Transcript Permissible Activities in the FFELP

Permissible Activities in the FFELP
Will Shaffner
Director Business Development
The Higher Education Loan Authority for the
State of Missouri (MOHELA)
MASFAP Conference
November 2007
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Fall 2007 MASFAP Conference
Life begins at 40 !
FFELP Participants
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Congress
Department of Education
Guarantors
Schools
Lenders
Servicers
Secondary Markets
Students
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FFELP Oversight
• Congress Establishes Law
• Department of Education Issues Guidance
– Regulations (Interpretation of Law)
– Dear Colleague Letters
• Guarantors
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Legislative Process
• Reauthorization of the Higher Education
Amendment (REA HEA)
– Act of Congress
• House & Senate Bills
• Conference
• Signed into Law
– Other Forms of Legislation
• Budget Reconciliation
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Regulatory Process
• Department of Education Guidance
– Negotiated Regulation (Neg Reg)
– Notice of Proposed Rule Making (NPRM)
– Dear Colleague Letter
– Occurs as Needed
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Legislative Process
• Budget Reconciliation
– Financial in Nature (PayGo)
– Act of Congress
– First in 2006
– Again in Oct 2007
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Where Are We Now
Current Situation
• Budget Reconciliation
• College Cost Reduction Access Act (CCRAA) of
2007
– Majority is financially driven
– Affects guarantors, lenders, loan holders & secondary
markets
– Indirectly impacts schools & borrowers
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Where Are We Now
Current Situation
• Current Laws/Regulatory Items
– CCRAA
– SLATE Act (New York)
– Department of Education Guidance
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Fall 2007 MASFAP Conference
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Where Are We Now
Current Situation
• Codes of Conduct
– Inconsistently Created
• Preemption
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Fall 2007 MASFAP Conference
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Review of Current Legislation and
Guidance
• CCRAA
– Largely financial affecting guarantors, lenders
and student loan holders
• Changes here could impact benefits and services
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Review of Current Legislation and
Guidance
• Student Lending Accountability, Transparency
and Enforcement Act (SLATE) Act
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For New York Colleges & Universities
Organizations doing business in New York
Shaping the national direction
Institutions with multiple campuses could be affected
• Department of Education
– Final Regulations 11/1/07
• Codes of Conduct & other agreements
– May be legally binding
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Fall 2007 MASFAP Conference
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Student Lending Accountability,
Transparency and Enforcement Act
(SLATE)
• No gifts can be given by a lender to a
school that are not more than nominal
value for consideration or advantage in
relation to the lenders education loan
activities
• EEs/FAOs of Colleges & Universities are
forbidden from accepting or receiving gifts
from lenders
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Fall 2007 MASFAP Conference
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Student Lending Accountability,
Transparency and Enforcement Act
(SLATE)
• EEs/FAOs of Colleges & Universities are
prohibited from accepting remuneration for
serving as member of advisory boards or
receiving reimbursement of expenses for doing
so
• PLL – If a school has a Preferred Lender List,
then any lender on the list must:
– Provide assurances to those who take out loans that
the advertised benefits upon repayment will continue
to inure to the benefit of the borrower regardless of
whether the loans are sold
– Must disclose of the lender has an agreement to sell
loans with another lender
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Department of Education Final
Regulations 11/1/07
• Permissible activities include:
– Largely affect lenders
• Indirectly impacting schools & borrowers
• Assistance to a school that is comparable to the
kind of assistance provided to FDSLP by te
Secretary
• Support of & participation in a school’s or
guaranty Agency’s Out reach activities,
excluding initial or exit counseling
– If printed material is provided by lender, must be
documented
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Fall 2007 MASFAP Conference
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Department of Education Final
Regulations 11/1/07
• Meals, refreshments & receptions
reasonable in costs & timed in conjunction
with training, meeting or conference
events, if open to all attendees
• Toll-free telephone numbers for use by
schools or others to obtain information
about FFELP & free data transmission
service for use by schools to electronically
submit loan data
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Fall 2007 MASFAP Conference
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Department of Education Final
Regulations 11/1/07
• Reduced Origination Fee
• Reduced Interest Rate
• Purchase a loan made by another lender
at a premium
• Other benefits to a borrower under a
repayment incentive program that
requires, at a minimum, one or more
scheduled payments to receive or retain
the benefit
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Fall 2007 MASFAP Conference
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Department of Education Final
Regulations 11/1/07
• Items of nominal value to schools, schoolaffiliated organizations & borrowers that are
offered as a form of generalized marketing or
advertising or to create good will
• Can provide staffing services to a school under
an emergency basis, such as a state or federally
declared natural disaster and other localized
disaster and emergencies identified by the
Secretary
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Fall 2007 MASFAP Conference
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Department of Education Final
Regulations 11/1/07
• Other services as identified and approved
by the Secretary through public
announcement, such as a notice in the
Federal Register
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Department of Education Final
Regulations 11/1/07
• Preferred Lender Lists (PLL)
– Can’t be used to deny or otherwise prevent
borrower’s choice of lender
– If using a PLL, a school must have at least
three un-affiliated lenders
– A lender on the school’s PLL must, if offering
borrower benefits, the lender must provide the
benefit to all borrowers at that school
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Fall 2007 MASFAP Conference
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Department of Education Final
Regulations 11/1/07
• Preferred Lender Lists (PLL)
– School must disclose to prospective
borrowers (if using a PLL)
• Method and criteria used to select any lender that
is recommended or suggested
• Provide comparative information about interest
rates & other benefits being offered
• Include a prominent statement, in any information
related to its list of lenders, advising that they are
not required to use one of the school’s
recommended or suggested lenders
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Fall 2007 MASFAP Conference
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Codes of Conduct and Other
Agreements
• Inconsistently Created
– State-by-State
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Not all states have issued them
Impacts institutions with multiple campuses
Impacts organizations doing business in multiple states
May or may not be enforceable
• Preemption
– “…any State law that conflicts with or “stands as an
obstacle to the accomplishment and execution of the
full purposes and objectives” of a Federal law is
preempted…”
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Review of Pending Legislation and
Guidance
• REA HEA
– Extended a record 8th time
• Not counting the automatic 1 year extension
– HR 3746
– S 1642
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Review of Pending Legislation and
Guidance
• H.R. 3746
– Student Loan Auction
– PLUS Loan Interest Rates
– Guarantor Inducement Provisions
– Lender Inducement Provisions
– Code of Conduct & PLL
– Disclosure Provisions
– Sharing of Student Loan Information
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Review of Pending Legislation and
Guidance
• H.R. 3746
– New Borrower Definition
– Loan Forgiveness
– Three-times Rule
– Aggregate Consolidation Loan Limits
– VFAs
– Financial Literacy
– Program Assistance for Borrowers
– Credit Bureau Reporting
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Review of Pending Legislation and
Guidance
• H.R. 3746
– Disability Determination
– FDLP Income-Contingent Repayment
– School Exit Counseling Requirements
– Financial Aid Fraud and Abuse Report
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Review of Pending Legislation and
Guidance
• S. 1642
– Using NSLDS for Deferments
– Disclosure requirements for unsub Stafford
loans
– Disclosure requirements on loan sales to
borrowers
– Amend Prohibited Inducements
– Lender Disclosure requirements on
capitalization impact
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Fall 2007 MASFAP Conference
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Review of Pending Legislation and
Guidance
• S. 1642
– Create financial literacy programs applicable
to guaranty agencies
– Require guarantors & lenders to work with all
national consumer reporting agencies
– Require lenders to provide borrowers with
certain information on their loan benefits
– Sunset SAL on June 30, 2012
– Expand discharge eligibility
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Fall 2007 MASFAP Conference
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Review of Pending Legislation and
Guidance
• S. 1642
– Require a guarantor to report a “rehabbed”
loan the new status to any consumer
reporting agency, removing the default from
the borrower’s credit history
– Contains other “sunshine” requirements
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Fall 2007 MASFAP Conference
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Other Pending Legislation Related
to FFELP & Financial Aid
• Sunshine Act
– Reporting Requirements
• Lenders are required to make annual certifications
w/Secretary that all PLL relationships are in
compliance
– Lenders on PLL are required to provide
annual reports to schools and Secretary using
the model approved for federal and private
loans for the prior Academic Year
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Fall 2007 MASFAP Conference
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Other Pending Legislation Related
to FFELP & Financial Aid
• Sunshine Act
– Gift Ban
– Staffing Assistance Ban
– Opportunity Pool Ban
– Participation on Advisory Councils
– Private Loans (Truth in Lending Act)
• Disclosure Requirements
– Specific Items
– To Schools
– To Borrowers
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Fall 2007 MASFAP Conference
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Permissible Activities
• Thank you for your time
• Additional Resources Include
– www.NCHELP.org
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Fall 2007 MASFAP Conference
Life begins at 40 !