act in 1986, 1987, 1992,
1993, and 1998, respectively
o abrogated certain rights of guarantee agencies under contracts with
the Secretary of Education relating to the repayment of certain
advances from the Secretary of Education,
o authorized the Secretary of Education to withhold reimbursement
payments otherwise due to certain guarantee agencies until specified
amounts of such guarantee agencies' reserves had been eliminated,
o added new reserve level requirements for guarantee agencies and
authorized the Secretary of Education to terminate the Federal
Reimbursement Contracts under circumstances that did not previously
warrant such termination,
o expanded the Secretary of Education's authority to terminate such
contracts and to seize guarantee agencies' reserves, and
o mandated the additional recall of guarantee agency reserve funds.
Federal Insurance and Reimbursement of Guarantee Agencies
Effect of Annual Claims Rate. With respect to loans made prior to October
1, 1993, the Secretary of Education currently agrees to reimburse the guarantee
agency for up to 100% of the amounts paid on claims made by lenders, as
discussed in the formula described below, so long as the eligible lender has
properly serviced such loan. The amount of reimbursement is lower for loans
originated after October 1, 1993, as described below. Depending on the claims
rate experience of a guarantee agency, such reimbursement may be reduced as
discussed in the formula described below. The Secretary of Education also agrees
to repay 100% of the unpaid principal plus applicable accrued interest expended
by a guarantee agency in discharging its guarantee obligation as a result of the
bankruptcy, death, or total and permanent disability of a borrower, or in the
case of a Federal PLUS Loan, the death of the student on behalf of whom the loan
was borrowed, or in certain circumstances, as a result of school closures, which
reimbursements are not to be included in the calculations of the guarantee
agency's claims rate experience for the purpose of federal reimbursement under
the Federal Reimbursement Contracts.
The formula used for loans initially disbursed prior to October 1, 1993 is
summarized below:
Claims Rate Federal Payment
----------- ---------------
0% up to 5% 100%
5% up to 9% 100% of claims up to 5%;
9% and over 90% of claims 5% and over
100% of claims up to 5%;
90% of claims 5% and over, up to 9%;
80% of claims 9% and over
The claims experience is not accumulated from year to year, but is
determined solely on the basis of claims in any one federal fiscal year compared
with the original principal amount of loans in repayment at the beginning of
that year.
The 1993 Amendments reduce the reimbursement amounts described above,
effective for loans initially disbursed on or after October 1, 1993 as follows:
100% reimbursement is reduced to 98%, 90% reimbursement is reduced to 88%, and
80% reimbursement is reduced to 78%, subject to certain limited exceptions. The
1998
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Amendments further reduce the federal reimbursement amounts from 98% to 95%, 88%
to 85%, and 78% to 75% respectively, for student loans first disbursed on or
after October 1, 1998.
The reduced reinsurance for federal guarantee agencies increases the risk
that resources available to guarantee agencies to meet their guarantee
obligation will be significantly reduced.
Reimbursement. The original principal amount of loans guaranteed by a
guarantee agency which are in repayment for purposes of computing reimbursement
payments to a guarantee agency means the original principal amount of all loans
guaranteed by a guarantee agency less:
o the original principal amount of such loans that have been fully
repaid, and
o the original amount of such loans for which the first principal
installment payment has not become due.
Guarantee agencies with default rates below 5% are required to pay the Secretary
of Education annual fees equivalent to 0.51% of new loans guaranteed, while all
other such agencies must pay a 0.5% fee. The Secretary of Education may withhold
reimbursement payments if a guarantee agency makes a material misrepresentation
or fails to comply with the terms of its agreements with the Secretary of
Education or applicable federal law.
Under the guarantee agreements, if a payment on a Federal Family Education
Loan guaranteed by a guarantee agency is received after reimbursement by the
Secretary of Education, the guarantee agency is entitled to receive an equitable
share of the payment.
Any originator of any student loan guaranteed by a guarantee agency is
required to discount from the proceeds of the loan at the time of disbursement,
and pay to the guarantee agency, an insurance premium which may not exceed that
permitted under the Higher Education Act.
Under present practice, after the Secretary of Education reimburses a
guarantee agency for a default claim paid on a guaranteed loan, the guarantee
agency continues to seek repayment from the borrower. The guarantee agency
returns to the Secretary of Education payments that it receives from a borrower
after deducting and retaining: a percentage amount equal to the complement of
the reimbursement percentage in effect at the time the loan was reimbursed, and
an amount equal to 24% of such payments for certain administrative costs. The
Secretary of Education may, however, require the assignment to the Secretary of
Education of defaulted guaranteed loans, in which event no further collections
activity need be undertaken by the guarantee agency, and no amount of any
recoveries shall be paid to the guarantee agency.
A guarantee agency may enter into an addendum to its Interest Subsidy
Agreement that allows the guarantee agency to refer to the Secretary of
Education certain defaulted guaranteed loans. Such loans are then reported to
the IRS to "offset" any tax refunds which may be due any defaulted borrower. To
the extent that the guarantee agency has originally received less than 100%
reimbursement from the Secretary of Education with respect to such a referred
loan, the guarantee agency will not recover any amounts subsequently collected
by the federal government which are attributable to that portion of the
defaulted loan for which the guarantee agency has not been reimbursed.
Rehabilitation of Defaulted Loans. Under the Higher Education Act, the
Secretary of Education is authorized to enter into an agreement with a guarantee
agency pursuant to which the guarantee agency shall sell defaulted loans that
are eligible for rehabilitation to an eligible lender. The guarantee agency
shall repay the Secretary of Education an amount equal to 81.5% of the then
current principal balance of such loan, multiplied by the reimbursement
percentage in effect at the time the loan was reimbursed. The amount of such
repayment shall be deducted from the amount of federal reimbursement payments
for the fiscal year in which such repayment occurs, for purposes of determining
the reimbursement rate for that fiscal year.
For a loan to be eligible for rehabilitation, the guarantee agency must
have received consecutive payments for 12 months of amounts owed on such loan.
Upon rehabilitation, a loan is eligible for all the benefits under the Higher
Education Act for which it would have been eligible had no default occurred
(except that a borrower's loan may only be rehabilitated once).
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Eligibility for Federal Reimbursement. To be eligible for federal
reimbursement payments, guaranteed loans must be made by an eligible lender
under the applicable guarantee agency's guarantee program, which must meet
requirements prescribed by the rules and regulations promulgated under the
Higher Education Act, including the borrower eligibility, loan amount,
disbursement, interest rate, repayment period and guarantee fee provisions
described herein and the other requirements set forth in the Higher Education
Act.
Prior to the 1998 Amendments, a Federal Family Education Loan was
considered in to be in default for purposes of the Higher Education Act when the
borrower failed to make an installment payment when due, or to comply with the
other terms of the loan, and if the failure persists for 180 days in the case of
a loan repayable in monthly installments or for 240 days in the case of a loan
repayable in less frequent installments. Under the 1998 Amendments, the
delinquency period required for a student loan to be declared in default is
increased from 180 days to 270 days for loans payable in monthly installments on
which the first day of delinquency occurs on or after the date of enactment of
the 1998 Amendments and from 240 days to 330 days for a loan payable less
frequently than monthly on which the delinquency occurs after the date of
enactment of the 1998 Amendments.
The guarantee agency must pay the lender for the defaulted loan prior to
submitting a claim to the Secretary of Education for reimbursement. The
guarantee agency must submit a reimbursement claim to the Secretary of Education
within 45 days after it has paid the lender's default claim. As a prerequisite
to entitlement to payment on the guarantee by the guarantee agency, and in turn
payment of reimbursement by the Secretary of Education, the lender must have
exercised reasonable care and diligence in making, servicing and collecting the
guaranteed loan. Generally, these procedures require:
o that completed loan applications be processed;
o a determination of whether an applicant is an eligible borrower
attending an eligible institution under the Higher Education Act be
made;
o the borrower's responsibilities under the loan be explained to him or
her;
o the promissory note evidencing the loan be executed by the borrower;
and
o that the loan proceeds be disbursed by the lender in a specified
manner.
After the loan is made, the lender must establish repayment terms with the
borrower, properly administer deferments and forbearances and credit the
borrower for payments made. If a borrower becomes delinquent in repaying a loan,
a lender must perform certain collection procedures, primarily telephone calls,
demand letters, skiptracing procedures and requesting assistance from the
applicable guarantee agency, that vary depending upon the length of time a loan
is delinquent.
Direct Loans
The 1993 Amendments authorized a program of "direct loans," to be
originated by schools with funds provided by the Secretary of Education. Under
the direct loan program, the Secretary of Education is directed to enter into
agreements with schools, or origination agents in lieu of schools, to disburse
loans with funds provided by the Secretary of Education. Participation in the
program by schools is voluntary. The goals set forth in the 1993 Amendments call
for the direct loan program to constitute 5% of the total volume of loans made
under the Federal Family Education Loan Program and the direct loan program for
academic year 1994-1995, 40% for academic year 1995-1996, 50% for academic years
1996-1997 and 1997-1998 and 60% for academic year 1998-1999. No provision is
made for the size of the direct loan program thereafter. Based upon information
released by the General Accounting Office, participation by schools in the
direct loan program has not been sufficient to meet the goals for the 1995-1996
or 1996-1997 academic years. The 1998 Amendments removed references to the
"phase-in" of the Direct Loan Program, including restrictions on annual limits
for Direct Loan Program volume and the Secretary of Education's authority to
select additional institutions to achieve balanced school representation.
The loan terms are generally the same under the direct loan program as
under the Federal Family Education Loan Program, though more flexible repayment
provisions are available under the direct loan program. At the discretion of the
Secretary of Education, students attending schools that participate in the
direct loan program (and
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their parents) may still be eligible for participation in the Federal Family
Education Loan Program, though no borrower could obtain loans under both
programs for the same period of enrollment.
It is difficult to predict the impact of the direct lending program. There
is no way to accurately predict the number of schools that will participate in
future years, or, if the Secretary of Education authorizes students attending
participating schools to continue to be eligible for Federal Family Education
Loan Program loans, how many students will seek loans under the direct loan
program instead of the Federal Family Education Loan Program. In addition, it is
impossible to predict whether future legislation will eliminate, limit or expand
the direct loan program or the Federal Family Education Loan Program.
Guarantee Agencies
Although SLC Student Loan Trust-I expects that most of the student loans it
acquires under the indenture will be guaranteed by the guarantee agencies
described in the related prospectus supplement, SLC Student Loan Trust-I may
acquire student loans under the indenture which are guaranteed by other
guarantee agencies with the approval of the rating agencies.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
General
The following discussion, which is based on the advice of counsel to be
specified in the prospectus supplement, summarizes certain of the U.S. federal
income tax consequences of the purchase, ownership and disposition of notes.
Except as provided below under "U.S. Federal Income Tax Treatment of Non-U.S.
Holders of Notes," this summary deals only with a beneficial owner of the notes
that is (i) a citizen or resident of the United States, (ii) a corporation (or
other entity that is treated as a corporation for U.S. federal tax purposes)
that is created or organized in or under the laws of the United States or any
State thereof (including the District of Columbia), (iii) an estate the income
of which is subject to U.S. federal income taxation regardless of its source, or
(iv) a trust if a court within the United States is able to exercise primary
supervision over its administration and one or more United States persons have
the authority to control all of its substantial decisions (each, a "U.S.
Holder"). If a partnership (including any entity that is treated as a
partnership for U.S. federal tax purposes) is a beneficial owner of notes, the
treatment of a partner in the partnership will generally depend upon the status
of the partner and upon the activities of the partnership. A beneficial owner of
notes that is a partnership, and partners in such a partnership, should consult
their tax advisors about the U.S. federal income tax consequences of holding and
disposing of the notes. A "Non-U.S. Holder" is a beneficial owner of a note that
is not a U.S. Holder.
This discussion is based on interpretations of the Internal Revenue Code of
1986, as amended (the "Code"), regulations issued thereunder, and rulings and
decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal income tax consequences described herein. This
summary addresses only U.S. Holders that purchase notes at initial issuance and
beneficially own such notes as capital assets and not as part of a "straddle,"
"hedge," "synthetic security" or a "conversion transaction" for federal income
tax purposes, or as part of some other integrated investment. This summary does
not discuss all of the tax consequences that may be relevant to particular
investors or to investors subject to special treatment under the federal income
tax laws (such as banks, thrifts, insurance companies, retirement plans, real
estate investment trusts, regulated investment companies, securities dealers or
investors whose functional currency is not the U.S. dollar). Accordingly,
prospective investors are urged to consult their tax advisors with respect to
the federal, state and local tax consequences of investing in the notes, as well
as any consequences arising under the laws of any other taxing jurisdiction to
which they may be subject.
Tax Characterization of the Trust.
In the opinion of Cadwalader, Wickersham & Taft, the trust, which issues
one or more classes of notes to investors and all of the equity interests of
which are retained by a single beneficial owner, will not be treated as an
association (or publicly traded partnership) taxable as a corporation for
federal income tax purposes, assuming that the terms of the trust agreement and
related documents will be complied with.
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However, if one or more classes of notes are treated as equity rather than
indebtedness for federal income tax purposes the trust could be treated as a
partnership or publicly traded partnership taxable as a corporation, as
described below.
Tax Consequences to Holders of the Notes.
Treatment of the Notes as Indebtedness. There are no regulations, published
rulings or judicial decisions involving the characterization for federal income
tax purposes of securities with terms substantially the same as the notes. The
Indenture requires the trust and all holders to treat the notes as indebtedness
for U.S. federal, state and local income and franchise tax purposes. Based on a
number of factors including certain representations of the trust, certain
information provided by the underwriters regarding the student loans to be
acquired by the trust, and the assumption that the holders will in fact treat
the notes as indebtedness for U.S. federal, state and local income and franchise
tax purposes, in the opinion of Cadwalader, Wickersham & Taft, the notes will be
treated as indebtedness for U.S. federal income tax purposes. However, because
no specific authority exists with respect to the characterization for U.S.
federal income tax purposes of securities having terms substantially similar to
the notes, the IRS could assert, and a court could ultimately hold, that the
notes constitute equity in the trust for U.S. federal income tax purposes. If
the notes are treated as equity in, rather than debt of, the trust for U.S.
federal tax purposes, there may be adverse tax consequences to a U.S. Holder of
the notes. If the notes are treated as equity in the trust, the trust could be
treated as a publicly traded partnership that would be taxable as a corporation.
In this case, the entity would be subject to U.S. federal income taxes at
corporate tax rates on its taxable income generated by student loans. An
entity-level tax could result in reduced distributions to noteholders and
noteholders could be liable for a share of the tax.
Furthermore, even if the trust is not taxable as a corporation, the
treatment of notes as equity interests in a partnership could have adverse tax
consequences to holders of the notes. For example, income from classes of notes
to tax-exempt entities (including pension funds) might be "unrelated business
taxable income," income to foreign holders may be subject to U.S. withholding
tax and U.S. tax return filing requirements, individual holders might be subject
to limitations on their ability to deduct their share of trust expenses, and
holders would be required to report income from the trust for each of their own
taxable years in which the taxable year of the trust ends. In addition, a holder
that is a cash basis taxpayer would be required to report income with respect to
the trust when it accrues, rather than under the cash method of accounting.
The trust's characterization of the notes as indebtedness for U.S. federal
income tax purposes will be binding on U.S. holders. Except as otherwise
indicated, the balance of this summary assumes that the notes are treated as
indebtedness for U.S. federal, state and local income and franchise tax
purposes.
Stated Interest. Except as otherwise provided in a related Prospectus
Supplement, stated interest on the notes will be taxable to a U.S. Holder as
ordinary interest income as the interest accrues or is paid (in accordance with
the holder's method of tax accounting).
Original Issue Discount. If so provided in a related Prospectus Supplement,
a note may be issued with original issue discount. A debt instrument has
original issue discount to the extent its "stated redemption price at maturity"
exceeds its "issue price" (each as defined below) by more than a de minimis
amount (generally 0.25% of the security's stated redemption price at maturity
multiplied by the number of years to its maturity, based on the anticipated
weighted average life of the securities and weighing each payment by reference
to the number of full years elapsed from the closing date to the anticipated
date of such payment). A note's "stated redemption price at maturity" includes
all payments thereon other than payments of "qualified stated interest," and its
"remaining stated redemption price at maturity" at any time is the sum of all
future payments to be made thereon other than payments of "qualified stated
interest." Except as otherwise provided in a related Prospectus Supplement, all
stated interest on the notes will be treated as qualified stated interest. The
term "issue price" generally means the price (including any pre-issuance accrued
interest) at which a substantial portion of such debt instruments was first sold
to investors.
U.S. Holders generally will be required to include non-de minimis original
issue discount on the notes in income as it accrues, without regard to the
timing of receipt of the cash attributable to such income or to the U.S.
Holder's method of accounting. Such discount would accrue under a constant yield
method based on the original yield to maturity of the instrument calculated by
reference to its issue price.
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If a U.S. Holder is considered to purchase a note issued with original
issue discount at a price that exceeds its "adjusted issue price" (as defined
below), such holder may reduce its original issue discount income by the
proportion of the aggregate amount of original issue discount remaining to be
accrued as of the time of the purchase that is represented by such excess. No
amount of original issue discount need be included in income if the purchase
price equals or exceeds the remaining stated redemption price at maturity. The
"adjusted issue price" of notes at any time is the sum of their issue price and
the amount of previously accrued original issue discount, reduced by the sum of
all prior payments of amounts other than qualified stated interest.
Premium and Market Discount. In the event that the notes are considered to
be purchased by a U.S. Holder at a price greater than their remaining stated
redemption price at maturity, they will be considered to have been purchased at
a premium. The noteholder may elect to amortize such premium (as an offset to
interest income), using a constant yield method, over the remaining term of the
notes. Special rules apply to determine the amount of premium on a "variable
rate debt instrument" and certain other debt instruments. Prospective U.S.
Holders should consult their tax advisors regarding the amortization of bond
premium.
In the event notes are considered to be purchased by a U.S. Holder at a
price that is lower than their remaining stated redemption price at maturity, or
in the case of notes issued with original issue discount, their adjusted issue
price, by more than a de minimis amount (generally 0.25% of their remaining
stated redemption price at maturity multiplied by the number of remaining years
to their maturity, based on the anticipated weighted average life of the
securities and weighting each payment by reference to the number of full years
elapsed from the closing date to the anticipated date of such payment, the notes
will be considered to have "market discount" in the hands of such U.S. Holder.
In that event, unless the U.S. Holder elects to include such market discount in
income as it accrues, gain realized by the U.S. Holder on the sale or retirement
of the notes will be treated as ordinary income to the extent of the market
discount that accrued thereon while it was considered to be held by such U.S.
Holder. In addition, the U.S. Holder could be required to defer the deduction of
all or a portion of the interest paid on any indebtedness incurred or continued
to purchase or carry the note unless the U.S. Holder elected to include market
discount in income currently. Such an election applies to all debt instruments
held by a taxpayer and may not be revoked without the consent of the IRS. In
general terms, market discount on notes will accrue ratably over the term of
such notes or, at the election of the holder, under a constant yield method.
Tax Basis. A U.S. Holder's initial tax basis in the notes will equal the
purchase price, and generally will be increased by any amounts of original issue
discount or market discount includible in income with respect thereto, and
reduced by any payments other than qualified stated interest and any amortized
premium with respect thereto.
Sale, Exchange and Retirement of Notes. Upon the sale, exchange or
retirement of notes, a U.S. Holder generally will recognize gain or loss equal
to the difference between the amount realized on the sale, exchange or
retirement of the notes and the U.S. Holder's tax basis in the notes.
Except as discussed above with respect to market discount, gain or loss
recognized by a U.S. Holder in respect of the sale, exchange, redemption or
other disposition of notes generally will be capital gain or loss, and will be
long-term capital gain or loss if the U.S. Holder is treated as having held the
notes for more than one year at the time of such disposition. The ability to use
capital losses to offset ordinary income in determining taxable income generally
is limited.
Tax-Exempt Organizations.
Except as otherwise provided in a related Prospectus Supplement, income or
gain from the notes held by a tax-exempt organization will not be subject to the
tax on unrelated business taxable income if the notes are not "debt financed"
property.
Foreign Investors.
Treatment of Interest. Non-U.S. Holders will not be subject to U.S. federal
income or withholding tax in respect of interest income or gain on the notes if
(1) the Non-U.S. Holder provides an appropriate statement, signed under
penalties of perjury, identifying the Non-U.S. Holder and stating, among other
things, that the Non-U.S. Holder is not a U.S. person, and (2) the Non-U.S.
Holder is not a "10-percent shareholder" or "related controlled foreign
corporation" with respect to the Issuer, unless certain exceptions apply. To the
extent these conditions are not met, a
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30% withholding tax will apply to interest income on the notes, unless an income
tax treaty reduces or eliminates such tax or the interest is effectively
connected with the conduct of a trade or business within the United States by
such Non-U.S. Holder. In the latter case, such Non-U.S. Holder will be subject
to U.S. federal income tax with respect to all income from the notes at regular
rates applicable to U.S. taxpayers.
Treatment of Disposition of Notes. Generally, a Non-U.S. Holder will not be
subject to federal income tax on any amount which constitutes capital gain upon
the sale, exchange, retirement or other disposition of a debt instrument unless
such Holder is an individual present in the United States for 183 days or more
in the taxable year of the sale, exchange, retirement or other disposition and
certain other conditions are met, or unless the gain is effectively connected
with the conduct of a trade or business in the United States by such Non-U.S.
Holder. If the gain is effectively connected with the conduct of a trade or
business in the United States by such Non-U.S. Holder, such Non-U.S. Holder will
generally be subject to U.S. federal income tax with respect to such gain in the
same manner as U.S. Holders, as described above, and a Non-U.S. Holder that is a
corporation could be subject to a branch profits tax on such income as well.
Backup Withholding and Information Reporting.
Backup withholding tax and certain information reporting requirements may
apply to payments of principal, premium and interest (including any original
issue discount) made to, and the proceeds of disposition of a note by, a U.S.
Holder. Backup withholding will apply only if (i) the U.S. Holder fails to
furnish its Taxpayer Identification Number to the payor in the manner required,
(ii) the IRS notifies the payor that the U.S. Holder has furnished an incorrect
Taxpayer Identification Number, (iii) the IRS notifies the payor that the U.S.
Holder has failed to report properly payments of interest and dividends or (iv)
under certain circumstances, the U.S. Holder fails to certify, under penalty of
perjury, that it has both furnished a correct Taxpayer Identification Number and
not been notified by the IRS that it is subject to backup withholding for
failure to report interest and dividend payments. Backup withholding will not
apply with respect to payments made to certain exempt recipients, such as
corporations and financial institutions. U.S. Holders should consult their tax
advisors regarding their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption.
Backup withholding tax is not an additional tax. The amount of any backup
withholding from a payment to a U.S. Holder will be allowed as a credit against
the holder's federal income tax liability and may entitle the holder to a
refund, provided that the required information is furnished to the IRS.
State, Local And Foreign Taxes.
Noteholders may be subject to state, local or foreign taxes with respect to
an investment in the notes. Prospective investors are urged to consult their tax
advisors with respect to the state, local and foreign tax consequences of an
investment in the notes.
THE FEDERAL TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A NOTEHOLDER'S
PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain fiduciary and prohibited transaction restrictions on employee
pension and welfare benefit plans subject to ERISA ("ERISA Plans"). Section 4975
of the Code imposes essentially the same prohibited transaction restrictions on
tax-qualified retirement plans described in Section 401(a) of the Code
("Qualified Retirement Plans") and on Individual Retirement Accounts ("IRAs")
described in Section 408(b) of the Code (collectively, "Tax-Favored Plans").
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA), and, if no election has been made under Section 410(d)
of the Code, church plans (as defined in Section 3(33) of ERISA), are not
subject to
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Title I of ERISA. However, such plans may be subject to the provisions of
applicable federal, state or local law ("Similar Law") materially similar to the
foregoing provisions of ERISA or the Code. Moreover, any such governmental plan
or church plan which is qualified under Section 401(a) and exempt from taxation
under Section 501(a) of the Code is subject to the prohibited transaction rules
set forth in Section 503 of the Code.
In addition to the imposition of general fiduciary requirements including
those of investment prudence and diversification and the requirement that an
ERISA Plan's investment be made in accordance with the documents governing the
ERISA Plan, Section 406 of ERISA and Section 4975 of the Code prohibit a broad
range of transactions involving assets of ERISA Plans and Tax-Favored Plans and
entities whose underlying assets include plan assets by reason of ERISA Plans or
Tax-Favored Plans investing in such entities (collectively hereafter "Plan" or
"Plans") and persons ("Parties in Interest" or "Disqualified Persons") who have
certain specified relationships to the Plans, unless a statutory or
administrative exemption is available. Certain Parties in Interest (or
Disqualified Persons) that participate in a prohibited transaction may be
subject to a penalty (or an excise tax) imposed pursuant to Section 502(i) of
ERISA or Section 4975 of the Code unless a statutory or administrative exemption
is available. Section 502(l) of ERISA requires the Secretary of the U.S.
Department of Labor (the "DOL") to assess a civil penalty against a fiduciary
who breaks any fiduciary responsibility under or commits any other violation of
part 4 of Title I of ERISA or any other person who knowingly participates in
such breach or violation.
The investment in a security by a Plan may, in certain circumstances, be
deemed to include an investment in the assets of SLC Student Loan Trust-I. The
DOL has promulgated regulations set forth at 29 CFR ss. 2510.3-101 (the
"Regulations") concerning whether or not an ERISA Plan's assets would be deemed
to include an interest in the underlying assets of an entity (such as a Trust
Fund) for purposes of the general fiduciary responsibility provisions of ERISA
and for the prohibited transaction provisions of ERISA and the Code, when a Plan
acquires an "equity interest" in such entity.
Under such Regulations the assets of an ERISA Plan will not include an
interest in the assets of an entity, the equity interests of which are acquired
by the ERISA Plan, if at no time do ERISA Plans in the aggregate own 25% or more
of the value of any class of equity interests in such entity. Because the
availability of this exemption depends upon the identity of the registered
owners at any time, there can be no assurance that the notes will qualify for
this exemption.
The Regulations also provide an exemption from "plan asset" treatment for
securities issued by an entity if such securities are debt securities under
applicable state law with no "substantial equity features." Except as otherwise
specified with respect to a Series in the related prospectus supplement, the
notes are intended to represent debt of SLC Student Loan Trust-I for state law
and federal income tax purposes; however, there can be no assurance that the DOL
will not challenge such position. Assuming that a class of notes will be
considered debt with no substantial equity features for purposes of the
Regulations, the assets of the Trust will not be characterized as "plan assets"
under the Regulations. The related prospectus supplement will set forth whether
any class of notes may be purchased by Plans or governmental or church plans
subject to Similar Law.
Without regard to whether the notes are treated as an "equity interest" for
such purposes, the acquisition or holding of notes by or on behalf of a Plan
could be considered to give rise to a prohibited transaction if SLC Student Loan
Trust-I or any of their respective affiliates is or becomes a Party in Interest
or Disqualified Person with respect to such Plan, or in the event that a note is
purchased in the secondary market by a Plan from a Party in Interest or
Disqualified Person with respect to such Plan. There can be no assurance that
SLC Student Loan Trust-I or any of their respective affiliates will not be or
become a party in interest or a disqualified person with respect to a Plan that
acquires notes. However, one or more of the following prohibited transaction
class exemptions may apply to the acquisition, holding and transfer of the
notes: Prohibited Transaction Class Exemption ("PTCE") 84-14 (regarding
investments by qualified professional asset managers), PTCE 90-1 (relating to
investments by insurance company pooled separate accounts), PTCE 91-38
(regarding investments by bank collective investment funds), PTCE 95-60
(regarding investments by insurance company general accounts) and PTCE 96-23
(regarding investments by in-house asset managers).
Any ERISA Plan fiduciary considering whether to purchase notes of any
Series on behalf of an ERISA Plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the Code to such investment and the availability of any
of the exemptions referred to above. Persons responsible for investing the
assets of Tax-Favored Plans that are not ERISA Plans should seek
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similar counsel with respect to the prohibited transaction provisions of the
Code. Fiduciaries of plans subject to Similar Law should make a similar
determination.
PLAN OF DISTRIBUTION
SLC Student Loan Trust-I may sell the notes of each series to or through
underwriters by "best efforts" underwriting or a negotiated firm commitment
underwriting by the underwriters, and also may sell the notes directly to other
purchasers or through agents. If so indicated in the prospectus supplement, SLC
Student Loan Trust-I may sell such notes, directly or through agents, through a
competitive bidding process described in the applicable prospectus supplement.
SLC Student Loan Trust-I intends that notes will be offered through such various
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of a particular series of the
notes may be made through a combination of such methods.
The distribution of the notes may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, or at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices based, among other things, upon existing
interest rates, general economic conditions and investors' judgments as to the
price of the notes.
In connection with the sale of the notes, underwriters may receive
compensation from SLC Student Loan Trust-I or from the purchasers of such notes
for whom they may act as agents in the form of discounts, concessions or
commissions. Underwriters may sell the notes of a series to or through dealers
and those dealers may receive compensation in the form of discounts, concessions
or commissions from the underwriters or commissions from the purchasers for whom
they may act as agents. Underwriters, dealers and agents that participate in the
distribution of the notes may be deemed to be underwriters and any discounts or
commissions received by them from SLC Student Loan Trust-I and any profit on the
resale of the notes by them may be deemed to be underwriting discounts and
commissions under the Securities Act. The underwriters will be identified, and
any compensation received from SLC Student Loan Trust-I will be described, in
the applicable prospectus supplement.
Under agreements which may be entered into by SLC Student Loan Trust-I, the
underwriters and agents who participate in the distribution of the notes may be
entitled to indemnification by SLC Student Loan Trust-I against liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribution with respect to payments which the underwriters or agents may be
required to make in respect thereto.
If so indicated in the prospectus supplement, SLC Student Loan Trust-I will
authorize underwriters or other persons acting as SLC Student Loan Trust-I's
agents to solicit offers by certain institutions to purchase the notes from SLC
Student Loan Trust-I pursuant to contracts providing for payment and delivery on
a future date. Institutions with which these contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all cases
the institutions must be approved by SLC Student Loan Trust-I. The obligation of
any purchaser under any contract will be subject to the condition that the
purchaser of the notes shall not be prohibited by law from purchasing such
notes. The underwriters and other agents will not have responsibility in respect
of the validity or performance of these contracts.
The underwriters may, from time to time, buy and sell notes, but there can
be no assurance that an active secondary market will develop and there is no
assurance that any market, if established, will continue.
LEGAL MATTERS
The validity of the notes will be passed upon by Cadwalader, Wickersham &
Taft as counsel to the trust, the depositor and the seller and servicer. Other
counsel, if any, passing upon legal matters for SLC Student Loan Trust-I or any
placement agent or underwriter will be identified in the related prospectus
supplement.
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RATINGS
It is a condition to the issuance of the notes that notes publicly offered
be rated by at least one nationally recognized statistical rating organization
in one of its generic rating categories which signifies investment grade
(typically, in one of the four highest rating categories). The specific ratings
for each class of notes will be described in the related prospectus supplement.
A securities rating addresses the likelihood of the receipt by owners of
the notes of payments of principal and interest with respect to their notes from
assets in the trust estate. The rating takes into consideration the
characteristics of the student loans, and the structural, legal and tax aspects
associated with the rated notes. The rating does not address any expected
schedule of principal repayments other than repayment of principal on the final
maturity date. There is no assurance that the ratings initially assigned to any
notes will not be lowered or withdrawn by the rating agency. In the event the
rating initially assigned to any securities is subsequently lowered for any
reason, no person or entity will be obligated to provide any credit enhancement
unless otherwise specified in the related prospectus supplement.
A securities rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each securities rating should be evaluated independently of
similar ratings on different securities.
INCORPORATION OF DOCUMENTS BY REFERENCE;
WHERE TO FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act
of 1934 and to comply with those requirements, we will file annual, quarterly
and special reports and other information with the SEC. The SEC allows us to
incorporate by reference into this prospectus the information we file with them,
which means that we can disclose important information to you by referring you
to the reports we file with the SEC. We hereby incorporate by reference all
periodic reporting documents we file with the SEC after the date of this
prospectus until the termination of the offering of the notes or if later, and
so long as market making transactions of Salomon Smith Barney Inc., an affiliate
of The Student Loan Corporation with respect to the notes are not exempt from
registration provisions of the Securities Act, the end of any period of such
market making transactions.
We will provide you, without charge, a copy of any of the documents
incorporated by reference upon written or oral request directed to SLC Student
Loan Trust-I, at 750 Washington Boulevard, 9th Floor, Stamford, CT 06901, or by
phone at (203) 975-6112.
You may read and copy our registration statement and reports and other
information that we file with the SEC at the SEC's Public Reference Room at 450
Fifth Street, NW, Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In
addition, the SEC maintains a website at http://www.sec.gov from which our
registration statement and reports are available. Our parent company maintains a
web site that provides information concerning our company at
http://www.ufscorp.com.
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GLOSSARY OF TERMS
Some of the terms used in this prospectus are defined below. The indenture
contains the definition of other terms used in this prospectus and reference is
made to the indenture for those definitions.
"Auction Date" means, with respect to any class of auction rate securities,
the date specified in the related prospectus supplement, and thereafter, the
business day immediately preceding the first day of each auction period for each
respective class, other than:
(a) each auction period commencing after the ownership of the
applicable auction rate securities is no longer maintained in book-entry
form by the securities depository;
(b) each auction period commencing after and during the continuance of
a payment default; or
(c) each auction period commencing less than the applicable number of
business days after the cure or waiver of a payment default.
"Book-Entry Form" or "Book-Entry System" means a form or system under which
(a) the beneficial right to principal and interest may be transferred only
through a book entry, (b) physical securities in registered form are issued only
to a securities depository or its nominee as registered owner, with the
securities "immobilized" to the custody of the securities depository, and (c)
the book entry is the record that identifies the owners of beneficial interests
in that principal and interest.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time. Each reference to a section of the Code herein shall be deemed to
include the United States Treasury Regulations, including temporary and proposed
regulations, relating to such section which are applicable to the notes of the
use of the proceeds thereof. A reference to any specific section of the Code
shall be deemed also to be a reference to the comparable provisions of any
enactment which supersedes or replaces the Code thereunder from time to time.
"Commercial Paper Rate (90-day)" shall mean the rate determined at the end
of each calendar quarter using the daily average of that quarter's bond
equivalent 3-Month Financial Commercial Paper rates. The daily bond equivalent
rates are calculated from the 3-Month Financial Commercial Paper discount rates
published in the Federal Reserve's H.15 report. On weekends, holidays, and any
other day when no H.15 rates are available, the rate from the most recent
published date is used.
"Derivative Product" shall mean a written contract or agreement between
SLC Student Loan Trust-I and a counterparty, which provides that SLC Student
Loan Trust-I's obligations thereunder will be conditioned on the absence of (i)
a failure by the counterparty to make any payment required thereunder when due
and payable, or (ii) a default thereunder with respect to the financial status
of the counterparty, and:
(a) under which SLC Student Loan Trust-I is obligated to pay (whether
on a net payment basis or otherwise) on one or more scheduled and specified
derivative payment dates, SLC Student Loan Trust-I derivative payments in
exchange for the counterparty' s obligation to pay (whether on a net
payment basis or otherwise), or to cause to be paid, to SLC Student Loan
Trust-I, reciprocal payments on one or more scheduled and specified
derivative payment dates in the amounts set forth in the derivative
product;
(b) for which SLC Student Loan Trust-I's obligation to make derivative
payments may be secured by a pledge of and lien on the trust estate on an
equal and ratable basis with any class of SLC Student Loan Trust-I's
outstanding notes and which derivative payments may be equal in priority
with any priority classification of SLC Student Loan Trust-I's outstanding
notes; and (c) under which reciprocal payments are to be made directly to
the indenture trustee for deposit into the Revenue Fund.
"Event of Bankruptcy" shall mean:
(a) SLC Student Loan Trust-I shall have commenced a voluntary case or
other proceeding seeking liquidation, reorganization, or other relief with
respect to itself or its debts under any bankruptcy, insolvency, or
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other similar law now or hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian, or other similar official of it
or any substantial part of its property, or shall have made a general
assignment for the benefit of creditors, or shall have declared a
moratorium with respect to its debts or shall have failed generally to pay
its debts as they become due, or shall have taken any action to authorize
any of the foregoing; or
(b) an involuntary case or other proceeding shall have been commenced
against SLC Student Loan Trust-I seeking liquidation, reorganization, or
other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian, or other similar
official of it or any substantial part of its property provided such action
or proceeding is not dismissed within 60 days.
"Federal Reimbursement Contracts" shall mean the agreements between the
guarantee agency and the Secretary of Education providing for the payment by the
Secretary of Education of amounts authorized to be paid pursuant to the Higher
Education Act, including (but not necessarily limited to) reimbursement of
amounts paid or payable upon defaulted student loans and other student loans
guaranteed or insured by the guarantee agency and interest benefit payments and
special allowance payments to holders of qualifying student loans guaranteed or
insured by the guarantee agency.
"Funds" shall mean the funds created under Section 5.01 of the indenture
and held by the indenture trustee, including the Acquisition Fund, the Revenue
Fund and the Reserve Fund.
"Guarantee" or "Guaranteed" shall mean, with respect to student loan, the
insurance or guarantee by the guarantee agency pursuant to such guarantee
agency's guarantee agreement of the maximum percentage of the principal of and
accrued interest on such student loan allowed by the terms of the Higher
Education Act with respect to such student loan at the time it was originated
and the coverage of such student loan by the federal reimbursement contracts,
providing, among other things, for reimbursement to the guarantee agency for
payments made by it on defaulted student loans insured or guaranteed by the
guarantee agency of at least the minimum reimbursement allowed by the Higher
Education Act with respect to a particular student loan.
"Guarantee Agreements" shall mean a guaranty or lender agreement between
the indenture trustee and any guarantee agency, and any amendments thereto.
"Guarantee agency" shall mean any entity authorized to guarantee student
loans under the Higher Education Act and with which the indenture trustee
maintains a guarantee agreement.
"Higher Education Act" shall mean the Higher Education Act of 1965, as
amended or supplemented from time to time, or any successor federal act and all
regulations, directives, bulletins, and guidelines promulgated from time to time
thereunder.
"Indenture" shall mean the indenture of trust between SLC Student Loan
Trust-I and Deutsche Bank Trust Company Americas (formerly known as Bankers
Trust Company), as indenture trustee, including all supplements and amendments
thereto.
"Treasury Bill Rate" shall mean the bond equivalent yield for auctions of
91-day United States Treasury Bills on the first day of each calendar week on
which the United States Treasury auctions 91-day Treasury Bills, which currently
is the United States Treasury's first business day of each week.
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================================================================================
$206,200,000
SLC Student Loan Trust-I
Issuer
Student Loan Asset-Backed Notes
Series 2002-2
--------
PROSPECTUS SUPPLEMENT
--------
Salomon Smith Barney Merrill Lynch & Co.
November 11, 2002
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING NOTES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
WE REPRESENT THE ACCURACY OF THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND PROSPECTUS ONLY AS OF THE DATES OF THEIR RESPECTIVE COVERS.
UNTIL NINETY DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT ALL DEALERS
THAT EFFECT TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN THIS
OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS.
THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
================================================================================