Transcript Private Loans:

WHILE
YOU
WAIT
• Does your school have a PLA? If so,
what are the top three reasons you
decided to have one?
• If not, what are the top three
reasons that lead you to this
decision?
PLA OR NOT
TO ‘EH’
Debra Ensor, Wells Fargo Education Financial Services
Kelli Izat, Frostburg State University
Michael Poma, SunTrust Bank
WHY ARE
WE
HERE?
• Review of definitions/requirements
• School options for PLA
• An inside look from a school’s
perspective
• Sharing best practices
PREFERRED
LENDER
ARRANGEMENTS,
PLA’S
• A “preferred lender arrangement”
(PLA) is an arrangement or
agreement between a lender and a
covered institution…under which
the lender provides education loans
to the covered institution’s
students or their families, and that
relates to the covered institution
recommending, promoting, or
endorsing the lender’s education
loan products.1
PLA
CONTINUED
In English, your
institution has a
list on the
webpage or on
paper
• “Any action that a [school] takes to
recommend, promote, or endorse the
education loan products of a lender that
provides…education loans to students
attending the [school] triggers the
preferred lender arrangement
requirements. The actions a [school]
may take to recommend, promote, or
endorse the education loan products of
a lender are not limited to including the
lender on a preferred lender list.”2
– This may be either intentional or
unintentional by the school.
– If you have a disproportionate
private loan volume from one or
two lenders, you may have
unintended PLA’s with that lender
or lenders.
Student Loan Marketplace
counts as a PLA
• Schools who furnish private loan
lender lists to their students and
parents are considered to have
Preferred Lender Arrangements
with those lenders included on the
list.
• A PLA exists if a school
recommends, promotes or endorses
a lender, even if this is not in the
form of a PLA
SCHOOL
OPTIONS
1.
2.
3.
4.
Actual Preferred Lender
Arrangement
Comprehensive written list or
web list
Third party list
No referral process
RFI OR
NO RFI
• Three of the criteria required in
compiling a Preferred Lender List
require you to explain your choices.
• There is no language per se about
the necessity to issue an RFI
• However, you will need to have
evidence that you have made
informed decisions
KISS
THEORY
• Think of 8 – 10 questions about private
loans that are important to your
students, your office and your
institution and create a one-pager
• Utilize the best practices of other
schools
• Ask your lender partners for their
“boilerplate”- their pre-prepared RFI
response, customized for your school
COMPREHENSIVE
LIST
The school must
provide a clear
statement that
a borrower can
choose to use
any…lender.”
“…a school that wants to provide basic
information to the school’s
students and their parents may
provide a comprehensive list of
lenders that have made loans to
the school’s students or parents
in the past three to five years (or
some other period) and that have
indicated that they would
continue to make such loans. The
school should not provide any
additional information about the
lender, including, for example, the
percentage of the school’s loans
made by the lender.
Make sure you
include everyone,
unless the
company is no
longer in business
• “…if a [school] includes certain
lenders on the list and leaves other
lenders off the list, the Department
views the [school] as recommending,
promoting, or endorsing the lenders
on the list over the lenders that it has
chosen to leave off the list regardless
of whether the [school] includes a
disclaimer on the list, asserting that
the [school] does not recommend,
promote, or endorse the lenders on
its list, despite whatever disclaimers
the school may attach to the list.”
THIRD
PARTY
•Finaid-L
•Student Lending Analytics
•
The Department does not consider an
institution that refers its students to a third
party entity that maintains a comprehensive,
neutral listing of private education lenders to be
participating in a [PLA] as long as the institution
ensures that the listing is broad in scope, does
not endorse or recommend any of the lenders
on the list and the lenders on the list do not pay
the third party entity to be placed on the list or
pay the third party entity a fee based on any
loan volume generated. However, if an
institution retains a third party entity to
develop a customized lender list for the
institution to provide to its students as a
resource…the Department does consider the
institution to be participating in, and subject to
the requirements of, a [PLA].”
NO
REFERRAL
NO
REFERRAL
APPROACH
Is this an advantage for
the school or for the
student?
Remember:
• “Any action that a [school] takes to
recommend, promote, or endorse…
education loan products…triggers the
preferred lender arrangement
requirements.”
• This includes no literature or brochures.
• No one at your institution may ever
discuss any lender with prospective
student families. The same rules apply
to the comprehensive list providers.
ASK
YOURSELF:
IS THIS
METHOD
MEETING THE
NEEDS OF MY
INSTITUTION,
STUDENTS AND
UNIVERSITY?
Shhhh,
is the
word
• You are not permitted to display
any brochures…
• No employee of your school is
permitted to reference any
alternative loan program without
triggering the PLA requirements…
• You’re concerned about the level of
customer service you’re providing
to students and parents…
• Your students are left searching the
web
WHAT ARE
SOME OF YOUR
COLLEAGUES
DOING?
COUNSELING
STUDENTS
Frostburg says a
PLA allows them to
counsel their
students
• Common for parents to want
student to have a loan in their
name. Do not want to take PLUS
Loan.
– Talk to parents about variable
vs. fixed interest rates.
– Let them know that if the
student doesn’t repay the loan
they are liable for the entire
balance anyway because they
are the co-borrower.
– Make parents aware of federal
and possible alternative loan
forgiveness for deceased
borrowers.
– Talk to students about applying
for federal loans and other aid
first.
COUNSELING
STUDENTS
Other options:
Mapping Your Future
• FSU requires all students to
do a private loan entrance
counseling before we will
certify a private loan.
– Great Lakes
WHY HAVE
A
PREFERRED
LENDER
LIST?
• Provide a place where parents and
students who do not have
experience with private loans can
start researching loans.
• Increases time management in the
office
• Helps protect students from “fly by
night companies”.
• More likely to ensure smooth
processing and receive funds on
time
• Provides and increased level of
customer service
REQUEST FOR
INFORMATION
(RFI)
– FSU completed the RFI process with a
committee the first year we posted a
preferred lender list.
• Created an RFI questionnaire that
was sent to lenders.
• Gave lenders a deadline for
completing and returning
questionnaire.
• Created a committee and supplied
them with a copy of the
questionnaire, a list of scoring
criteria, a scoring sheet, and scale
for scoring, and each lender’s
response.
• Made sure committee was
composed of individuals both in and
out of the financial aid office.
RFI QUESTIONS
• Tried to keep lender questionnaire as short as possible while still acquiring
all important information.
Request for Information (RFI)
Frostburg State University
Alternative Loans
1. Do you offer any private loan products for students who are less than half-time?
2. Do you offer any private loan products for students who are non-degree (not
degree seeking)?
3. Do you require that a student meets the schools Satisfactory Academic Progress
(SAP) standards in order to qualify? Please just answer Yes or No for
clarification purposes.
4. Do you charge any front end fees?
5. Do you charge any back end fees?
6. Do you offer a grace period on your products?
7. Do you offer any borrower benefits on your products?
8. Please list the current interest rate or interest rate range on your private loan
products.
SCORING
CRITERIA
Alternative / Private Loan Lender List Selection Criteria
1)
2)
3)
4)
5)
6)
Online interfaces / online applications
Toll-free numbers
Stability / Number of years in the student loan business
Ability to process via Scholarnet
Ability to send funds via EFT through Scholarnet
Variety of products, loans for non-degree students, loan for prior
balances, less than half-time status, loans for students who don’t
meet SAP, etc.
7) Front end or back end fees?
8) Reasonable interest rates?
9) Are any borrower benefits offered?
10) Grace period?
GRADING
SCALE
• Before giving any lender
information to committee
members, a scale for rating the loan
products must be made.
• FSU used a scale similar to academic
grades.
– Lenders were given a grade of
A through D on each of the
individual criteria.
– An overall grade for the lender
was derived by calculating an
average of all of the individual
criteria scores.
CALCULATING SCORES
• Each committee member was given a worksheet to fill out
with a grade for each criteria, and a place for an overall
grade for each lender.
ALT
Loan approval
Criteria
Co-borrows-time
frame
Overall Approval
Interest rates/fees
Loan approval w/in tiers
Benefits
Grace period
Direct Consumer
Variety of products
Customer Service
Electronic
processing?
Overall Grade
Bank
A
Bank
B
Bank
C
Bank
D
Bank
E
Bank
F
Bank
G
Bank
H
Bank
I
Bank
J
Bank
K
SETTING
CRITERIA
FOR BEING
INCLUDED
ON THE
PREFERRED
LENDER LIST
• Identify a threshold that will be
used to decide whether a lender
makes it onto the preferred lender
list.
– FSU included everyone who
scored an overall grade of A, B,
or C.
– FSU decided not to include
anyone who requires students
to be a resident of a certain
state or member of a certain
credit union in order to apply.
RENEWING
PREFERRED
LENDER
LIST
What about the
annual report?
• Title X guidelines require that financial
aid office’s review their preferred
lender list each year. This does not
mean that a full RFI is required each
year.
– FSU sends out a compressed RFI to
each lender on our list and any
lender who has requested to be on
our list each year in February.
– Having lenders complete a small
RFI annually insures that you have
the correct information on file
about each lender and that their
loan programs have not changed.
– Once the completed RFI’s have
been received the information is
kept on file for auditing purposes.
Any necessary adjustments to the
list itself are than made.
DISCLOSURE
TO
STUDENTS
• Schools are required to disclose to
students who is on their preferred
lender list, why they are on it, and
that students are not required to
borrow from someone on the
school’s list.
• To comply with regulations FSU
posts all of it’s information
regarding it’s preferred lender list
online on an “Alternative Loans”
page.
ONLINE INFORMATION
DISCLOSURE
• The preferred lender list
• A statement information students that they are not obligated
to borrow from a lender listed on FSU’s preferred lender list.
• The MD College Loan Code of Conduct
• A list of RFI questions
• A chart showing a summary of RFI responses
• Sample private loan application disclosures from each lender on
the lender list
• A copy of the private loan self-certification form and
instructions on how to obtain the information necessary to fill
the form out
• A link to FSU’s private loan entrance counseling.
OTHER
SCHOOL’S IN
TRI-STATE
WITH A PLA
Have you changed
your mind and
want to be added
to this list?
•
•
•
•
•
•
•
•
•
•
•
American University
Bowie State University
Frostburg State University
John’s Hopkins University
McDaniel College
MICA
Mount St. Mary’s University
Salisbury University
UMBC
University of Delaware
University of Maryland, College Park
EXAMPLE
• http://www.frostburg.edu/ungrad/faid/alternativeloans.htm
Questions??
• [email protected]
• [email protected]
• [email protected]
RESOURCES
1.
HEOA, p. 40
2.
Fed. Register 10/28/09, page 55630,
col. 2, last paragraph
3.
DCL ID: GEN-09-08
4.
Fed. Register 10/28/09, page 55630,
col. 1, last paragraph
5.
Fed. Register 10/28/09, § 601.10(a)
through (c)
6.
Fed. Register 10/28/09, § 601.20(a)
and (b)
7.
Fed. Register 10/28/09, §
601.21(a)(2)(ii) and (iii)
8.
Fed. Register 10/28/09, § 601.21(c)
9.
Fed. Register 10/28/09, § 601.21(c)(6)
10.
Fed. Register 10/28/09, §
601.21(c)(2)(ii)
11.
Fed. Register 10/28/09, §601.12(b)
12.
HEOA, p. 71
13.
Fed. Register 10/28/09, page 55630,
col. 2, second paragraph