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HEA 101 Quick Guide: Student Loan Sunshine


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(HEA Title I, Part E; throughout Title IV, including Section 487 (a) and (e); Title X)

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First NPRM from Spring Negotiated Rule-making Sessions

On July 23, the Department of Education released a Notice of Proposed Rule-making (NPRM) on the HEOA loan provisions negotiated by Team I this spring. (Federal Register. Vol. 74, No. 140.)

Team I reached consensus on the loan provisions affecting lenders it considered during negotiations. These provisions constitute the bulk of the NPRM. Team II considered loan provisions from the school perspective. Team II had responsibility for defining a number of terms. Since a number of them were pertinent to the issues of both teams, they are included in this NPRM and will be included in the NPRM based on Team II’s consensus.

Comments are due by August 24.

On July 28, the Department of Education published an NPRM on loan provisions from the school perspective. (Federal Register Vol. 74. No. 143, pp. 37432-37494). This is a very important NPRM because it spells out the sunshine provisions and disclosure requirements. Although there were representatives from four year private institutions on Team II that negotiated and came to consensus on the draft regulations, NAICU had no official representation and therefore neither it, nor its members are prohibited from commenting negatively on the NPRM. Comments are due by August 27, 2009.

Also, late in July, the Board of Governors of the Federal Reserve System released a final rule amending Regulation Z, which implements the Truth in Lending Act (TILA) following enactment of the Higher Education Opportunity Act (HEOA) on August 14, 2008. The rule revises the disclosure requirement for private education loans which include certain institutional loans. Based on recommendations of Team I and II negotiators and others, some improvements in the draft regulations were made. Interest-free tuition billing plans of less than a year and emergency loans with terms of 90 days or less are excluded from the disclosures in TILA. Certain loans to students who have completed graduate or professional schools would not be excluded. Loan co-branding restrictions will not be applicable to institutional loans or loans of preferred providers.

Quick Take

The law imposes new restrictions on colleges, guaranty agencies and both federal and private lenders, in order to prevent conflicts between their interests and their responsibilities to borrowers. Issues addressed include “prohibited inducements” by lenders, new disclosures to borrowers, and requirements for institutional codes of conduct. The law also defines the requirements for preferred lender lists developed by colleges.

Under the new law, colleges can be held liable for the actions of certain “institution-affiliated organizations,” such as alumni associations and athletic booster clubs.

When Will This Take Effect?

These provisions went into effect when the bill was signed into law on August 14, 2008. Regulations issued on November 1, 2007 (34CFR 682), also continue to apply unless they were superseded by the new law. Provisions regarding the code of conduct for federal student loans are subject to negotiated rulemaking. The Secretary is required to develop guidelines for disclosures and may issue regulations on other aspects of the new requirements.


Who On Campus May Need to Be Involved?

Financial aid; legal counsel; business/finance office; development office




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