What You Need to Know……Higher Education Opportunity Act (HEOA) Presented by:  Chuck Parker Vice President- Sales and Train...
Agenda Legislative Initiatives - HEOA, TILA, Reg. Z, PSLTIA,  Offices Impacted Disclosure Requirements Consumer Informatio...
Legislative Initiatives <ul><li>The Higher Education Act of 1965, as amended </li></ul><ul><li>Truth in Lending Act (TILA)...
Legislative Initiatives <ul><li>HEOA </li></ul><ul><ul><li>It’s  All  about the Consumer and providing beneficial informat...
Legislative Initiatives <ul><li>Title X – Private Student Loan Transparency and Improvement Act </li></ul><ul><ul><li>Disc...
Consumer Information Requirements <ul><li>Section 110.  Improved Information from the Federal Financial Aid website </li><...
Consumer Information Requirements <ul><li>Section 434.  Student Loan Information (Disclosures) </li></ul><ul><li>Section 4...
Disclosure Requirements Loan Origination Disclosures <ul><li>Application and Solicitation Disclosure </li></ul><ul><li>Loa...
Disclosure Requirements Application & Solicitation Disclosures <ul><li>Purpose of Disclosures: </li></ul><ul><li>Provides ...
Disclosure Requirements Loan Approval Disclosure <ul><li>Purpose of Disclosure: </li></ul><ul><li>This must  be provided o...
Disclosure Requirements Final Disclosure <ul><li>Purpose of Disclosure: </li></ul><ul><li>Sent after loan terms are accept...
Disclosure Requirements <ul><li>We will not allow a school to set a disbursement date that falls within our estimated righ...
Disclosure Requirements Self-Certification Form <ul><li>Purpose of Disclosure: </li></ul><ul><li>Helps the consumers ident...
Disclosure Requirements Re-Disclosure Situations <ul><li>The loan approval disclosure will need to be re-disclosed for the...
Disclosure Requirements Preferred Lender Arrangements <ul><li>No Co-branding:  Lenders cannot use the name, emblem, mascot...
Disclosure Requirements What It All Means For You <ul><li>Should  be a seamless integration into the borrower application ...
Disclosure Requirements What It All Means For You <ul><li>Self-Certification Form has both lender and school implications ...
Offices Impacted <ul><li>Covered Educational Institution </li></ul><ul><ul><li>Any educational institution that offers a p...
Compliance <ul><li>Lender Requirements for Compliance </li></ul><ul><ul><li>The HEOA requires lenders to provide the follo...
Compliance <ul><li>School Requirements for Compliance </li></ul><ul><ul><li>In addition to the consumer information that s...
Compliance <ul><li>School Requirements for Maintaining a Preferred Lender List </li></ul>Annual report to the Department o...
Are There Benefits to Maintaining a Preferred Lender List? <ul><li>A preferred lender list: </li></ul><ul><li>Allows  scho...
Are There Downsides to Maintaining a Preferred Lender List? Many schools may find that if they do not have a preferred len...
Best Practices For Great Service <ul><li>Current Best Practices: </li></ul><ul><li>Disclose to families the method, criter...
Understanding Preferred Lender Arrangements <ul><li>A preferred lender arrangement exists if the school:  </li></ul><ul><l...
Understanding Preferred Lender Arrangements <ul><li>Scenarios NOT considered to be a preferred lender arrangement: </li></...
Best Practices For Great Service <ul><li>Schools should also consider the following when selecting a private loan provider...
Keeping You Informed  <ul><li>As your partner in education finance, Sallie Mae is committed to keeping you informed about ...
The information contained in this presentation is not comprehensive, is subject to constant change, and therefore should s...
Questions Contact Information: Chuck Parker 225-768-7460 [email_address] www.SallieMae.com/straighttalk
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What You Need to Know.Higher Education Opportunity Act (HEOA)

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  • We are going to cover several items with you to day that will help you better understand the changes that either have already gone into effect or will go into effect soon. Our comments will be limited to private loan lender lists and not federal We are going to give you some background on the Higher Education Opportunity Act or HEOA that summarize the intent of the legislation We are going to talk about the changes that formalize the best practices that many schools have in place today and any new requirements for schools Next we will provide you with a summary of what is and what is not considered a preferred lender arrangement Finally, we will provide you with some tips that will help you select preferred lenders.
  • Current Private Education Loan Disclosures: Regulation Z and Truth in Lending Act (TILA). The Higher Education Opportunity Act of 2008: Enacted August 14, 2008; Title X - Private Student Loan Transparency and Improvement Act of 2008; Adds new subsections to TILA governing ‘‘private education loans’’ Effective February 14, 2010 Three pieces of relevant legislation affected by this project. TILA – which regulates credit practices by requiring lenders to provide uniform disclosures about loan costs and terms. Regulation Z issued by the Federal Reserve Board (FRB) provides guidance to creditors in applying the TILA and regulates loan disclosures for current types of closed-end credit, including private education loans. On August 14, 2008, Congress enacted the Higher Education Opportunity Act of 2008 (HEOA). Title X of the HEOA, entitled the ‘‘Private Student Loan Transparency and Improvement Act of 2008,’’ adds two new subsections to TILA and updates Regulation Z regarding private education loans) Effective date of the legislation is Feb 14. 2010. The main focus of the new law is to enhance borrower awareness of credit options to pay for education expenses, including the availability of federal loan program options, to educate borrowers about loans costs and terms. We at SM think these are admirable goals and completely consistent with our philosophies and practices.
  • While there are 3 stages for providing disclosures, there are 17 different disclosures, a few… Information on availability of federal student aid and corresponding interest rates Information on availability of school-specific education loan benefits General eligibility criteria Range of interest rates, including whether fixed or variable Limitations on interest rate adjustments Term of the loan Potential charges and fees (late payments/default) Information about accrual of interest while in school Payment deferral options Example of the total cost over the life of the loan 30 days to consummate the loan without terms of the loan changing Requirements of a co-borrower/co-signer Requirement of Self-Certification form Any other disclosure required by law or regulation Self-Certification Form requires Cost of Attendance (COA) Estimated Expected Family Contribution (EEFC) Estimated Financial Assistance (EFA) Difference between COA and EFA Sum of EFC and Difference between COA and EEFA Signature
  • While there are 3 stages for providing disclosures, there are 17 different disclosures, a few… Information on availability of federal student aid and corresponding interest rates Information on availability of school-specific education loan benefits General eligibility criteria Range of interest rates, including whether fixed or variable Limitations on interest rate adjustments Term of the loan Potential charges and fees (late payments/default) Information about accrual of interest while in school Payment deferral options Example of the total cost over the life of the loan 30 days to consummate the loan without terms of the loan changing Requirements of a co-borrower/co-signer Requirement of Self-Certification form Any other disclosure required by law or regulation Self-Certification Form requires Cost of Attendance (COA) Estimated Expected Family Contribution (EEFC) Estimated Financial Assistance (EFA) Difference between COA and EFA Sum of EFC and Difference between COA and EEFA Signature
  • While there are 3 stages for providing disclosures, there are 17 different disclosures, a few… Information on availability of federal student aid and corresponding interest rates Information on availability of school-specific education loan benefits General eligibility criteria Range of interest rates, including whether fixed or variable Limitations on interest rate adjustments Term of the loan Potential charges and fees (late payments/default) Information about accrual of interest while in school Payment deferral options Example of the total cost over the life of the loan 30 days to consummate the loan without terms of the loan changing Requirements of a co-borrower/co-signer Requirement of Self-Certification form Any other disclosure required by law or regulation Self-Certification Form requires Cost of Attendance (COA) Estimated Expected Family Contribution (EEFC) Estimated Financial Assistance (EFA) Difference between COA and EFA Sum of EFC and Difference between COA and EEFA Signature
  • For Loan Approval Disclosure (Replaces Reg Z TILA): Loan acceptance period for up to 30 calendar days Final Disclosure (prior to disbursement): Right to cancel the loan for up to 3 business days Preferred Lender Arrangement A Preferred Lender Arrangement (PLA) is an arrangement or agreement between a lender and a school (or school-affiliated organization) under which a school recommends, promotes, or endorses specific education loan products. In blue: Three new disclosures designed by the Federal Reserve Board (we will review in detail) that must be presented to borrowers Application solicitation disclosure (at application for shoppers) (very early in the application before credit is pulled) Loan approval (at credit approval ) Final Disclosure (before first disbursement )   In Green: Self Certification Form Department of Education Form Designed to prevent over-borrowing by alerting the borrower to actual gap funding needs, and educate consumers on federal funding options   In Purple: Preferred Lender Arrangement Disclosures HEOA formalizes what many of you already do in documenting your PLA selection process. This aspect of the legislation does not go into effect until July 2010 and the forms are still in development. Our focus today is on the disclosures and self cert form which go into affect relatively soon, but as more details emerge we will communicate those details with you. A few of the key items that are clear requirements are listed on the slide.  
  • New info under “Key Information” PDF format Dedect to see right of the review Can print if they choose to do it Range This is the first of the three new disclosures and it is for “shoppers”. It provides ranges of rates and fees and general terms   FRB designed the form for user comparison, but we all know varying assumptions sometimes make a “common” comparison difficult. So the FRB also identified a set of standard assumptions for all lenders to use to create an “apples to apples” shopping comparison of lender loan terms.   The application solicitation disclosure must be shown at application or with a firm offer of credit. This means that:   prescreen offers by lenders must include the application solicitation disclosure online application (early – before credit is submitted) if you distribute paper applications to borrowers (for any lender) the Application solicitation disclosure needs to be included with that application Phone pre-approvals for loans Special exception if borrowers get approved via phone application the application solicitation does not have to be sent.  
  • Once the student accepts the loan, the lender does not have to wait the remainder of the 30-day period in order to fund the loan. The loan approval formally replaces the Reg Z- TIL for private education loans It shows actual rate and fees based on the borrower’s credit at credit approval Borrowers must actively accept the terms of the loan approval disclosure and have up to 30 days to do this Lenders cannot change the terms (except for index changes) during this period Lenders can give the borrower more than 30 days at their discretion If borrowers accept on day one, the loan can proceed (i.e. if the borrower accepts on day one - the lender does not have to wait 30 days before disbursing) Borrower acceptance is a new activity and it is important to educate students about this Similar to application solicitation disclosure, but on page one instead of ranges it shows actual borrower rates, fees and proposed payment schedule.   Borrower can accept here or accept later (methods for acceptance) Borrower can move on and esign their application even if they haven’t accepted loan terms. If accepted on day one, loan can move on for school certification even if 30 days has not elapsed.
  • FRB requires this to be shown before first disbursement. For school certified loans SM will disclose after school certification but prior to first disbursement.   Looks and feels very similar to loan approval disclosure with one major difference.   The Final disclosure includes a three (business day) right to cancel period Lenders cannot disburse loans in the three day window If the disclosure is mailed add another three business days to the period in which lenders cannot disburse. My recommendation to schools to prevent delays in disbursements – certify loans early!!! As a matter of fact, I know many of you accumulate and batch certifications –but I would certify as soon as you get them. Let me give you an example If you receive a certification request on Aug 1 for classes beginning Aug 20 th and you aim to disburse the loans on Aug 20 th . If you wait until Aug 15 th to certify, you may not get those funds on Aug 20 th . Better to certify on Aug 2 – ensuring no conflict with the “right to cancel” period and if we do run into one of the “redisclosure” scenarios – we still have ample time to resolve before you actual need the funds.
  • That is it for the disclosures: now onto the self certification form.   This form is Dept of Ed not an FRB form   The purpose of the form: to educate borrowers on federal loan options and to make borrowers aware of their “gap” funding needs. Another words help them figure out how much they need to borrower.     Legislatively: The borrower may obtain the form from a school or a lender. The lender must obtain a completed, signed form before they can disburse the loan. However, the key information (COA and Est Fin Aid) clearly should be coming from the school financial aid office.
  • Regulation Z, Section 226.48 (a) Co-branding prohibited (1) Except as provided in paragraph (b) of this section, a creditor, other than the covered educational institution itself, shall not use the name, emblem, mascot, or logo of a covered educational institution, or other words, pictures, or symbols identified with a covered educational institution, in the marketing of private education loans in a way that implies that the covered education institution endorses the creditor’s loans. (2) A creditor’s marketing of private education loans does not imply that the covered education institution endorses the creditor’s loans if the marketing includes a clear and conspicuous disclosure that is equally prominent and closely proximate to the reference to the covered educational institution that the covered educational institution does not endorse the creditor’s loans and that the creditor is not affiliated with the covered educational institution.   (b) Endorsed lender arrangements. If a creditor and a covered educational institution have entered into an arrangement where the covered educational institution agrees to endorse the creditor’s private education loans, and such arrangement is not prohibited by other applicable law or regulation, paragraph (a)(1) of this section does not apply if the private education loan marketing includes a clear and conspicuous disclosure that is equally prominent and closely proximate to the reference to the covered educational institution that the creditor’s loans are not offered or made by the covered educational institution, but are made by the creditor.   Summary The co-branding restriction under Regulation Z, Section 226.48 contemplates two scenarios:   1. School and lender do not have a preferred lender arrangement (i.e., school does not endorse the lender’s loans): In this case the restriction on using the school’s name is not violated if a disclosure states that the school does not endorse the lender’s loans and that the lender is not affiliated with the school. The disclosure must be clear, conspicuous, equally prominent and closely proximate to the reference to the school.   2. School and lender do have a preferred lender arrangement (i.e., school does endorse the lender’s loans): In this case the restriction on using the school’s name is not violated if a disclosure states that the lender’s loans are not offered or made by the school, but are made by the lender. The disclosure must be clear, conspicuous, equally prominent and closely proximate to the reference to the school.
  • Employee is any employee…not just someone associated with the financial aid office. The Act defines “agent” as an officer or employee of a covered institution or an institution – affiliated organization. An affiliated organization may include an alumni organization, athletic organization, foundation, or social, academic, or professional organization, of a covered institution.
  • Details on these lender reporting requirements are in the Appendix.
  • Details on these lender reporting requirements are in the Appendix.
  • Annual Report to the Department - - department has NOT issued guidance yet, so we do not know what the forms might contain. But all lenders are required to send schools an Application Solicitation Disclosure – schools can use the information contained in them to support their filing with the Department.
  • Before you finalize your private loan lender list decision for AY 10/11. We wanted to highlight the benefits of having a preferred lender list for you and your families. A survey conducted by Sallie Mae in February showed that 69% of schools continue to maintain a preferred lender list for private so you would not be alone should you decide to have one. The primary benefit of a preferred lender list for families is that it makes it easier for then by having access to meaningful lender and product information all in one place Families will not have to do the research themselves and weed through the vast amount of information available out there on student loans It allows you to act as an advocate for your families and allows you to guide them through the process from start to finish The new guidelines require annual reporting by lenders to schools. By you publishing this information on your web site provides a single source for them to compare products in a consistent manner The primary benefit for schools in having a preferred lender list is that they drive students through the school’s process. It is a way to ensure that the majority of the loans you will be asked to certify all come through your desired flow.
  • We have talked about the benefits of having a preferred lender list, and there are many. You may find that under the new regulations you are more restricted if you do not maintain one. Preferred lender arrangement regulations are not limited to whether or not you maintain a preferred lender list. Not having one could also limit your ability to counsel families to the extent that you might like to recommend a product or a lender and it could limit your ability to provide families with the information they need to make at he right decision The guidelines also apply to other offices on campus such as the business office or the book store and affiliated organizations such as the alumni office. I am going to turn it over to Steve Wynne who will go through the new guidelines as well as the definition of what is and is not considered a preferred lender arrangement.
  • The text in the blue box in the center – this is your schools’ BEST PRACTICES message. Preferred private lender lists are an effective tool to help your students and families select the lender that offers the best combination of value and service. While students and families are free to select any lender—whether identified on a preferred list or not—there’s considerable value in the objective research you perform in selecting lenders for your school’s lender list. And it is easy to do. If you currently offer a preferred private lender list at your school, you should continue to do so. In fact, the Department of Education has formalized many of the best practices schools are following today…
  • REMINDER BOX TEXT: If a school does NOT choose to have a PLL, they must be proactive in learning what other departments across campus activities with regard to private lenders. BLUE BOX AT THE BOTTOM: Our Straight Talk calls are meant to convey information in general language. If schools have detailed questions about the regulations that may be considered asking for legal advice, refer them to this link.
  • Schools with a comprehensive list CAN remove lenders who are no longer in the business, this does not constitute a PLL.
  • The list demonstrates industry Good Business Practices
  • What You Need to Know.Higher Education Opportunity Act (HEOA)

    1. 1. What You Need to Know……Higher Education Opportunity Act (HEOA) Presented by: Chuck Parker Vice President- Sales and Training Sallie Mae This session will provide a summary of the consumerism and disclosure requirements that institutions must comply with as a result of the Higher Education Opportunity Act.
    2. 2. Agenda Legislative Initiatives - HEOA, TILA, Reg. Z, PSLTIA, Offices Impacted Disclosure Requirements Consumer Information Requirements Best Practices For Great Service Compliance
    3. 3. Legislative Initiatives <ul><li>The Higher Education Act of 1965, as amended </li></ul><ul><li>Truth in Lending Act (TILA)of 1968, as amended </li></ul><ul><ul><li>Regulation Z (regulations implementing TILA) </li></ul></ul><ul><li>The Higher Education Opportunity Act (HEOA) of 2008, Enacted August 14, 2008 </li></ul><ul><li>The Private Student Loan Transparency and Improvement Act of 2008, which is actually Title X of the HEOA </li></ul><ul><ul><li>Amends the Truth in Lending Act (TILA) to cover private education loans, to require additional disclosures for private loans, and more </li></ul></ul><ul><li>Effective dates vary, noted throughout presentation </li></ul>
    4. 4. Legislative Initiatives <ul><li>HEOA </li></ul><ul><ul><li>It’s All about the Consumer and providing beneficial information </li></ul></ul><ul><ul><li>It was designed to support students and families in making wise choices </li></ul></ul><ul><li>Title X – Private Student Loan Transparency and Improvement Act </li></ul><ul><ul><li>Was introduced to ensure that families had the information they needed to make an educated decision about borrowing </li></ul></ul><ul><ul><li>Must prevent Unfair and Deceptive Private Educational Lending Practices and Conflicts of Interest (no gifts, co-branding, compensation for advisory boards) </li></ul></ul><ul><ul><li>It was designed to support students and families in making wise choices—which is in alignment with the goals of preferred lender lists </li></ul></ul>
    5. 5. Legislative Initiatives <ul><li>Title X – Private Student Loan Transparency and Improvement Act </li></ul><ul><ul><li>Disclosures must be made at three different stages </li></ul></ul><ul><ul><li>These disclosures became effective February 14, 2010 </li></ul></ul><ul><ul><li>Requires Self-Certification Form </li></ul></ul><ul><ul><li>Imposed a new obligation on lenders to annually report private loan information to schools </li></ul></ul><ul><ul><li>Contains requirements for schools maintaining a preferred lender arrangement for private student loans </li></ul></ul>
    6. 6. Consumer Information Requirements <ul><li>Section 110. Improved Information from the Federal Financial Aid website </li></ul><ul><ul><li>Financial planning </li></ul></ul><ul><ul><li>Student financial assistance available from other Federal departments and agencies </li></ul></ul><ul><li>Section 111. Transparency in College Tuition for Consumers </li></ul><ul><ul><li>Net Price Calculator </li></ul></ul><ul><ul><li>If “outside the norm”, selected schools will be required to explain </li></ul></ul><ul><ul><li>Supply litany of consumer information for College Navigator website </li></ul></ul><ul><li>Section 112. Textbook Information </li></ul><ul><ul><li>To the extent practicable, make the required textbook information available online </li></ul></ul><ul><ul><li>Requires institutions to publish a link to information in its written course schedule </li></ul></ul><ul><li>Section 120. Institution and Lender Reporting and Disclosure Requirements - Preferred Lender Arrangements (more on this later) </li></ul>
    7. 7. Consumer Information Requirements <ul><li>Section 434. Student Loan Information (Disclosures) </li></ul><ul><li>Section 488. Institutional and Financial Assistance Information for Students…Requires each institution to…(more) </li></ul><ul><ul><li>Disclose information about plans to improve academic program to current and prospective students </li></ul></ul><ul><ul><li>Develop plans to detect and prevent unauthorized distribution of copyrighted material </li></ul></ul><ul><ul><li>Disclose information on student body, diversity, the placement in employment…(more) </li></ul></ul><ul><ul><li>Disclose policies on all vaccinations </li></ul></ul><ul><ul><li>Disaggregate data on completion and graduation rates based on student gender…(more) </li></ul></ul><ul><ul><li>Disclose a statement of current campus policies regarding emergency response…(more) </li></ul></ul><ul><ul><li>Notify campus community in the event of a significant emergency…(more) </li></ul></ul><ul><ul><li>Publicly disclose current credit transfer policies…(more) </li></ul></ul><ul><ul><li>Provide each student, upon enrollment, with a “separate, clear notice about drug-related…(more) </li></ul></ul><ul><ul><li>Provide comprehensive information on the terms and conditions of loans…(more) </li></ul></ul>
    8. 8. Disclosure Requirements Loan Origination Disclosures <ul><li>Application and Solicitation Disclosure </li></ul><ul><li>Loan Approval Disclosure </li></ul><ul><li>Final Disclosure (Prior to Disbursement) </li></ul><ul><li>Safe harbor for use of model disclosure forms </li></ul>Borrower Self-Certification Form Preferred Lender Arrangements <ul><li>Requirements for completing annual lists with unaffiliated lenders </li></ul><ul><li>Disclosing of maximum Title IV grant and loan aid available </li></ul><ul><li>Publishing of a Code of Conduct </li></ul><ul><li>Annual reporting to the U.S. Department of Education </li></ul>
    9. 9. Disclosure Requirements Application & Solicitation Disclosures <ul><li>Purpose of Disclosures: </li></ul><ul><li>Provides the general range of rates and fees so that borrowers can make informed decisions when choosing a private loan </li></ul><ul><li>This disclosure is needed when an application is initiated or firm offer of credit extended </li></ul><ul><li>Key Information: </li></ul><ul><li>Provided with the application or firm offer of credit. </li></ul><ul><li>Shows the available range of rates and fees for the loan </li></ul><ul><li>Uses some standard assumptions for all lenders </li></ul><ul><li>Unique rules apply to providing this disclosure information for phone pre-approvals </li></ul><ul><li>Will display in web application flow if electronic permissions are given </li></ul><ul><li>NOTE: Cosigners will receive a copy of all three disclosures, as applicable, for informational purposes only. </li></ul>
    10. 10. Disclosure Requirements Loan Approval Disclosure <ul><li>Purpose of Disclosure: </li></ul><ul><li>This must be provided on or with any notice of approval. </li></ul><ul><li>Provide the borrower with specific terms of the loan offer; disclosure contents are specific to the individual borrower's loan offer approval </li></ul><ul><li>Key Information: </li></ul><ul><li>Shows borrower-specific actual rates and fees offered </li></ul><ul><li>Mandatory up to 30-day acceptance period </li></ul><ul><li>Loan terms must be accepted by the borrower before the lender can proceed – lender cannot alter any terms in any way during this time period other than for very limited purposes, such as changes in the index (LIBOR) or school certification </li></ul><ul><li>Certain borrower, cosigner, and school changes may require re-disclosure and, if so, will restart the clock on the 30-day acceptance period </li></ul><ul><li>If approval disclosure has been created and not viewed on Sallie Mae OpenNet Web Loan Delivery SM the disclosure will be mailed </li></ul><ul><li>NOTE: Cosigners will receive a copy of all three disclosures, as applicable, for informational purposes only. </li></ul>
    11. 11. Disclosure Requirements Final Disclosure <ul><li>Purpose of Disclosure: </li></ul><ul><li>Sent after loan terms are accepted and school has certified the loan. The Final Disclosure gives the customer a three business day right to cancel period </li></ul><ul><li>Funds may not be disbursed until the right to cancel period has passed </li></ul><ul><li>Key Information: </li></ul><ul><li>Regulations require a three business day right to cancel period. If the final disclosure is mailed, the borrower will have an additional four days </li></ul><ul><li>Final disclosure and cover letter to be sent to borrowers and cosigners </li></ul><ul><li>Provided at final loan approval, prior to which the lender must have received school certification and the signed borrower self-certification form and the borrower must have accepted the terms of the loan </li></ul><ul><li>NOTE: Cosigners will receive a copy of all three disclosures, as applicable, for informational purposes only. </li></ul>
    12. 12. Disclosure Requirements <ul><li>We will not allow a school to set a disbursement date that falls within our estimated right to cancel period. </li></ul><ul><li>PDF format </li></ul><ul><li>Schools will be notified as they are today when a borrower cancels a loan </li></ul>Sample of Model Form – Final Disclosure
    13. 13. Disclosure Requirements Self-Certification Form <ul><li>Purpose of Disclosure: </li></ul><ul><li>Helps the consumers identify their gap funding needs and Federal financial aid alternatives. </li></ul><ul><li>Key Information: </li></ul><ul><li>A new mandatory self-certification form created by the Department of Education </li></ul><ul><li>Form may be provided to the borrower by the school or the lender </li></ul><ul><li>Lender is required to obtain the signed completed form before disbursing the loan </li></ul><ul><li>Key data elements: specific borrower’s cost of attendance and estimated financial assistance, the cost of attendance minus estimated financial assistance, and a signature </li></ul><ul><li>Must be hand signed or e-Signed </li></ul><ul><li>This information is available through the school financial aid office </li></ul>
    14. 14. Disclosure Requirements Re-Disclosure Situations <ul><li>The loan approval disclosure will need to be re-disclosed for the following situations: </li></ul><ul><ul><li>If any borrower, cosigner or school changes affect the financial terms as detailed in the loan approval disclosure </li></ul></ul><ul><ul><ul><li>Exceptions include a school certification lowering the total requested loan amount and a change to a disbursement date </li></ul></ul></ul><ul><li>Re-disclosure requires: </li></ul><ul><ul><li>30-day acceptance period clock to be reset </li></ul></ul><ul><ul><li>Borrower to “re-accept” terms of the loan </li></ul></ul>
    15. 15. Disclosure Requirements Preferred Lender Arrangements <ul><li>No Co-branding: Lenders cannot use the name, emblem, mascot, symbol, picture or logo of a school in marketing in a way that could imply the school endorses that lender. </li></ul><ul><li>Marketing does not imply endorsement if there is a clear and conspicuous disclosure that school does not endorse </li></ul><ul><li>If a lender’s loan product is endorsed by the school, clear and conspicuous disclosure disclaimers are necessary that creditor and not school is making loan </li></ul>
    16. 16. Disclosure Requirements What It All Means For You <ul><li>Should be a seamless integration into the borrower application process </li></ul><ul><li>May have an impact on the current school process as highlighted below and on the following slide </li></ul><ul><li>Encourage students to inquire and apply for loans earlier </li></ul><ul><li>Ensure that students are aware that they must proactively accept their loan terms </li></ul><ul><li>Plan to certify loans earlier, particularly around peak periods; to allow for 7-day right to cancel requirement to ensure funds are disbursed in a timely fashion </li></ul>Compliance onus for the three new disclosures is on the lender HOW YOU CAN HELP!
    17. 17. Disclosure Requirements What It All Means For You <ul><li>Self-Certification Form has both lender and school implications </li></ul><ul><li>Ensure all students have accurate information about their enrollment, cost of attendance and financial assistance as early as possible </li></ul><ul><li>If a school has any question about how Sallie Mae utilizes COA, contact your sales representative </li></ul>HOW YOU CAN HELP!
    18. 18. Offices Impacted <ul><li>Covered Educational Institution </li></ul><ul><ul><li>Any educational institution that offers a postsecondary educational degree, certificate, or program of study (including any institution of higher education) </li></ul></ul><ul><ul><li>Includes an agent , officer or employee of the educational institution </li></ul></ul><ul><li>Covered Private Educational Lender </li></ul><ul><ul><li>Any financial institution, federal credit union, or person engaged in the business of soliciting, making, or extending private education loans </li></ul></ul>
    19. 19. Compliance <ul><li>Lender Requirements for Compliance </li></ul><ul><ul><li>The HEOA requires lenders to provide the following information to schools by April 1 each year: </li></ul></ul><ul><ul><li>In addition to disclosing this to families, schools can use this information in selecting their preferred lenders </li></ul></ul><ul><ul><li>Sallie Mae will be providing this information to schools annually in the form of an Application Solicitation Disclosure </li></ul></ul>
    20. 20. Compliance <ul><li>School Requirements for Compliance </li></ul><ul><ul><li>In addition to the consumer information that schools have already been tasked with providing, The HEOA adds additional requirements, see sections </li></ul></ul><ul><ul><ul><li>111. Transparency in College Tuition for Consumers </li></ul></ul></ul><ul><ul><ul><li>112. Textbook Information </li></ul></ul></ul><ul><ul><ul><li>120. Institution and Lender Reporting and Disclosure Requirements </li></ul></ul></ul><ul><ul><ul><li>153. Loan Information to be Disclosed and Model Disclosure Form for Covered Institutions, Institution-Affiliated Organizations, and Lenders Participating in Preferred Lender Arrangements </li></ul></ul></ul><ul><ul><ul><li>154. Loan Information to be Disclosed and Model Disclosure Form for Institutions Participating in the William D. Ford Federal Direct Loan Program </li></ul></ul></ul><ul><ul><ul><li>488. Institutional and Financial Assistance Information for Students </li></ul></ul></ul><ul><ul><ul><li>493. Program Participation Agreements </li></ul></ul></ul>
    21. 21. Compliance <ul><li>School Requirements for Maintaining a Preferred Lender List </li></ul>Annual report to the Department of Education - Disclosure information - Statement indicating why your school participates in a Preferred Lender Arrangement with each lender Truth in Lending Act disclosure reporting to families - Sallie Mae provided this information to schools in the form of an Application Solicitation Disclosure on March 17 and will continue to provide the Disclosure annually
    22. 22. Are There Benefits to Maintaining a Preferred Lender List? <ul><li>A preferred lender list: </li></ul><ul><li>Allows schools to act as an advocate for families, providing relevant and meaningful lender and product information in one consolidated source </li></ul><ul><li>Allows schools to better guide students and families through the entire loan process -- from start to finish </li></ul><ul><li>Provides students and families with an opportunity to compare products in a consistent manner </li></ul><ul><li>Helps families navigate through a school's preferred process -- from application to certification to disbursement </li></ul>69% of schools continue to maintain a preferred lender list for private loans SOURCE: February 2010 survey conducted by Sallie Mae ® Best Practices For Great Service YES!
    23. 23. Are There Downsides to Maintaining a Preferred Lender List? Many schools may find that if they do not have a preferred lender list, they will be restricted in the amount and type of guidance they can provide to students and families. Best Practices For Great Service
    24. 24. Best Practices For Great Service <ul><li>Current Best Practices: </li></ul><ul><li>Disclose to families the method, criteria and rationale used in selecting lenders with which you have a “Preferred Lender Arrangement” (PLA) </li></ul><ul><li>List at least two unaffiliated lenders and describe any relationship a lender may have with another lender on your list </li></ul><ul><li>Remind students and families that they may have access to free or lower cost federal loan options </li></ul><ul><li>Differentiate private loan information from Title IV loan information </li></ul><ul><li>Disclose that students do not have to borrow from a lender on the preferred lender list </li></ul>The HEOA formalized many of the best practices schools are following today. If you currently offer a preferred lender list for private loans at your school, you should continue to do so.
    25. 25. Understanding Preferred Lender Arrangements <ul><li>A preferred lender arrangement exists if the school: </li></ul><ul><li>Recommends, promotes or endorses a lender—even if that recommendation is not in the form of a lender list </li></ul><ul><li>Refers their students to a third-party entity that manages a listing of private lenders on behalf of the school </li></ul><ul><li>Refers their students to a third-party entity where the lenders pay a fee based on loan volume generated </li></ul><ul><li>Provides a list of lenders that is not a neutral, comprehensive list </li></ul>Please refer to 34 CFR 601 of the October 28, 2009 Federal Register for the specific preferred lender arrangement requirements. Available at SallieMae.com/StraightTalkHEOA REMINDER A preferred lender arrangement is not limited to activities of the financial aid office. New rules may apply to activities of other offices on campus or affiliated organizations. Best Practices For Great Service
    26. 26. Understanding Preferred Lender Arrangements <ul><li>Scenarios NOT considered to be a preferred lender arrangement: </li></ul><ul><li>If a school provides a neutral, comprehensive list of lenders who lent at the school in the past </li></ul><ul><ul><li>The school cannot use judgment regarding which lenders to include on the list and the school cannot rank, recommend, promote, or endorse any of these lenders </li></ul></ul><ul><ul><li>The school must also reference that a student is free to choose any lender </li></ul></ul><ul><li>If a school refers its students to a third-party entity that maintains a comprehensive, neutral listing of private education lenders </li></ul><ul><ul><li>The school must ensure that the listing is broad in scope and cannot endorse or recommend any of the lenders on the list </li></ul></ul><ul><ul><li>The lenders on the list cannot 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 </li></ul></ul>Best Practices For Great Service
    27. 27. Best Practices For Great Service <ul><li>Schools should also consider the following when selecting a private loan provider to be included on a preferred lender list: </li></ul><ul><ul><li>What is the provider’s financial strength and longevity in the industry? </li></ul></ul><ul><ul><li>Do they have superior customer service for families? </li></ul></ul><ul><ul><li>Do they have an account management team? </li></ul></ul><ul><ul><li>Are there low cost funding options available? </li></ul></ul><ul><ul><li>Is pricing available that rewards applicants who have maintained good credit? </li></ul></ul><ul><ul><li>Are they fully compliant with HEOA in their online loan delivery process? </li></ul></ul><ul><ul><li>Do they have an electronic self-certification process? </li></ul></ul>Differentiating Private Loan Lenders
    28. 28. Keeping You Informed <ul><li>As your partner in education finance, Sallie Mae is committed to keeping you informed about HEOA requirements and what they mean for your school as well as the students and families you serve </li></ul>For detailed information about HEOA and sample disclosures from the Department of Education visit: SallieMae.com/StraightTalkHEOA
    29. 29. The information contained in this presentation is not comprehensive, is subject to constant change, and therefore should serve only as general, background information for further investigation and study related to the subject matter and the specific factual circumstances being considered or evaluated.  Nothing in this presentation constitutes or is designed to constitute legal advice.
    30. 30. Questions Contact Information: Chuck Parker 225-768-7460 [email_address] www.SallieMae.com/straighttalk

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