University Business - July 2007 - (Page 42)

FINANCIAL AID of education to prepare a report on the adequacy of information provided to students and parents about education loans. The secretary would then consult with students, college representatives, lenders, loan servicers, and guaranty agencies to develop a model disclosure form for informing students about loans from lenders appearing on their preferred lender lists. The Department of Education would be required to make the report and model disclosure form available to institutions, lenders, and the public and annually assess the form to make improvements. At a minimum, the model disclosure form would provide the loan’s interest rate; any fees; repayment terms; opportunity for deferment or forbearance while in repayment, including in-school deferment options; and additional terms and conditions, including beneﬁts contingent on repayment behavior. In addition, the form would provide annual percentage rates for loans, determined on the basis of the actual net disbursed amount of the loan, the average amount and interest rate of loans borrowed by students enrolled in the institution during the preceding academic year, contact information for the lender, and any philanthropic contributions the lender made to the institution. For private loans made by preferred lenders, institutions would have to disclose how to determine the loan’s interest rate, if and how early repayment may be available without penalty, late payment penalties, and any other information that the secretary may require. Preferred lenders would be required to provide annually to institutions the information required in the model disclosure form for each type of loan provided to students attending the institution for the preceding academic year. An institution would be required to post all information from the model disclosure form on its website and in any student aid material it distributed. MORE REQUIREMENTS Institutions using a preferred lender list would be required to submit an annual 42| July 2007 report to the secretary with information from the model disclosure form for each type of loan provided by each preferred lender to its students. The report would also include a detailed explanation of why institutional oﬃcials believe the terms and conditions of each type of educational loan provided are beneﬁcial for its students. An established process would ensure that preferred lenders are selected based on borrower beneﬁts. Institutions would have to make the report publicly available and provide it to all students attending or planning to attend the school before they’ve made a loan selection. Preferred lender lists would have to explain why each lender has been included, especially with respect to terms and conditions favorable to the borrower. The list would also make it clear that students do not have to borrow from a lender on the list. Preferred lender lists would need to include at least three lenders that are not afﬁliated with each other. They would also need to indicate if a lender were aﬃliated with any other lender on the list and to describe the speciﬁcs of any aﬃliations. The secretary would maintain a list of lender aﬃliates of all eligible lenders and provide this list to institutions to help them comply. Institutions would also be required to establish a process to ensure that preferred lenders are selected based on the beneﬁts provided to borrowers, including (1) highly competitive interest rates, terms, or conditions, (2) high-quality servicing, or (3) additional beneﬁts beyond the standard terms and conditions. Aid administrators would be required to exercise a “duty of care and a duty of loyalty to select preferred lenders without prejudice and for the sole beneﬁt of the student.” The bill would forbid institutions from denying or impeding the borrower’s choice of a lender, or causing unnecessary delays in loan certiﬁcation for borrowers who choose a lender that has not been recommended or suggested by the institution. It would require an institution to state on its website and in any student aid materials distributed that students aren’t required to use preferred lenders and that the institution is required to process loans from any eligible lender selected. The bill would also require an institution to include an easy-to-understand explanation of maximum federal grant and loan amounts and the institution’s cost of attendance on its website and in its ﬁnancial aid materials. Finally, the bill would prohibit preferred lenders from providing a private loan to a student until the institution informed the student of any remaining options for federal loans and any terms and conditions of available federal loans that were more favorable to the borrower. COBRANDING PROHIBITION In addition, lenders would be prohibited from using an institution’s name, emblem, mascot, logo, or any words, pictures, or symbols readily identiﬁed with the institution in any way that implied that the institution endorsed the private educational loans oﬀered by the lender. This restriction would apply to lenders’ marketing eﬀorts for private loans. SUNSHINE ACT COMPLIANCE AND ENFORCEMENT Institutions and lenders would be required to comply with the Sunshine Act as a condition of receiving federal funds or assistance. If the secretary determines that an institution or lender has violated a subsection, the penalty would depend on the severity of the infraction. Institutions or lenders that don’t participate in Title IV loan programs may be ﬁned up to $25,000. For lenders that participate in the Title IV programs, the secretary may limit, terminate, or suspend the lender’s participation in the program. universitybusiness.com http://universitybusiness.com

Table of Contents for the Digital Edition of University Business - July 2007

Contents
College Index
Company Index
Advisory Board
Editor's Note
People Watch
Sense of Place
Marketing
Viewpoint
Human Resources
Money Matters
Financial Aid
Community Colleges
Seeds of Scandal
Controlling the Flow
Special Delivery
Presidential Progress
Best Foot Forward: SOX and Financial Standards
Business Technology
What's New
Calendar of Events
Direct Connect
End Note

University Business - July 2007