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The Changing Landscape of Loans: Preferred Lender Lists. Patricia Reilly, Tufts University Christine McGuire, Boston University Bernard Pekala, Boston College. MASFAA Conference Newton, MA November 8, 2007. Tufts University. Patricia Reilly Director of Financial Aid.

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patricia reilly tufts university christine mcguire boston university bernard pekala boston college

The Changing Landscape

of Loans:

Preferred Lender Lists

Patricia Reilly, Tufts University

Christine McGuire, Boston University

Bernard Pekala, Boston College

MASFAA Conference

Newton, MA

November 8, 2007

slide2

Tufts University

Patricia Reilly

Director of Financial Aid

slide3

“Preferred Lender List”

  • Simplifies students’ process of selecting lenders
  • Guides students to the “best” lenders
  • Gives schools leverage to negotiate the “best” deals
    • For the student
    • For the institution
    • For both
slide5

Cuomo: School loan corruption widespread

Large student-loan firm settles with N.Y. AG

Sallie Mae to alter business practices,

pay $2 million to education fund

Cuomo: States Will Pursue Student Loan Fiasco

n y code of conduct
N.Y. Code of Conduct
  • Prohibition of certain remuneration to University employees or the University.
  • Limitations on University employees serving on Lender advisory boards.
  • Regulations on how preferred lender lists and can constructed and what need to be disclosed to families about the lists.
slide7

Statement of Ethical Principles

And

Code of Conduct

For

Institutional

Financial Aid Professionals

slide8

The primary goal of the institutional financial aid professional is to help students achieve their educational potential by providing appropriate financial resources.

slide9

To accomplish this,

financial aid professionals

are expected to…

slide10

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

nasfaa code of conduct
NASFAA Code of Conduct
  • Refrain from taking any action for his or her personal benefit.
  • Refrain from taking any action he or she believes is contrary to law, regulation, or the best interests of the students and parents he or she serves.
  • Ensure that the information he or she provides is accurate, unbiased and does not reflect any preference arising from actual or potential personal gain.
nasfaa code of conduct1
NASFAA Code of Conduct
  • Be objective in making decisions and advising his or her institution regarding relationships with any entity involved in any aspect of student financial aid.
  • Disclose to his or her institution in such manner as his or her institution may prescribe any involvement with or interest in any entity involved in any aspect of student financial aid.
nasfaa code of conduct2
NASFAA Code of Conduct
  • Refrain from soliciting or accepting anything of other than nominal value from any entity involved in themaking, holding, consolidating or processing of any student loans
slide14

All Things Considered, April 25, 2007

  • New York Attorney General Andrew Cuomo
  • told lawmakers that if the federal government
  • doesn't step in to regulate the student loan
  • industry, the states will.
student lending accountability transparency and enforcement act slate
Student Lending Accountability, Transparency and Enforcement Act(SLATE)

Mirrors codes of conduct embedded in agreements entered into between NY Attorney General, lenders and institutions.

slide16

Student loan probe pushes Congress to act

Lawmakers say Cuomo-endorsed

rules should be applied nationwide

slide17

Final Regulations(Federal Register, November 1, 2007)

  • Preferred Lender Lists must contain at least three unaffiliated lenders.
  • No lender who offers the institution any benefits may be on a Preferred Lender List
  • Must be reviewed and updated annually.
  • Lenders may not automatically be assigned through award packaging for first time borrowers.
slide18

Final Regulations(Federal Register, November 1, 2007)

  • Institution must disclose
    • method and criteria for selecting lenders
    • Comparative information about interest rates and other benefits offered by lenders
    • That students are not required to use lenders on the list
slide19

Final Regulations(Federal Register, November 1, 2007)

  • Lenders are prohibited from
    • Any philanthropic activities, in return for being placed on a Preferred Lender List
    • Paying costs of aid administrators attending conferences, or for entertainment at lender-sponsored events
    • Conducting in person entrance or exit counseling
    • Soliciting a school employee to serve on an advisory board or paying for costs associated with serving on an advisory board
slide20

Final Regulations(Federal Register, November 1, 2007)

  • Lenders are permitted to
    • Offer in-person financial literacy outreach to students.
    • Provide short term staffing on an emergency, non-recurring basis.
    • Pay for meals, refreshments, and receptions that are reasonable in cost if scheduled on conjunction with a training, meeting or conference open to all attendees.
boston university
Boston University

Christine McGuire

Executive Director

slide22

What is the standard process forchange in the aid programs?

  • Proposed Legislation
    • Must pass both houses of Congress and be signed by the President to become law
  • Negotiated Rulemaking
  • Notice of Proposed Rulemaking (NPRM)
  • Final Regulation is published
february 8 2006
February 8, 2006

President Bush signed the Higher Education Reconciliation Act of 2005 (the “HERA”),

Pub. L. 109 171, which made significant changes to the Higher Education Act of 1965, as amended (the “HEA”), and reauthorized the Federal Family Education Loan (FFEL) Program.

negotiated rulemaking required by the department
Negotiated Rulemaking Required by the Department

The loans team began meeting in December.

Met 4 times for a total of approximately 12 days.

Finished in April without consensus on the whole package of regulations.

why consensus was difficult
Why consensus was difficult?
  • Negotiators represented sectors rather than specific organizations
  • Department of Education decided consensus was all or nothing
  • Political situation exploded in the middle of the negotiating
slide26

Choice of lender in Direct Loans?

The U.S. Department of Education commented on this during negotiated rulemaking…

There are two federal guaranteed loan programs developed and maintained with distinctly different purposes.

The school chooses which program in which to participate.

slide27

Impact of the Media Coverage

  • Press releases and media coverage have confused the current laws and regulations regarding Preferred Lender Lists.
  • Regulations now in place for FFELP lender lists have been broadly applied to private loans in the eyes of anyone from outside the aid office.
mapping the landscape
Mapping the Landscape

Why have a Lender List?

  • Students and families want advice
  • Families and schools want to process funds efficiently to ensure the bill is paid
  • Direct marketing can be confusing and sometimes misleading
mapping the landscape1
Mapping the Landscape

Why not have a Lender List?

  • Reduce concern of real or perceived conflict of interest
  • Reduce the schools responsibility to disclose methods and criteria for selection
slide30

What approach should schools be taking regardless of whether DL or FFELP?

Articulate clear policies regarding:

  • Institutional gift policy
  • Conflict of interest policy
  • The process for evaluating and disclosing lenders or loans recommended, regardless of Federal or private credit
slide31

Boston College

Bernard Pekala

Director of Financial Aid Strategies

slide32

Campus Considerations

Decision Making: To BE or

Not TO BE:

  • Inform
  • Include
  • Communicate
slide33

Campus Considerations

Decision Making: To BE or

Not TO BE: (cont.)

  • Inform
    • Decision Makers
    • Decision Approvers
slide34

Campus Considerations

Decision Making: To BE or

Not TO BE: (cont.)

  • Include
    • Need-to-Know
    • Interested Parties
slide35

Campus Considerations

Decision Making: To BE or

Not TO BE: (cont.)

  • Communicate
    • Often
    • Inclusive
    • Final
    • Follow-up
slide36

Campus Considerations

Include??

  • Internal
    • President
    • Vice-Presidents/Deans (various Executive, Financial, etc..)
    • Departments (Financial Aid, Bursar, Legal, Purchasing, etc..)
    • Directors
    • Coordinators
    • Staff
slide37

Campus Considerations

Include??

  • External
    • Students/Parents
    • Guarantee Agencies
    • MASFAA/EASFAA/NASFAA
    • Consultants
    • Lenders
      • Profit
      • Non-Profit
slide38

Campus Considerations

Options??

  • No lists
  • Partial lists
    • UG Only
    • Grad Only
    • By Program
    • By School
    • FFELP
    • Private
slide39

Campus Considerations

Options??

  • How many on the list
  • List Types
    • Inclusive (All)
    • Volume
    • Benefit
slide40

Campus Considerations

Information Collection Options??

  • Request For Proposals
  • Request For Information
slide42

Boston College’s RFI

Four Parts

  • Cover Letter (optional)
  • Actual RFI
  • Answer Sheet
  • Analysis Sheets
  • Disclosure Information
    • Web
    • Printed