NASFAA Board Of Directors Approves Private Educational Loan Policy Change
On a December 7th conference call, the NASFAA Board of Directors unanimously approved a resolution endorsing a policy change that the association will pursue with the Congress. The policy concerns the coordination of private educational loans and other Federal student aid and other assistance.
NASFAA members were asked by the NASFAA Federal Issues Committee to comment on a draft version of the policy and many did so. The committee reviewed more than 60 pages of positive and negative comments and suggestions for change. The committee made several important modifications from the draft version in response to members concerns and forwarded that modified policy to the Board of Directors for its decision.
NASFAA’s proposal accomplishes several important goals. It protects the interest of the Federal government and Title IV eligible students and private educational loan borrowers by helping ensure that they receive the maximum amount of federal student aid for which they are eligible. It replicates current private educational loan school certification procedures performed routinely by many financial aid offices. It guarantees that no such private educational loan will be made beyond the borrower’s cost of attendance. (It would not apply to private educational loans made for expenses not included in the cost of attendance such as medical and law school transition expenses.) It assists in reducing the potential of borrowing beyond what is necessary to finance an education and limiting the impact of less-than-accurate marketing campaigns used by some in the lending industry.
PROPOSED SOLUTION: To modify H.R. 4137’s credit notification requirement, we propose the following:
The institution will certify each private educational loan by:
a. Confirming that the student is enrolled or scheduled to enroll at the institution;
b. Using procedures determined by the institution, advising student borrowers about the impact of the private educational loan on potential Federal financial assistance through a Title IV program;
c. Recommending a private educational loan amount not to exceed the school’s cost of attendance minus the student’s estimated financial assistance.
An institution must preserve the borrower’s right to select a lender.
An institution shall not certify an amount that exceeds the amount determined by the calculation in 1c.
A lender may not make a private educational loan that is greater than the amount certified or make a private educational loan prior to receiving the institution’s certification; however, a lender may reduce the amount requested by a borrower if warranted even if a higher amount was certified by the institution.
On or before the date of disbursement the lender of a private educational loan must notify the institution of the loan disbursement amount and date as well as the student on whose behalf the loan is made.
The Secretary shall prepare easy-to-understand materials explaining the benefits of, Federal aid vs. private educational loans. Institutions may provide these materials to their students and families.
Posted 12/10/07 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
