Gentlemen and/or Ladies:
As chairpersons of the NASFAA Graduate and Professional Issues Committee (GPIC) and the AAMC Committee on Student Financial Assistance (COSFA), in addition to being financial aid administrators for health professions students, we appreciate the opportunity to provide comments regarding Regulation Z requirements. Although we are in agreement that borrowers need to be adequately informed of their loan rights and responsibilities, mandating this requirement for educational loans provided through the Department of Health and Human Services (Title VII and Title VIII of the PHS) has amassed confusion to the awarding and disbursement process of such loans.
Title VII & Title VIII loans (Health Professions Loan, Nursing Student Loans, Loans for Disadvantaged Students and Primary Care Loans) are subsidized loans funded by the federal government and are similar to the campus-based programs authorized under Title IV of the Higher Education Act, particularly the Federal Perkins Loan. These loans currently have better interest rates and terms than the Federal Direct Stafford and PLUS Loan Programs.
The last Regulation Z final regulations required the completion of the Private Education Loan Application Self-Certification. Under section 1 of the self-certification, the first bullet indicates that lower cost Title IV financial aid may be available. Loans offered under Title VII and VIII are as or more cost effective than loans offered under the Title IV program (particularly the Federal Direct Stafford and Federal Direct PLUS Loans). The third bullet strongly encourages the student to pursue the availability of free or lower-cost financial aid with the school's financial aid office. This statement is confusing since aid administrators are encouraging students to borrow through the more favorable Title VII and Title VIII programs, but still require the completion of the Private Education Loan Applicant Self-Certification. Statements such as these make aid administrators appear to be less knowledgeable and diminish the trusting relationship that aid administrators try to develop with students. In addition, there are most likely several students who are overwhelmed with the paperwork and after reading the Private Education Loan Application Self-Certification become discouraged or believe that Federal Direct Loans are indeed more cost effective.
Institutions are required to award and administer Title VII and Title VIII programs in a fiscal and responsible manner through previous Regulation Z guidance. This guidance provides clear guidelines for awarding, notifying, disbursing and repaying of the aforementioned programs (refer to http://bhpr.hrsa.gov/dsa/sfag/health_professions/bk1prt1.htm). The inclusion of these additional Regulation Z requirements creates an unnecessary paperwork burden for the institution and the student.
The regulations also delay the disbursement of the funds due to the required three day right to cancel option. Depending on a school's institutional policies, the disbursement delay could result in the assessment of late payment charges, removal from classes or delay in living and book reimbursement monies. In addition, Title VII and Title VIII loans have provisions which permit the cancellation without penalty beyond a three day period.
We have spoken to several colleagues who are in agreement with this opinion. Since the regulatory definition for a private education loan was created by the Federal Reserve Board and the CFPB will be responsible for regulation writing henceforth, we request that the CFPB consider eliminating this requirement for Title VII and Title VIII loans offered through the Department of Health and Human Services. If additional authority concerning this matter is required from Congress, we request that appropriate action be taken to provide relief.
Thank you in advance for your consideration.
NASFAA GPIC Chair
Associate Director, Health Sciences Center Financial Aid Office
West Virginia University
AAMC COSFA Chair
Director, Financial Aid Office
Publication Date: 1/26/2012