Guiding Students on Selecting a Lender

Very Carefully

Challenges ’07 –ACG/SMART –Few Firm Guidelines –Reading High School Transcripts ’08 –Loans –Few Firm Guidelines –Establishing Auditable Lender Lists

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Initial Decisions FFELP or Direct Lending Suggested Lender List or Not (FFELP and Alternative Loans) One Lender List for All Loan Programs or Separate List for Each Loan Program

Decide on Selection Process (1) Request for Proposal (RFP) –Formal bid process –Decide on bid specifications –Work through Purchasing Agent

Decide on Selection Process (2) Request for Information (RFI): Formal –Send out request for information –Cover points of importance –Request no more than 4-5 pages

Decide on Selection Process (3) Request for Information (RFI): Informal –Request information from only lenders of interest or those who have made contact –Determine points of interest to students and to your process –Ask for no more than 4-5 pages of information

Who Will Review Information and Select Lenders? 1)University Committee – No Financial Aid 2)University Committee – Financial Aid Involvement 3)Financial Aid Department

Lender Selection Criteria (1) Up Front Benefits –Origination Fee Do you cover the origination fee for students? –Default Fee Do you cover the default fee for students? If not, which guarantor with whom you partner, covers the fee?

Lender Selection Criteria (1) Up Front Benefits con’t –Interest Rate (Alternative Loans) On what basis is your interest rate determined? What is your interest rate structure? How many of the institution’s borrowers fall under each level?

Lender Selection Criteria (2) Back-End Benefits –ACH – Debit What is your ACH-Debit benefit? –Repayment Terms What repayment options are provided borrowers?

Lender Selection Criteria (2) Back-End Benefits con’t –Deferment or Forbearance Options What are your deferment and forbearance options? –Repayment Benefits Describe and provide examples of the best savings for each repayment benefit and the percentage of borrowers that qualify for each benefit. (Use institutional statistics if possible).

Lender Selection Criteria (3) Operational/Customer Service Needs –Operational Is the lender compliant with the school’s system? (transmission, receipt, disbursement) What has been the institution’s experience with the lender’s customer service? Will the institution have a single point of contact? –Who will that be?

Lender Selection Criteria (4) Default Management –What is your default rate? (Include institutional information if possible) –List default management activities above the federal minima.

Evaluation Process (1) Formal Checklist –Develop a 5-point assessment –Analyze each question asked (2) Informal Process –Keep detailed notes –Justify decisions

Checklist Decide which questions will be analyzed. Determine rating scale: –Exceeds expectations (4) –Meets expectations (3) –Does not meet expectations (2) –Disappointing (1) –Did not respond/Cannot Determine (0) Calculate results. Make selection.

Are We Having Fun Yet?

The Next Step (1) List the lender selected. (2) Disclose method/criteria for lender inclusion. (3) Provide information on borrower benefits. (4) Include statement that the student can use any lender. (5) Be able to justify your selections. (6) Cannot cause unnecessary delays.

(1) Lender Name (2) Lender Name (3) Lender Name You may select a lender of your choice. Benefits should be equal to or better than for the suggested lenders. Possible Loan Selection Screen Benefits Select

Evaluation Phase Best Move –Recusing myself from the process Biggest Bust –Private Loan Information Impression of the Process –Bureaucratic Boondoggle

Conclusion Remain calm Don’t panic Maintain a sense of humor Even This Will Pass…