UNITED STATES DEPARTMENT OF EDUCATION
WASHINGTON, D.C. 20202
In the Matter of Docket Nos. 96-19-ST and
STUDENT LOAN FUND OF IDAHO, Student Financial Assistance And Show Cause Proceedings
Appearances: Robert C. Montgomery, Esq., Fruitland, Idaho, and John J. Keohane, Esq., New York, New York, for the Student Loan Fund of Idaho.
Brian P. Siegel, Esq., Office of the General Counsel, United States Department of
Education, Washington, D.C., for Student Financial Assistance Programs.
Before: Judge Ernest C. Canellos
By notice dated February 20, 1996, the Office of Student Financial Assistance Programs (SFAP) notified SLFI that it was intending to terminate the agreements under which SLFI
participated as a guaranty agency. SFAP cites §428(c)(9)(E)(4) of the HEA and 34 C.F.R.
§682.413(c)(1)(iv) as authority for such action. This same notice imposed an Emergency Action
against SLFI in accordance with the provisions of 34 C.F.R. § 682.413(e)(2)(i) and 682.704(a).
In response to the notice, on March 8, 1996, the Executive Director of SLFI requested a hearing
in the termination action and an opportunity to show cause why the emergency action was
Pursuant to a delegation of authority from the Secretary to conduct proceedings and issue
final decisions in both of these proceedings, I was assigned this matter on March 26, 1996. I
issued an Order Governing Proceedings on April 2, 1996, in which I required the parties to
address, as a threshold issue, the extent of my jurisdiction in this matter.See footnote 2
The parties submitted briefs, procedural issues were resolved, and a teleconference was held on May 15, 1996. During
my dialogue with counsel for both parties during the teleconference, it became clear that the
parties concurred that SLFI had voluntarily terminated its guaranty agency agreements effective
June 10, 1994. As a result of such apparent concurrence, the parties were directed to attempt to
enter into a stipulation which reflected this understanding. The parties were unable to arrive at a
stipulation because of their stated disagreement as to the consequences of the termination of the
agreements, but readily proffered that the agreements were terminated. Each of the parties
submitted a timely draft order for my signature. Both draft orders contain the following identical
1. The Office of Student Financial Assistance Programs
(SFAP) and the Respondent, Student Loan Fund of Idaho (SLFI)
stipulate that: (a) on April 22, 1994, SLFI informed the
Department of Education (ED) that it was providing the 60 days
written notice of termination required under the agreements
between SLFI and ED; and (b) that, pursuant to that notice, those
agreements [were] terminated at the close of business on June 30,
In a show cause proceeding, the guaranty agency has the burden of persuading me that the emergency action is unwarranted. 34 C.F.R. § 682.704(d)(2)(ii). Further, pursuant to the provisions of 34 C.F.R. § 682.704(a), an emergency action should be upheld if: (1) there is reliable information that the institution is violating a provision of Title IV; (2) immediate action is necessary to prevent the misuse of federal funds, and (3) the likelihood of loss from the misuse outweighs the importance of adherence to the procedures for termination actions. However, in a termination action, it is ED which has the burden of proving that the agreements should be
terminated. In either case, it is obvious that there must be a viable pre-existing agreement
between the parties for me to have jurisdiction to determine whether the parties met their
respective burdens; otherwise, I have nothing to decide. Consistent with the stated position of
the parties, I find that the guaranty agency agreements between SLFI and ED were effectively
terminated by SLFI in 1994, and, as a result, my jurisdiction to consider whether the termination
or emergency action is warranted is necessarily eliminated. Since I have determined that I lack
jurisdiction over this matter, I can not reach any of the substantive questions raised by the parties.
Judge Ernest C. Canellos
Dated: May 21, 1996
A copy of the attached initial decision was sent by certified mail, return receipt requested to the
Robert C. Montgomery, Esq.
6905 Highway 95, Post Office Box 730
Fruitland, Idaho 83619-0730
John J. Keohane, Esq.
Orrick, Herrington & Sutcliffe
666 Fifth Avenue
New York, New York 10103-0001
Brian P. Siegel, Esq.
Office of the General Counsel
U.S. Department of Education
600 Independence Avenue, S.W.
Washington, D.C. 20202-2110