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									What You Need to Know……Higher
Education Opportunity Act (HEOA)
      This session will provide a summary of the
      consumerism and disclosure requirements that
      institutions must comply with as a result of the
      Higher Education Opportunity Act.

     Presented by: David Haygood
Legislative Initiatives - HEOA, TILA, Reg. Z, PSLTIA,

Consumer Information Requirements

Disclosure Requirements

Offices Impacted


Best Practices For Great Service
                 Legislative Initiatives
• The Higher Education Act of 1965, as amended
• Truth in Lending Act (TILA)of 1968, as amended
   – Regulation Z (regulations implementing TILA)
• The Higher Education Opportunity Act (HEOA) of 2008,
   – Enacted August 14, 2008
• The Private Student Loan Transparency and Improvement Act
  of 2008, which is actually Title X of the HEOA
   – Amends the Truth in Lending Act (TILA) to cover private education
     loans, to require additional disclosures for private loans, and more
• Effective dates vary, noted throughout presentation
                 Legislative Initiatives
   – It’s All about the Consumer and providing beneficial information
   – It was designed to support students and families in making wise choices
• Title X – Private Student Loan Transparency and Improvement Act
   – Was introduced to ensure that families had the information they needed to
     make an educated decision about borrowing
   – Must prevent Unfair and Deceptive Private Educational Lending Practices
     and Conflicts of Interest (no gifts, co-branding, compensation for advisory
   – It was designed to support students and families in making wise choices—
     which is in alignment with the goals of preferred lender lists
                Legislative Initiatives

• Title X – Private Student Loan Transparency and Improvement Act
   – Disclosures must be made at three different stages
   – These disclosures became effective February 14, 2010
   – Requires Self-Certification Form
   – Imposed a new obligation on lenders to annually report private loan
     information to schools
   – Contains requirements for schools maintaining a preferred lender
     arrangement for private student loans
                  Consumer Information
• Section 110. Improved Information from the Federal Financial Aid website
    – Financial planning
    – Student financial assistance available from other Federal departments and agencies
• Section 111. Transparency in College Tuition for Consumers
    – Net Price Calculator
    – If “outside the norm”, selected schools will be required to explain
    – Supply litany of consumer information for College Navigator website
• Section 112. Textbook Information
    – To the extent practicable, make the required textbook information available online
    – Requires institutions to publish a link to information in its written course schedule
• Section 120. Institution and Lender Reporting and Disclosure Requirements -
  Preferred Lender Arrangements (more on this later)
                 Consumer Information
• Section 434. Student Loan Information (Disclosures)
• Section 488. Institutional and Financial Assistance Information for
  Students…Requires each institution to…(more)
    – Disclose information about plans to improve academic program to current and
      prospective students
    – Develop plans to detect and prevent unauthorized distribution of copyrighted material
    – Disclose information on student body, diversity, the placement in employment…(more)
    – Disclose policies on all vaccinations
    – Disaggregate data on completion and graduation rates based on student gender…(more)
    – Disclose a statement of current campus policies regarding emergency response…(more)
    – Notify campus community in the event of a significant emergency…(more)
    – Publicly disclose current credit transfer policies…(more)
    – Provide each student, upon enrollment, with a “separate, clear notice about drug-
    – Provide comprehensive information on the terms and conditions of loans…(more)
               Disclosure Requirements

                             Application and Solicitation Disclosure
                             Loan Approval Disclosure
Origination                  Final Disclosure (Prior to Disbursement)
Disclosures                  Safe harbor for use of model disclosure forms

Borrower Self-Certification Form

                             Requirements for completing annual lists with unaffiliated lenders
                             Disclosing of maximum Title IV grant and loan aid available
Lender                       Publishing of a Code of Conduct
Arrangements                 Annual reporting to the U.S. Department of Education
              Disclosure Requirements
              Application & Solicitation Disclosures

Purpose of Disclosures:
•       Provides the general range of rates and fees so that borrowers can make informed
        decisions when choosing a private loan
•       This disclosure is needed when an application is initiated or firm offer of credit

    Key Information:
    •    Provided with the application or firm offer of credit.
    •    Shows the available range of rates and fees for the loan
    •    Uses some standard assumptions for all lenders
    •    Unique rules apply to providing this disclosure information for phone pre-approvals
    •    Will display in web application flow if electronic permissions are given

                           NOTE: Cosigners will receive a copy of all three disclosures, as applicable, for informational purposes only.
              Disclosure Requirements
                        Loan Approval Disclosure
Purpose of Disclosure:
•       This must be provided on or with any notice of approval.
•       Provide the borrower with specific terms of the loan offer; disclosure contents are
        specific to the individual borrower's loan offer approval

    Key Information:
    •    Shows borrower-specific actual rates and fees offered
    •    Mandatory up to 30-day acceptance period
    •    Loan terms must be accepted by the borrower before the lender can proceed –
         lender cannot alter any terms in any way during this time period other than for very
         limited purposes, such as changes in the index (LIBOR/Prime) or school certification
    •    Certain borrower, cosigner, and school changes may require re-disclosure and, if so,
         will restart the clock on the 30-day acceptance period
    •    If approval disclosure has been created and not viewed online Lenders must mail the

                            NOTE: Cosigners will receive a copy of all three disclosures, as applicable, for informational purposes only.
              Disclosure Requirements
                                   Final Disclosure
Purpose of Disclosure:
•       Sent after loan terms are accepted and school has certified the loan. The Final
        Disclosure gives the customer a three business day right to cancel period
•       Funds may not be disbursed until the right to cancel period has passed

    Key Information:
    •    Regulations require a three business day right to cancel period. If the final disclosure
         is mailed, the borrower may have additional days as determined by each lender
    •    Final disclosure and cover letter to be sent to borrowers and cosigners
    •    Provided at final loan approval, prior to which the lender must have received school
         certification and the signed borrower self-certification form and the borrower must
         have accepted the terms of the loan

                            NOTE: Cosigners will receive a copy of all three disclosures, as applicable, for informational purposes only.
Disclosure Requirements

                 Sample of Model
                   Form – Final
             •   We will not allow a school to set a
                 disbursement date that falls within
                 our estimated right to cancel period.
             •   Schools will be notified as they are
                 today when a borrower cancels a
              Disclosure Requirements
                          Self-Certification Form
Purpose of Disclosure:
•       Helps the consumers identify their gap funding needs and Federal financial aid

    Key Information:
    •    A new mandatory self-certification form created by the Department of Education
    •    Form may be provided to the borrower by the school or the lender
    •    Lender is required to obtain the signed completed form before disbursing the loan
    •    Key data elements: specific borrower’s cost of attendance and estimated financial
         assistance, the cost of attendance minus estimated financial assistance, and a
    •    Must be hand signed or e-Signed
    •    This information is available through the school financial aid office
             Disclosure Requirements
                      Re-Disclosure Situations

• The loan approval disclosure will need to be re-disclosed
  for the following situations:
   – If any borrower, cosigner or school changes affect the financial
     terms as detailed in the loan approval disclosure
       • Exceptions include a school certification lowering the total requested
         loan amount and a change to a disbursement date
• Re-disclosure requires:
   – 30-day acceptance period clock to be reset
   – Borrower to “re-accept” terms of the loan
            Disclosure Requirements
              Preferred Lender Arrangements

• No Co-branding: Lenders cannot use the name, emblem,
  mascot, symbol, picture or logo of a school in marketing in a
  way that could imply the school endorses that lender.

• Marketing does not imply endorsement if there is a clear and
  conspicuous disclosure that school does not endorse

• If a lender’s loan product is endorsed by the school, clear and
  conspicuous disclosure disclaimers are necessary that
  creditor and not school is making loan
              Disclosure Requirements
                         What It All Means For You
        Compliance onus for the three new disclosures is on the lender
•   Should be a seamless integration into the borrower application process
•   May have an impact on the current school process as highlighted below and on the following slide

                             HOW YOU CAN HELP!
•   Encourage students to inquire and apply for loans earlier
•   Ensure that students are aware that they must proactively accept their loan terms
•   Plan to certify loans earlier, particularly around peak periods; to allow for 7-day right to cancel
    requirement to ensure funds are disbursed in a timely fashion
                Disclosure Requirements
                          What It All Means For You

Self-Certification Form has both lender and school implications
                             HOW YOU CAN HELP!
  •   Ensure all students have accurate information about their enrollment, cost of attendance and
      financial assistance as early as possible
                 Offices Impacted
• Covered Educational Institution
   – Any educational institution that offers a postsecondary
     educational degree, certificate, or program of study (including
     any institution of higher education)
   – Includes an agent, officer or employee of the educational

• Covered Private Educational Lender
   – Any financial institution, federal credit union, or person
     engaged in the business of soliciting, making, or extending
     private education loans
• Lender Requirements for Compliance
  – The HEOA requires lenders to provide the following information to schools by
    April 1 each year:
                    Fees, and
                    default or
   Interest                        Repayment            Cost
                       late                                            Eligibility
    Rates           payment          Terms           Estimates

  – In addition to disclosing this to families, schools can use this information in
    selecting their preferred lenders
  – Lenders should provide this information to schools annually in the form of an
    Application Solicitation Disclosure
• School Requirements for Compliance
  – In addition to the consumer information that schools have already
    been tasked with providing, The HEOA adds additional requirements,
    see sections
     •   111. Transparency in College Tuition for Consumers
     •   112. Textbook Information
     •   120. Institution and Lender Reporting and Disclosure Requirements
     •   153. Loan Information to be Disclosed and Model Disclosure Form for Covered
         Institutions, Institution-Affiliated Organizations, and Lenders Participating in
         Preferred Lender Arrangements
     •   154. Loan Information to be Disclosed and Model Disclosure Form for Institutions
         Participating in the William D. Ford Federal Direct Loan Program
     •   488. Institutional and Financial Assistance Information for Students
     •   493. Program Participation Agreements
School Requirements for Maintaining
  a Preferred Lender List

 Annual report to the Department of Education
    - Disclosure information
    - Statement indicating why your school participates
     in a Preferred Lender Arrangement with each lender

   As of May 13th the Department has not provided
       the details about the format of the report.
         Best Practices For Great Service
Are There Benefits to Maintaining a Preferred Lender List?

                YES!
A preferred lender list:
                                    A preferred lender list makes it easier for families to
                                    select the financing option that is right for them.

    Allows schools to act as an advocate for families,
    providing relevant and meaningful lender and product
    information in one consolidated source
•   Allows schools to better guide students and families
    through the entire loan process -- from start to finish
•   Provides students and families with an opportunity to
    compare products in a consistent manner
•   Helps families navigate through a school's preferred
    process -- from application to certification to
    Best Practices For Great Service
Are There Downsides to Maintaining a Preferred
                Lender List?

     Many schools may find that if they do not have a
     preferred lender list, they will be restricted in the
     amount and type of guidance they can provide to
                   students and families.
          Best Practices For Great Service
    The HEOA formalized many of the best practices schools are following today.
                         If you currently offer a preferred lender list for
                   private loans at your school, you should continue to do so.

Current Best Practices:
•    Disclose to families the method, criteria and rationale used in selecting lenders with
     which you have a “Preferred Lender Arrangement” (PLA)
•    List at least two unaffiliated lenders and describe any relationship a lender may have
     with another lender on your list
•    Remind students and families that they may have access to free or lower cost
     federal loan options
•    Differentiate private loan information from Title IV loan information
•    Disclose that students do not have to borrow from a lender on the preferred lender
            Best Practices For Great Service
    Understanding Preferred Lender Arrangements
A preferred lender arrangement exists if the school:
• Recommends, promotes or endorses a lender—even if that
    recommendation is not in the form of a lender list

•   Refers their students to a third-party entity that manages a listing
    of private lenders on behalf of the school

•   Refers their students to a third-party entity where the lenders pay
    a fee based on loan volume generated

•   Provides a list of lenders that is not a neutral, comprehensive list

                    Please refer to 34 CFR 601 of the October 28, 2009 Federal Register
                       for the specific preferred lender arrangement requirements.
          Best Practices For Great Service
    Understanding Preferred Lender Arrangements
Scenarios NOT considered to be a preferred lender arrangement:

•    If a school provides a neutral, comprehensive list of lenders who lent at the school
     in the past
      – The school cannot use judgment regarding which lenders to include on the list and the
        school cannot rank, recommend, promote, or endorse any of these lenders
      – The school must also reference that a student is free to choose any lender
•    If a school refers its students to a third-party entity that maintains
     a comprehensive, neutral listing of private education lenders
      – The school must ensure that the listing is broad in scope and cannot endorse
        or recommend any of the lenders on the list
      – The lenders on the list cannot pay the third-party entity to be placed on the list
        or pay the third-party entity a fee based on any loan volume generated
        Best Practices For Great Service
            Differentiating Private Loan Lenders

•   Schools should also consider the following when selecting a private loan
    provider to be included on a preferred lender list:
    –   What is the provider’s financial strength and longevity in the industry?
    –   Do they have superior customer service for families?
    –   Do they have an account management team?
    –   Are there low cost funding options available?
    –   Is pricing available that rewards applicants who have maintained good credit?
    –   Are they fully compliant with HEOA in their online loan delivery process?
    –   Do they have an electronic self-certification process?

GEN-08-12 Department of Education’s Summary of the HEOA

  The information contained in this presentation is not
comprehensive, is subject to constant change, and therefore
 should serve only as general, background information for
further investigation and study related to the subject matter
 and the specific factual circumstances being considered or
  evaluated. Nothing in this presentation constitutes or is
            designed to constitute legal advice.

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