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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. Tufts University. Patricia Reilly Director of Financial Aid.

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Patricia Reilly, Tufts University Christine McGuire, Boston University Bernard Pekala, Boston College

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  1. 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

  2. Tufts University Patricia Reilly Director of Financial Aid

  3. “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

  4. Everybody Wins Right?

  5. 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

  6. 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.

  7. Statement of Ethical Principles And Code of Conduct For Institutional Financial Aid Professionals

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

  9. To accomplish this, financial aid professionals are expected to…

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

  11. 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.

  12. 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.

  13. 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

  14. 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.

  15. Student Lending Accountability, Transparency and Enforcement Act(SLATE) Mirrors codes of conduct embedded in agreements entered into between NY Attorney General, lenders and institutions.

  16. Student loan probe pushes Congress to act Lawmakers say Cuomo-endorsed rules should be applied nationwide

  17. 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.

  18. 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

  19. 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

  20. 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.

  21. Boston University Christine McGuire Executive Director

  22. 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

  23. 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.

  24. 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.

  25. 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

  26. 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.

  27. 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.

  28. 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

  29. 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

  30. 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

  31. Boston College Bernard Pekala Director of Financial Aid Strategies

  32. Campus Considerations Decision Making: To BE or Not TO BE: • Inform • Include • Communicate

  33. Campus Considerations Decision Making: To BE or Not TO BE: (cont.) • Inform • Decision Makers • Decision Approvers

  34. Campus Considerations Decision Making: To BE or Not TO BE: (cont.) • Include • Need-to-Know • Interested Parties

  35. Campus Considerations Decision Making: To BE or Not TO BE: (cont.) • Communicate • Often • Inclusive • Final • Follow-up

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

  37. Campus Considerations Include?? • External • Students/Parents • Guarantee Agencies • MASFAA/EASFAA/NASFAA • Consultants • Lenders • Profit • Non-Profit

  38. Campus Considerations Options?? • No lists • Partial lists • UG Only • Grad Only • By Program • By School • FFELP • Private

  39. Campus Considerations Options?? • How many on the list • List Types • Inclusive (All) • Volume • Benefit

  40. Campus Considerations Information Collection Options?? • Request For Proposals • Request For Information

  41. Boston College’s RFI Four Parts • Cover Letter (optional) • Actual RFI • Answer Sheet • Analysis Sheets • Disclosure Information • Web • Printed

  42. DISCUSSIONand QUESTIONS

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