Following up on our past posts on the transition away from the London Interbank Offering Rate (“LIBOR”), and other interbank offering rates (“IBOR”) denominated in other currencies, in this post, we discuss the proposal from the Alternative Reference Rates Committee (“ARRC”) consultation on fallback contract language for new variable rate private student loans.

This is the sixth set of fallback contract language proposed by ARRC in their ongoing effort to help support a smooth transition from LIBOR to the Secured Overnight Financing Rate (“SOFR”). This contract fallback language is for new variable rate private student loans and proposes a two-step process to transition to a new rate if LIBOR becomes unavailable or is no longer reliable or representative. The first step is to follow the replacement rate adopted or recommended for use in consumer products by the Federal Reserve Bank of New York or other equivalent governing body. The second step, if the rate is not selected or recommended as described in the first step, is that the note holder of the loan would choose a replacement index. The full contract language is available here. The ARRC has requested feedback by public comment before May 15, 2020.

Norton Rose Fulbright also has assembled a group of its attorneys from around the globe to stay on top of these issues and assist clients in the transition to new reference rates. More information can be found here.

* Special thanks to Mary Kate LeViness for her assistance in preparing this post