The preferred lender list controversy l.jpg
This presentation is the property of its rightful owner.
Sponsored Links
1 / 41

The Preferred Lender List Controversy PowerPoint PPT Presentation


  • 97 Views
  • Uploaded on
  • Presentation posted in: General

The Preferred Lender List Controversy. ___________________________________________ John Marcus Senior Vice President for Business Development The Education Resources Institute ___________________________________________ Rick Shipman Director of Financial Aid Michigan State University

Download Presentation

The Preferred Lender List Controversy

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


The preferred lender list controversy l.jpg

The Preferred Lender List Controversy

___________________________________________

John Marcus

Senior Vice President for Business Development

The Education Resources Institute

___________________________________________

Rick Shipman

Director of Financial Aid

Michigan State University

____________________________________________

2008 College Board Midwestern Regional Forum, Chicago, IL

2008 Midwestern Regional Forum


Goals of session l.jpg

Goals of Session

Speaker perspectives

Review student loan landscape

Evolution of student loan investigation

Legislative response

School, lender, guarantor response

2008 College Board Midwestern Regional Forum, Chicago, IL


About l.jpg

About

Michigan State University

2008 College Board Midwestern Regional Forum, Chicago, IL


Msu on the map l.jpg

MSU on the Map

2008 College Board Midwestern Regional Forum, Chicago, IL


Campus l.jpg

Founded in 1855

Nation’s first land-grant institution

Located in East Lansing, Michigan

5,200 acre campus

Largest residence hall system in US

24 halls and 3 apartment villages

Campus

2008 College Board Midwestern Regional Forum, Chicago, IL


Academics l.jpg

Academics

200 academic programs

17 degree-granting colleges

3 medical colleges

Private, affiliated law college

49,000 students from

All 83 Michigan counties

All 50 states

130 countries

240 study abroad programs in 60 countries/all continents

11,000 faculty/staff

2008 College Board Midwestern Regional Forum, Chicago, IL


Slide7 l.jpg

The Office of Financial Aid has…

43 regular employees

3 full time/5 part time campus locations

72% of students receive financial aid

$438 Million paid in 2006-07

$ 263 M – Loans

$ 120 M – Grants/Scholarships

$ 53 M – Fellowships/Sponsors/Educational Trusts

$ 2 M – Work Study

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu l.jpg

Loans at MSU

Joined FDSLP in Year 2

Rejoined FFELP for Fall 2003

Exercising School Lender Option

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu9 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu10 l.jpg

Loans at MSU

2007-08 Federal Loans

39 FFEL Lenders

3 account for 99% of loans

29,601 Loans for $100 Million

2007-08 Private Loans

11 Primary Lenders

6 account for 90% of loans

2,390 Loans for $12 Million

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu11 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


About12 l.jpg

About

Our Mission: Promoting educational opportunities to change people’s lives

Established in 1985 as a 501(c)3 non-profit

Located in Boston, MA

Primary activities

Promoting access to education for the underserved

Guaranteeing private education loans

2008 College Board Midwestern Regional Forum, Chicago, IL


About13 l.jpg

About

Over 22 years of loan guarantee experience

National reputation and significant expertise in college access, affordability and success

Guarantee loans at over 6000 schools

Guaranteed over $4 billion in 2007 and more than $18 billion since 1985

2008 College Board Midwestern Regional Forum, Chicago, IL


About14 l.jpg

About

Overview of the TERI Guarantee Programs

Available at a broad base of schools

Co-borrowers are strongly encouraged

Widely used by respected lenders

Loans are based on credit standing, not school of attendance

Fair rates and fees for the entire student body

2008 College Board Midwestern Regional Forum, Chicago, IL


Student loan landscape l.jpg

Student Loan Landscape

Federal Loans

FDSLP and FFELP

Perkins

Graduate and Parent PLUS

Private Loans

School Channel

Direct to Consumer

2008 College Board Midwestern Regional Forum, Chicago, IL


Student loan landscape16 l.jpg

Student Loan Landscape

What Are Preferred Lender Lists?

Why Do Schools Have Them?

Apply to FFELP and Private Loans only

Reduce confusion for borrowers

Can reduce borrowing costs

Improve processes for borrowers

Improve administrative process for schools

2008 College Board Midwestern Regional Forum, Chicago, IL


Evolution of student loan investigation l.jpg

Evolution of Student Loan Investigation

Lender(s) complain of closed school doors

New York Attorney General Andrew Cuomo opens a broad inquiry

NASFAA chief issues denial

Cuomo responds with evidence

Congress/media/public take note

2008 College Board Midwestern Regional Forum, Chicago, IL


Evolution of student loan investigation18 l.jpg

Evolution of Student Loan Investigation

What did the investigation find?

Very little but achieved major headlines

Aid administrators received personal gain

Students denied choice of lender

Inappropriate lender/school arrangements

Lender advisory boards

Lender revenue sharing with schools

Lender staffing assistance for schools

Students steered to higher cost loans to benefit schools

56 schools out of 8,000 total have signed codes of conduct

2008 College Board Midwestern Regional Forum, Chicago, IL


Cuomo s reaction l.jpg

Cuomo’s Reaction

Code of conduct for schools/lenders

Student Lending Accountability, Transparency, and Enforcement Act (SLATE)

11 lenders & 56 schools signed

Some schools/lenders required to pay fines

Push for new state regulations

Push for new federal regulations

2008 College Board Midwestern Regional Forum, Chicago, IL


State media nasfaa reaction l.jpg

State/Media/NASFAA Reaction

Media widely covered this as story of graft

Schools were targeted

Lenders/guarantors/ED were targeted

NASFAA Statement of Ethical Principles and Code of Conduct for Institutional Financial Aid Professionals revised and approved on 5/3/07

“Commit to the highest level of ethical behavior and refrain from conflict of interest or the perception thereof.”

10 states instituted codes similar to NY’s SLATE Act

Florida, Indiana, Nebraska, New Jersey, Texas …

2008 College Board Midwestern Regional Forum, Chicago, IL


Federal reaction l.jpg

Federal Reaction

Congress Demands Action

Kennedy launches own investigation

Negotiated Rulemaking focus on ethical loan practices

New Federal Regulations improve loan transparency

College Cost Reduction and Access Act reduce profits

Higher Education Act Reauthorization proposals

Department of Education investigations

8/9/07 Spellings Letter to Schools

2008 College Board Midwestern Regional Forum, Chicago, IL


Spellings letter urges schools l.jpg

Spellings Letter Urges Schools

To protect the borrower’s choice of lenders;

To base lists of preferred, recommended, or suggested lenders, if provided by your institution, solely on the best interests of the student or parent borrowers, considering factors such as interest rates, fees, and loan benefits provided by the lender to the borrower;

To not request or accept any payments or benefits of any kind from a lender in exchange for being included on a preferred or recommended lender list or in exchange for the school recommending the lender to its students or parents;

To clearly and fully disclose to students and parents the criteria and process used to select the lenders for preferred, recommended, or suggested lender lists;

To ensure that employees of lenders who make loans to students or their parents do not identify themselves as employees of the institution of higher education and that employees or agents of a lender, servicer, or guaranty agency do not work in or provide staffing to an institution’s financial aid office unless they do so at fair market value; and

To ensure that the institution’s employees will not receive any gift, including travel gifts, of more than nominal value from any lender, servicer, or guaranty agency.

2008 College Board Midwestern Regional Forum, Chicago, IL


Spellings letter urges lenders l.jpg

Spellings Letter Urges Lenders

To not provide any payments or benefits to an institution and its employees in exchange for being included on that institution’s preferred, recommended, or suggested lender list;

If included on a school’s list of preferred, recommended, or suggested lenders, to clearly and fully disclose any promises or offers relating to the terms of the loans or any services to borrowers that your organization made to be included on the list;

To ensure that the employees of your organization and its contractors do not identify themselves as employees of a school and to refrain from providing employees or agents to work in or provide staffing to a school’s financial aid office unless they do so at fair market value;

To refrain from offering anything of more than nominal value, including travel, to an employee of any institution;

To refrain from providing payment or gifts of more than nominal value to employees or agents of an institution who serve on an advisory board for your organization; and

To restrict use of the Department’s National Student Loan Data System to authorized personnel and for authorized purposes only.

2008 College Board Midwestern Regional Forum, Chicago, IL


So where are we today l.jpg

So Where Are We Today?

US House of Representatives

HR 890, Student Loan Sunshine Act

Passed 414 – 3 on 5/9/07

HR 4137, College Opp. and Affordability Act of 2007

Introduced 11/9/07; Vote scheduled for 2/7/08

US Senate

S 1642, Higher Educ Amendments of 2007

Passed 95 – 0 on 7/24/07

2008 College Board Midwestern Regional Forum, Chicago, IL


So where are we today25 l.jpg

So Where Are We Today?

US Department of Education

Published final regulations on 11/1/07, most effective 7/1/08

Borrower choice of lender (guarantor/servicer) absolute

Minimum of 3 FFEL lenders on lists; minimum of 2 private lenders

Selection criteria must clearly disclosed

No payments, benefits, loan deals allowed

Must provide comparative data

No processing delays permitted for non-preferred lenders

No automatic assignment of lender/guarantor/servicer for 1st time borrower

Loan benefits must survive sale

Lender staffing of aid office prohibited

Lender assistance to aid office must be transparent

No opportunity loans or private loan agreements

Aid officer participation on lender advisory boards regulated

Must update list at least annually

Note that some rules are less restrictive for guarantors/servicers

2008 College Board Midwestern Regional Forum, Chicago, IL


So where are we today26 l.jpg

So Where Are We Today?

2008 College Board Midwestern Regional Forum, Chicago, IL


So where are we today27 l.jpg

So Where Are We Today?

2008 College Board Midwestern Regional Forum, Chicago, IL


How is michigan state university reacting l.jpg

How is Michigan State University Reacting?

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu29 l.jpg

Loans at MSU

We previously provided limited information

About suggested lenders

About selection process

About unfettered choice of lender

We now provide enhanced information

Highlight borrower choice

Explain role of players in process

Reveal selection process and criteria

In process of identifying lenders for full list

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu30 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu31 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu32 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu33 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu34 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu35 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu36 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu37 l.jpg

Loans at MSU

2008 College Board Midwestern Regional Forum, Chicago, IL


Loans at msu38 l.jpg

Loans at MSU

What is the result of the changes?

Decreased trust

Does the school benefit to the student’s deficit?

Why does the school recommend so few?

Commercial ads beat school endorsements

Increased confusion

How do you select the right lender?

What are the differences between them?

Can’t MSU just tell me what to do?

Unpredictable processes and funds delivery

More work

Preparing to issue RFI for additional FFEL lenders

2008 College Board Midwestern Regional Forum, Chicago, IL


How is lending community reacting l.jpg

How is Lending Community Reacting?

Some have instituted their own code of conduct or signed the NY AG code

Taking a more cautious approach in dealing with school officials

Cutting back on providing services to schools

Reducing/eliminating borrower benefits

Carefully watching what comes out of DC

2008 College Board Midwestern Regional Forum, Chicago, IL


How is teri reacting l.jpg

How is TERI Reacting?

Enhanced training of our sales team

Working closely with lender partners and schools to convey any changes to our business

Responding to many more RFIs/RFPs

Promoting teri.org as a solution for schools who want multiple lenders

2008 College Board Midwestern Regional Forum, Chicago, IL


Questions and discussion l.jpg

Questions and Discussion

2008 College Board Midwestern Regional Forum, Chicago, IL


  • Login