1. DEVELOPING A PREFERRED LENDER LIST Sarah Bauder Director University of Maryland sbauder@umd.edu

2. AGENDA Review Negotiated Rulemaking – Why Was Neg Reg Needed? – Lender Lists – Inducements Define Regulations Current Issues Developing Your Own Process – Understanding the Current Environment – Best Practices Questions

3. NEGOTIATED RULEMAKING What is Negotiated Rulemaking? – Negotiated rulemaking is a process which brings together representatives of various interest groups and a federal agency to negotiate the text of a proposed rule. The goal of a negotiated rulemaking proceeding is for the committee to reach consensus.

4. MAIN FOCUS OF LOAN TEAM Preferred Lender Lists – Section 682.212(h)(1) Inducements – Section 682.200 and 682.401

5. REGULATORY LANGUAGE INDUCEMENTS – WHAT IS ALLOWED a lender may provide— – Staffing services to a school on an short-term, emergency basis to assist the school with financial aid related functions; – Support of and participation in a school’s or a guaranty agency’s student aid and financial literacy related outreach activities;

6. REGULATORY LANGUAGE INDUCEMENTS – WHAT IS ALLOWED The cost of meals, refreshments, and receptions that are part of a meeting, training, or conference as long as those meals, refreshments, or receptions events are open to all meeting or conference attendees; Meals and refreshments, reasonable as to cost, nature, and amount, that are provided in connection with lender-sponsored training of program participants; Toll-free telephone numbers for use by schools or others to obtain information about FFEL program loans and free data transmission service, or for use by schools

7. REGULATORY LANGUAGE INDUCEMENTS – WHAT IS ALLOWED 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; and Items of a nominal value to schools, schools-affiliated organizations, and borrowers that are offered as a form of generalized marketing or advertising or to creation of good will.

8. INDUCEMENTS: WHAT IS NOT ALLOWED Schools cannot accept nor can lenders/guarantors offer anything in exchange for loan volume

9. INDUCEMENTS: WHAT IS NOT ALLOWED Payments or other benefits provided to a school or school affiliated organization Payment of conference or training registration, transportation, and lodging costs for an employee of a school or school affiliated organization

10. INDUCEMENTS: WHAT IS NOT ALLOWED Payment of entertainment expenses for employees of a school or a school affiliated organization including private hospitality suites, tickets to shows or sporting events, meals, alcoholic beverages, and any lodging, rental, transportation, and other gratuities related to a lender-sponsored social activity

11. DEFINITION OF A SCHOOL AFFILIATED ORGANIZATION …a school-affiliated organization is any organization that is directly or indirectly related to a school and includes, but is not limited to alumni organizations, foundations, athletic organizations, and social, academic, and professional organizations.

12. CONNECTION BETWEEN LENDER LISTS AND INDUCEMENT “School affiliated organization” Language “prohibits a lender from undertaking philanthropic activities including providing scholarships, grants, restricted gifts or financial contributions in exchange for FFEL loan volume…” “…the Secretary applies a rebuttable presumption that the payments or activities were offered or provided to secure applications for FFEL loans or to secure FFEL loan volume…”

13. REGULATORY LANGUAGE FOR PREFERRED LENDER LISTS Must have at least three unaffiliated lenders – Department of Education changed definition in March 2008 Cannot impede or deny a borrower’s choice of lender – provide prominent statement on choice Cannot include lenders who have been known to offer financial benefits (inducements) to an institution Provide disclosure as to method used Cannot assign a lender to a first time borrower

14. BEST PRACTICES FOR LENDER LISTS Create a firewall around the process Ask Questions of Lenders – RFI, RFP, Survey Keep the lender list static each year Know the mission of your institution for disclosure purposes Communicate to your President

15. Create a Firewall – Committee decides lender list Students Staff Director – not included but can have influence

16. Different Methods Which every method you choose, keep the questions concise. No more than 30 questions. Remember: you need to review it. RFP – Request for Proposal (not recommended) – Creates a contract – Goes through Procurement RFI – Request for Information – Often gives a purpose Survey – Just asks questions

17. POTENTIAL PROCESS (see handouts) 30 question survey Decision is by committee – Quantitative data – Qualitative data Letter to Lenders for Reason Provide Disclosure to Institution and Students

18. www.financialaid.umd.edu

19. CALENDAR Effective date: July 1, 2008

20. QUESTIONS AND ANSWERS Sarah Bauder University of Maryland College Park 301-314-8279 sbauder@umd.edu