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Title X of HEOA – What is It? How will it impact the private loan application process, my office and students? PowerPoint Presentation
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Title X of HEOA – What is It? How will it impact the private loan application process, my office and students?
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  1. Title X of HEOA – What is It? How will it impact the private loan application process, my office and students? Erin Gjerde-Bailey Account Executive The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  2. Discussion Agenda • Overview of Title X • NEW Disclosures w/Key Points • NEW Private Education Loan Applicant Self-Certification Form w/Key Points • School Involvement • Questions to Ask Private Loan Lenders • Appendices & Resources The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  3. Title X Overview • Title X of the HEOA is entitled the “Private Student Loan Transparency and Improvement Act of 2008” • Amended Regulation Z of TILA (Truth in Lending Act) • Result of a collaborative effort between Federal Reserve Board (FRB) and ED • Focus on the CONSUMER– assure that the best interests of the consumer/student is being served • Effective date for compliance is February 14, 2010 • Requires a private education lender to: • Present three new disclosures at specific times during the private loan application process • Follow rules around acceptance, rescinding and re-disclosure • Collect a private loan self-certification form prior to disbursing funds The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  4. Title X Overview • A private education loan–(§140 of the TILA) • Is a non-title IV loan provided by a private educational lender expressly for postsecondary educational expenses • Does not include an extension of credit under an open-end consumer credit plan or secured by real property • Does not include an extension of credit in which the educational institution is the lender if: • The extension of credit is 90 days or less • Interest will not be applied to credit balance and term is one year or less, even if payable in more than 4 payments • Co-branding language (Similar to CCRAA language) • Private Education Lenders cannot use the name, emblem, mascot, or logo of the institution or affiliate or pictures, words or symbols identified with the institution or affiliate in the marketing of private education loans in a way that implies the loan is offered or made by the institution or affiliate The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  5. Disclosures The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  6. Background • The regulations require lenders to provide three new disclosures for all private loan products • Application and Solicitation Disclosure • Approval Disclosure • Final Disclosure • Disclosures were designed as a result of extensive testing with consumer focus groups • Purpose of disclosures are to… • Present the terms/costs of the loan in a clear and consistent manner • Allow for comparison shopping and reevaluation of borrowing a private loan during the application process • Present lower cost federal options • Reduce overall borrower indebtedness During the following series of slides I plan to present the timing and unique aspects of each disclosure The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  7. Application Disclosure • Presented with or on an application or at time a solicitation is made • Lender is required to mail an application disclosure within 3 days after a phone application is taken and credit is pulled • Provides general information about the range of rates, fees and other terms that apply The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  8. Application Disclosure • Also includes information on federal loan options with directions to contact the financial office or Department of Education (all disclosures will include this section) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  9. Approval Disclosure • Presented when a lender is prepared to make a firm offer (conditionally approved/approved) and contains terms extended The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  10. Approval Disclosure • Borrower has 30 calendar days to accept offer made by lender • Disclosure can be mailed or presented electronically • Mailed disclosures are required to provide an additional 3 business days to account for mail time • Disclosure must state the acceptance date deadline and the manner in which the lender requires the borrower to accept the terms of the loan • A lender can allow the borrower to accept the terms of the loan by mail, phone or electronically (cannot be sole form of acceptance) However, electronic communication can be sole means of acceptance when the consumer has already indicated a willingness to communicate electronically by consenting to and receiving a disclosure electronically, pursuant to the E-Sign Act. The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  11. Approval Disclosure • Lenders are prohibited from changing the terms of the loan, except for changes based on adjustments to the index, during the acceptance period • Exceptions: Fraud or if an extension of credit would be prohibited by law • Re-disclosure would not be required if there would be any “unequivocally beneficial” changes to the loan such as reduced interest rate or loan amount The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  12. Final Disclosure • Presented to borrower after the loan has been accepted and 3 business days before the loan is disbursed (3 additional business days if mailed) – loan funds may not be disbursed during this period • The type of information disclosed in Final Disclosure is identical to Approval Disclosure except for Right to Cancel Notice • Disclosure must clearly note the borrower’s right to cancel and state the cancellation deadline and method lender accepts for cancellation The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  13. Key Points • The lender is responsible for presenting the new disclosures to applicants at the appropriate time within their application process – burden/responsibility does not fall on school • Loan funds may not be disbursed until the day after the right to cancel period ends • Lenders will need to re-disclose disclosure(s) if there is a change that is considered materially adverse to the applicant • Schools will want to be conscious of the right to cancel period that is triggered by the Final Disclosure when certifying loans and scheduling disbursements • FAOs may want to review school scheduled disbursement dates setup with their CDA The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  14. Private Education Loan Applicant Self-Certification Form The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  15. Background • Regulations require lenders collect a Private Loan Self-Certification Form prior to disbursing any private loan funds • Self-certification form can be received anywhere within the application process • Lenders or schools can provide the self-certification form to applicants • Electronically and/or paper • The same exact federal form will be used by all lenders and schools • Consistent with the Disclosures, the purpose of the self-certification form is to… • Present lower cost federal options that should be exhausted prior to considering a private loan • Direct students to the financial aid office for counseling • Reduce overall borrower indebtedness by having student calculate gap During the following series of slides I plan to review various sections of the self-certification form and the responsibilities of the school, lender and borrower The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  16. Private Education Loan Applicant Self-Certification Form • Final version published on February 14, 2010 • Section 1 contains notice to applicant • Lower-cost aid options • Directs students to financial aid office for counseling and financial data to complete form • At the request of the applicant, the school is required to provide counseling • Top right section of the form can be used by lender The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  17. Private Education Loan Applicant Self-Certification Form • Section 2 of the form asks for financial data so the applicant can calculate the gap • School is required to make this information available to private loan applicants (if available) • This data needs to be student specific and accurately depict the student’s cost and financial aid picture at the time the form is completed • Lender is not required to validate data or use the calculated gap as the amount the student is requesting to borrow The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  18. Private Education Loan Applicant Self-Certification Form • Section 3 asks for applicant’s demographic information • Student name and DOB fields must be completed if applicant is not the student • No unique identifier to assist lender in matching up form with application • Section 4 asks the applicant to certify the accuracy of the information provided by signing the form • Form can be signed and returned to lender electronically (e-sign) or with wet signature (fax or mail) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  19. Key Points • Applicant is required to complete one new requirement before loan funds can be disbursed – Self-Certification Form • Schools can provide lenders with the requested information so that a pre-populated form can be provided to the applicant • As a general rule, the self-certification form should not be returned to a lender until the application is initiated • Financial aid office is likely to see an increase in phone calls and walk-ins due to self-certification form • Impact of proposed amendment to H.R. 4173 (Wall Street Reform and Consumer Protection Act)??? The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  20. School Involvement How your office wants to educate students regarding the private loan self-certification requirement will depend on your office’s philosophy and/or need for private loans • Reactive approach – sensitive to increasing awareness of private loans • Provide directions when office is contacted by student • One off e-mails • Require counseling • Proactive approach – minimize number of phone calls and/or walk-ins to the financial aid office • Award package/letter, FAMS and IVR • Lender materials/application instructions • Private loan lender listing or school private loan request form • Vanderbilt (example) • Ole Miss (example) • University of North Dakota (example) • Online tutorials (website) • Ferris State University (example) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  21. Questions to Ask Private Loan Lenders • When and how will you make the private loan self-certification form available to borrowers? • How do you plan on collecting the private loan self-certification form? What options are available to the school to send the form/data on behalf of the borrower? • What impact do these new regulatory requirements have on your credit-pull policy? • When do you plan on requesting school certification (before or after you receive the self-certification form)? What options may exist? The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  22. Questions to Ask Private Loan Lenders • Will there be any outstanding borrower stipulations (i.e. additional disclosure requirements) that need to be met after we receive a certification request that could further delay disbursement? • When and how do you plan on presenting the Final Disclosure to the borrower (i.e. offered online, via direct mail, etc)? • How many days after the Final Disclosure is presented will funds be available for disbursement? The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  23. Questions The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  24. Appendices The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  25. Application Disclosure (front) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  26. Application Disclosure (back) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  27. Approval Disclosure (front) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  28. Approval Disclosure (back) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  29. Final Disclosure (front) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  30. Final Disclosure (back) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  31. Private Education Loan Applicant Self-Certification Form (front) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  32. Private Education Loan Applicant Self-Certification Form (back) The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.

  33. Resources • Federal Register and model disclosure forms and samples: http://www.federalreserve.gov/newsevents/press/bcreg/20090730a.htm • Implementing New TILA Disclosures with Institutional and Non-Title IV Federal Loans http://www.nasfaa.org/publications/2010/tila021010.html • What to expect during the private student loan application process http://wfefs.wellsfargo.com/jump/PrivateLoanProcess.pdf • NACUBO – Truth in Lending Act Compliance Checklist http://www.nacubo.org/Business_and_Policy_Areas/Student_Financial_Services/News/TILA_Compliance_Checklist_Available.html • The finalApplicantSelf-Certification Formhttp://www.ifap.ed.gov/dpcletters/GEN1001.html • Ferris State University online tutorial http://www.ferris.edu/admissions/financialaid/webvideos/selfcertification/index.htm • Proposed amendment to H.R. 4173: http://www.rules.house.gov/111/AmndmentsSubmitted/hr4173/polis155_hr4173.pdf • NCHELP e-Library • HEOA • P.L. 110-315, integrated HEA, side-by-side analysis documents:http://nchelp.org/elibrary/index.cfm?parent=1945 • Regulations • NPRM, Final Rule, integrated regulations, side-by-side analysis documents: http://nchelp.org/elibrary/index.cfm?parent=2023 The information contained herein is for informational purposes only and is not legal advice or a substitute for legal counsel.