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 David.firstname.lastname@example.org Agenda Legislative Initiatives - HEOA, TILA, Reg. Z, PSLTIA, Consumer Information Requirements Disclosure Requirements Offices Impacted Compliance 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 • HEOA – 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 boards) – 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 Requirements • 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 Requirements • 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- related…(more) – Provide comprehensive information on the terms and conditions of loans…(more) Disclosure Requirements Application and Solicitation Disclosure Loan 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 Preferred 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 extended 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 disclosure 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 Disclosure • 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 loan Disclosure Requirements Self-Certification Form Purpose of Disclosure: • Helps the consumers identify their gap funding needs and Federal financial aid alternatives. 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 signature • 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 institution • Covered Private Educational Lender – Any financial institution, federal credit union, or person engaged in the business of soliciting, making, or extending private education loans Compliance • 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 costs – 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 Compliance • 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 Compliance 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 disbursement 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 list 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? Resources http://www.gasfaa.org/docs/conferences/2009/fall_presentations /HEOAOneYearLater.pdf GEN-08-12 Department of Education’s Summary of the HEOA http://www.ifap.ed.gov/dpcletters/GEN0812FP0810.html NASFAA HEOA Summary: http://www.nasfaa.org/publications/2008/HEASummary.html 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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