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© 2013 PASFAA The Value of Private Lender Lists and Keeping It Simple. Nancy Harvey – First Marblehead Julie Moreno Rehder – ELM Resources Robert Sevret – Discover Student Loans
© 2013 PASFAA The Value of a Lender List The Value of Private Loans Myths vs. Facts – Private loans and PLUS/Grad PLUS Regulatory Background & Preferred Lender Arrangements (PLA) Benefits of the PLA Option Information to Compile Tips on Choosing Lenders Questions Agenda
© 2013 PASFAA The Value of a Private Loan Lender List and Keeping It Simple- Julie Moreno Rehder, ELM Resources
© 2013 PASFAA MYTH: Government loans are always less expensive for borrowers than private loans. FACT: When measuring the true cost of credit through an APR comparison, private loans often compare favorably to unsubsidized federal loans, particularly Graduate PLUS Loans. MYTH: Private student loans are all variable products with extremely high interest rates. FACT: Most lenders offer students the choice of fixed-rate or variable-rate products. The Value of Private Loans
© 2013 PASFAA MYTH: Private student loans can pose more risk for borrowers than federal student loans. FACT: Federal loans, in contrast to private student loans, are provided without the most basic consumer protection – a determination of the borrowers ability to repay. MYTH: Students and families do not receive adequate information about private student loan terms before borrowing. FACT: Lenders provide three notices containing 18 disclosure items about private loan terms at three different times before a private loan is made. These disclosures are required by law. The Federal Reserve conducted extensive consumer testing before establishing these new disclosure requirements, which have been in effect since February The Value of Private Loans
© 2013 PASFAA Regulatory Background and Private Loan Arrangements – Nancy Harvey, First Marblehead
© 2013 PASFAA … a preferred lender list can be an effective tool to help families… …by providing this information, schools may help students and their parents navigate the increasingly complex student loan landscape. …a borrowers choice of lender may be better informed by preferred lender lists and other consumer information... …which play a useful role in assisting financial aid administrators in dealing with the large volume of requests for information and assistance, and in informing borrower choice. Reference: DCL GEN posted May 8, 2008 Subject: School Use of a Preferred Lender List in the FFEL Program Previous ED Guidance
© 2013 PASFAA A Preferred Lender Arrangement exists if: Lender provides education loans to students/families, AND School recommends, promotes or endorses the education loan products of a lender No formal agreement required to trigger definition, Applies to the entire institution and all staff Preferred Lender Arrangement
© 2013 PASFAA School Lender List Options
© 2013 PASFAA No Lender List Comprehensive Historical List 3 rd Party List Preferred Lender Arrangement (PLA) School Lender List Options
© 2013 PASFAA No information, guidance or counseling assistance is provided to prospective borrowers on any private education loan programs by any school staff Borrowers and families are on their own to educate themselves and make informed decisions on private education loan options No Lender List
© 2013 PASFAA Provides students with a starting point Schools can provide a neutral, comprehensive list of lenders that provided private education loans from a certain period of time Cannot exclude any lenders unless they are no longer providing education loans Some loan programs may not be available to your borrowers Excluding active lenders or adding new lenders triggers PLA requirements Terms and conditions of loans may be provided Private loan disclosure requirements must be met Comprehensive
© 2013 PASFAA Provides students with a starting point Schools can provide a neutral, historical list of lenders that students used in the past at their institution Cannot exclude any lenders unless they are no longer providing private education loans Some loan programs may not be available to your borrowers Excluding active lenders or adding new lenders triggers PLA requirements Terms and conditions of loans may be provided Private loan disclosures requirements must be met Historical
© 2013 PASFAA [Not 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 loan volume generated. School is still responsible for all compliance Private loan disclosure requirements must be met Some loan programs may not be available to your borrowers Additional topics for consideration: – Loan comparison functionality – Advertising influence on 3 rd party sites – Unsolicited s to borrowers Reference: Federal Register: October 28, 2009 (Volume 74, Number 207) –Final Rule 3 rd Party Lender List
© 2013 PASFAA Benefits of the PLA Option and Information to Compile – Robert Sevret, Discover Student Loans
© 2013 PASFAA School staff can provide guidance and counseling to borrowers and families Provides a meaningful starting point for making informed decisions on private loans Allows for more streamlining of electronic processing Will open dialog with a private loan lender representative who will provide customer service and keep you updated on product changes. Benefits of the PLA Option
© 2013 PASFAA Information to Compile and Disclose This information is based on Discovers review and interpretation of regulations. This document should not be construed to be legal advice. Please consult with your own compliance and legal counsel to ensure that you are in full compliance with the preferred lender arrangement requirements applicable to your school.
© 2013 PASFAA What form can private lender lists take? No List – students will be on their own to determine which lender to choose. Third Party List – Student Lending Analytics, Finaid.org - ? School Created List – must adhere to all PLA requirements List Created in conjunction with ELM – ELMSelect 2.0
© 2013 PASFAA Comprehensive product offerings Competitive pricing: fixed & variable rates and no fee options Borrower benefits/repayment incentives Loan Product Features offered Reputation & track record Stability & longevity What to Look for When Choosing a Lender Program
© 2013 PASFAA Quality of Lender Customer Service & Support Dedicated marketing/service staff Toll free number – single point of contact User friendly web-based services offered Level of automated processing offered Technical support offered Training offered Default management Other value-added services What to Look for When Choosing a Lender Program
© 2013 PASFAA Disclaimer & Reference The information contained in this presentation is not comprehensive, is subject to change based on additional guidance or directives from the U.S. Department of Education (ED). It serves only as general, background information for further investigation and study related to the subject matter. Nothing in this presentation constitutes or is designed to constitute legal advice. Please consult your own counsel to ensure that you are in full compliance with requirements applicable to your institution. References: Federal Reserve final rules for private loans – August 14, 2009 Federal Register, 34 CRF 601- October 28, 2009
© 2013 PASFAA Questions
© 2013 PASFAA Contact Information for Presenters:
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