As a financial aid administrator, your primary role is to help students finance their postsecondary education and to assist them in making good choices about how they fund it. This responsibility is particularly important in the area of student borrowing. Financial aid administrators at schools participating in the Federal Family Education Loan Programs (FFELP) frequently review available loan products and offer their student and parent borrowers a list of options from which to choose. Some also provide a listing of private loan products, as well. Developing a Request for Information (RFI) can be an important part of each process.

The information in this article was developed to help NASFAA members prepare an objective list of student loan providers from which students may select a lender that best meets their needs. It is excerpted from an upcoming NASFAA monograph - on hold pending completion of related legislation - on developing a lender list. This material reflects the legal principle that it is the student's right - and the student's responsibility - to select his or her lender and that right cannot be limited by institutional policies or practices.

Identifying Lenders. To identify lenders that will provide desirable benefits and service to your students, you will need to gather a good representation of lenders. This is the best way to ensure that your students' needs and your school's operational needs are met.

It may make sense to start by identifying lenders with whom the institution has a good working relationship. Consider such factors as which lenders are responsive to the institution's processing needs, which lenders the institution's students have chosen in the past (and why), and which lenders have created the fewest problems for students and the financial aid office. Also, talk to colleagues within the state and region, as well as nationally. Ask them which lenders they enjoy working with and find out why. Develop a fairly exhaustive preliminary list of lenders from whom more information is needed. Include the school in the list of lenders to be evaluated if the school participates as an FFEL lender.

Each institution will ultimately need to develop its own unique listing of the factors that it considers important and that will be used to evaluate a lender. There is no magic number or right set of qualifiers, although too few could be construed as limiting student choice and too many could be confusing. Possibly, the only standard is that the list of qualification criteria should fit both the institution and the institution's borrowers' identified needs and must not be compromised.

Gathering Input. You will want to solicit the information your school needs related to the selection criteria and factors that have been previously identified. A commonly used approach is to offer a Request for Information (RFI) solicitation. This is a formal request sent by the institution inviting each lender to submit specific detailed pre-determined information. An RFI is sometimes used as a way for institutions to get help in "thinking their way through the process," by using lenders (in this case) as insightful contributors or consultants.

Developing a Request for Information (RFI). At this point, you have identified a list of key evaluation criteria for lenders and students as well as the operational requirements for the institution. To reduce potential confusion and eliminate the extra time needed to complete the evaluation process, avoid adding questions that do not pertain to the identified factors, criteria, and requirements.

When you issue an RFI, review and decide what items are essential or are deal-breakers, and what items are desirable but not essential: EFT; interest rates, fee reductions, rebates and other repayment rewards or incentives available to students; availability of customer service representatives for both borrowers and the financial aid office at a toll-free number for extended hours; availability of online and electronic services, such as promissory notes, origination, borrower access to loan information; quality of printed materials and an informative web site; whether the lender sells loans or provides life-of-loan service; default prevention and collection practices; availability of lender support for entrance and exit counseling; whether the lender sell lists of borrower names and addresses or markets credit cards or other products or services to students, etc. Seek advice from colleagues as to what lenders have worked and not worked well for them to determine the lenders to which you should send the RFI.

Collecting the desired information can be a challenging and difficult undertaking. A lender might (without realizing it) provide responses that are either ambiguous or do not answer the questions with the information and/or details sought. To ensure that the institution obtains accurate and appropriate responses, questions must be phrased in a way that minimizes the opportunity for ambiguity. Try to avoid asking "yes" or "no" type questions. For example:

Instead of asking, "Is your company capable of providing real-time credit approvals for PLUS and private loans?" you might ask questions like these:

• What data elements are required to submit a PLUS pre-approval application?
• What data elements are required to submit a private loan pre-approval application?
• What is the average response time after each type of loan application has been completed and submitted?
• What percent of each category of loan application is approved on first submission?
• What percent of application denials is automatically directed for a second review?

Instead of asking, "Does your company offer borrower benefits?" instruct the lender to "Please identify each of your borrower benefits, the requirements for each, and the borrower utilization rate for each since inception."

You might ask, "What was your company's FYXX cohort default rate for community college borrowers in the state of XYZ?" as a way of determining the company's capability for mining its own data or working with a certain category of borrowers.

When issuing an RFI, provide a submission deadline specifying the time for receipt, as well as the format for submission of all proposals. Allow adequate time for lenders to review the RFI and ask follow-up questions. Consider establishing set times and dates for fielding those questions, possibly limiting that interaction to a single specific time and location (or a specific process) in which all lenders can participate concurrently. The advantage in doing this is that all lenders will hear the same questions and answers. It also conserves the school's time spent on the process. A potential downside to this process is that it may inhibit questions from lenders who feel they would give away some of their "edge" by asking the questions in the first place. Schools should develop a process that best meets their objectives and is structured so that they may get the best possible lender responses, while allowing a reasonable amount of time for each of the lenders who wish to respond to do so.

If the RFI has been well-constructed and if lenders have been instructed to respond in a specific format, comparing and evaluating the lender submissions will be more manageable and efficient for the institution. Information that is received from lenders may be incomplete or need further clarification. Build into the process a timeline that allows adequate time for a thorough review of the information or proposals and allows you to follow-up for additional information, questions, or clarification if that is needed. Make sure lenders understand that this will be part of the process.

Evaluating Lender Responses. When deciding whether or not to include a lender on the list you offer your borrowers, you must objectively weigh the many different attributes that you have decided to evaluate. A lender may excel in several areas. How important is each area to both the school and its borrowers? How can lenders be compared objectively and impartially?

Remember that your lender list is a service that should reflect what your school feels is best for your borrowers based on the lender's service throughout the life of the loan; it must never be based on a relationship with the sales representative assigned to your school or area. Make every effort to be objective when assessing the value and performance of any lender.

You may wish to form a committee to evaluate the responses. The committee should be representative of all stakeholders in the student loan process at the institution such as the financial aid office, student accounts, students, etc. Broad representation will increase the objectivity of the evaluation process and protect it from undue political influence.

You may also choose to develop a Lender Comparison Chart using the factors, criteria, student needs and expectations, institutional needs and expectations, and any other items of importance that you identified in the earlier stages of this process. The sample Lender Comparison Chart displays a sample listing of specific criteria with lines for additions. Since no single listing can be expected to include all the criteria important to all schools, each school will need to create its own chart that includes, at a minimum, all of the specific items the school has identified as important.

A Note of Caution. NASFAA hopes the preceding information is helpful in your efforts to serve the best interests of your students. We developed this article to have a general applicability for financial aid offices; however, we urge you to have regular discussions with your school's legal representatives or counsel's office. Given the fluid nature of the controversy surrounding lender lists as well as the myriad state laws, state Attorneys General rulings, investigations, and Codes of Conduct, it is possible that your school could face RFI restrictions that another school does not have to take into account. Finally, remember that this document will be revised to take into account legislative and/or regulatory actions by the Department and the Congress when such actions occur.

Lender Comparison Chart -- Sample

Student-Related Factors

Stability of lender
Customer service
Front end fees/benefits for borrowers
Repayment incentives/benefits for borrowers
Hold/sell loans after origination
Web-based services for borrowers
Loan consolidation options

School-Related Factors

Stability of lender
Customer service
Marketing ethics (solicitation, sale of names)
Compatibility with school's computer system
Experience of peers with lender
Common Line compliance
Loan processing options
Electronic signature options Electronic Funds Transfer (EFT) options
Loan processing support
PLUS pre-approval options
Private loan products
Default rate of lender
Guarantee agency relationship of lender
Market initiatives of lender
Market position of lender

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Posted 07/23/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.