Brazos Higher Education Authority, Inc. (BHEA) and Brazos Education Loan Authority, Inc. (BELA) (collectively, the “Companies”) operate in the education loan industry. While the individual entities are independent of one another, they are controlled by common officers and certain common directors with the ability to influence the business performed by each entity. The Companies provide funds for the origination, acquisition and servicing of guaranteed student loans which are insured by the U.S. Department of Education (DOE) and guaranteed by various national guarantors under the Federal Family Education Loans Program (Lenders) as provided for in the Higher Education Act of 1965, as amended. To maintain such insurance and guarantee of student loans, the Companies must individually comply with the servicing, collecting, accounting, and reporting requirements of the Federal Family Education Loans Program (Lenders).
The Companies receive interest subsidies on behalf of eligible students during qualified periods and special allowance on eligible qualifying loans disbursed before April 1, 2006. The Special Allowance Payment formula, or SAP rate, is determined by the DOE, based upon an average of all of the applicable floating rates (91-day Treasury bill, commercial paper, and SOFR) in a calendar quarter, plus a spread between 1.74% and 3.50%, depending on the underlying loan status and origination date. These rates are then applied to the quarterly average daily balance for loans eligible to receive SAP. For loans first disbursed prior to April 1, 2006, the Companies earn interest at the higher of the borrower’s rate or the SAP rate. If the SAP rate exceeds the borrower’s rate, the DOE makes a payment directly to the Companies. For loans first disbursed after April 1, 2006, the Companies earn interest at the SAP rate. If the SAP rate is less than the borrower’s rate, the Companies “rebate” the difference between the borrower’s rate and the lower SAP rate to the DOE. If the SAP rate is greater than the borrower’s rate, the DOE makes SAP payments to the Companies for the difference between the two rates.
Brazos Higher Education Service Corporation, Inc. (BHESC) provides the Companies with the necessary student loan servicing to maintain compliance with the requirements of the Federal Family Education Loans Program (Lenders) by holding subservicing agreements for loan servicing duties with various student loan servicing agencies. BHESC holds subservicing agreements for Federal Family Education Loans Program (Lenders) loan servicing duties with Navient Solutions, LLC/Higher Education Loan Authority of the State of Missouri, Nelnet Diversified Solutions LLC, and Pennsylvania Higher Education Assistance Agency. Under the terms of these subservicing agreements, the sub servicer shall reimburse the Companies for any loss of principal and interest resulting from deficiencies in the loan servicing performed by the subservicer.
The following represents the accrued federal interest and subsidies receivable for the year ended June 30, 2025.
The federal loan program listed subsequently is administered directly by the Companies, and balances and transactions relating to this program are included in the Companies’ basic financial statements. Loans outstanding at the beginning of the year, loans made during the year, if any, interest subsidies and special allowance subsidies (payments) are included in the federal expenditures presented in the Schedule. The balance of loans outstanding at June 30, 2025, consists of: